Determining qualifying Business R&D Tax Credit Activity
A simple four-part test helps to determine qualified R&D activity:
- Does your company undertake activity intended to develop a new or improved product or process for yourself or your customer? Do you create a product, process, technique, formula or invention to improve performance, functionality, reliability or cost?
- Is this activity technical in nature?
- Does this activity seek to eliminate technical uncertainty?
- Does this activity follow a process of experimentation?
Dozens of industries qualify, including
- Engineering Services
- Job Shops (metal fabrication, gears, coatings, HVAC, recycling, etc.)
- Medical Devices
- Tool & Die
Less than 33% of companies that qualify for the Federal Research and Development Tax Credit actually utilize it, due to misconceptions about qualification and the complexity of necessary documentation. Companies of all sizes qualify for the credit and can benefit significantly. Recent IRS code changes have broadened the definition of qualifying activity, and over 70% of states now offer a credit as well. There has never been a better time to consider an R&D Tax Credit Study!