Research & Development Tax Credit

The following facts were posted in regards to actual R&D credits claimed over the past few years:

• • $11.6 Billion in R&D Expenditures were reported on individual and corporate tax returns
  • Manufacturing was actually the largest sector to claim, but only 6,219 of 15,873 Manufacturers actually took the credit (39%)
  • Businesses of $250 Million of sales or more account for 14% of all claims made, but this 14% accounts for 84% of the total credits claimed
  • Companies with less than $50 Million in sales account for 72% of all filers, but this represents only 11% of the credits claimed

R&D Tax Credit overview:

The Research & Development tax credit was created in 1981 as part of the Economic Recovery Act, designed to fuel American Business and innovation. The R&D tax credit can result in a dollar-for-dollar reduction in a company’s Federal Income tax liability. This general business tax credit is under the IRS Code Section 41, “Credit for Increasing Research Activities.”

Here are some other fast facts regarding the R & D Tax Credit:

• • Taxpayers can claim Federal R&D Tax Credits retroactively and receive cash back by filing amended returns for the past three years
  • Approximately 36 states have their own R&D Tax Credit programs to reduce state tax liability
  • Certain companies can utilize the credit against all taxes paid, including the Alternative Minimum Tax (AMT)
  • Incentivizes innovation in the USA by ensuring the retention of highly skilled personnel in the USA
  • Any R&D Tax Credit not used can be carried forward up to 20 years