R&D Tax Credit Tag

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While many tax breaks have been reduced or expired, Research and Development (R&D) tax credit has been in existence for over 30 years and recently made permanent. The R&D tax credit has generated over $12 billion dollars annually for companies engaging in research activities. While most Fortune 500 firms claim it, many in the construction industry erroneously believe they do not qualify. In fact, only about ten percent of eligible businesses actually take the R&D tax credit....

While many manufacturing tax breaks have been reduced or have expired, one tax incentive has been in existence for over 30 years and recently made permanent. The Research and Development (R&D) Tax Credit, a dollar-for-dollar tax reduction, has generated over $12 billion dollars annually for companies engaging in research activities....

A recent court case denied a taxpayer the Research Credit under IRC §41 since it could not substantiate proper use of the “start-up” base period to calculate its credit rather than use of the 1984-1988 base period. IRC §41 permits a taxpayer to use a base period of either 1984-1988 or, if certain criteria are met, an alternative base period intended to make the credit available to “start-up” companies that were not in business from 1984-1988....

The IRS released final regulations concerning the application of the R&D tax credit to “internal use software” (i.e., software which is developed by or for the benefit of the taxpayer). Examples of internal-use software include software for use in human resources, support services and financial management. Software that is not for internal use needs to meet a lower threshold to qualify for the credit. These final regulations also include examples to illustrate the application of the process of experimentation requirement to software....