Research & Development Tax Credits

What is Research & Development Tax Credits?

A The Research & Development (R&D) tax credit is for businesses of all sizes that designs, develops, or improves products, processes, techniques, formulas or inventions. In fact, if a company has simply invested time, money, and resources toward the advancement and improvement of its products and processes, the time involved will likely qualify for the R&D tax credit.

The R&D Tax Credit (RTC) program was added to the U.S. Internal Revenue Code (hereinafter the “Code”) in 1981 through the Economic Recovery Tax Act of 1981 as a temporary provision. The RTC program had most recently expired on December 31, 2014. A tremendous paradigm shift to the RTC program was made possible through the PATH Act which not only renewed the RTC retroactively for all of calendar year 2015 but most importantly made the RTC program permanent.

The enhanced RTC program has been considerably restructured to:

• Allow eligible small businesses (i.e., $50 million or less in gross receipts) to claim the credit against the Alternative Minimum Tax (hereinafter “AMT”) for tax years beginning after December 31, 2015.

• Allow eligible startup companies (i.e., those with less than $5 million in gross receipts and earning revenue for less than 5 years) to claim up to $250,000 of the credit against the company’s federal payroll tax for tax years beginning after December 31, 2015.