Rising Demand for New Hampshire R&D Tax Credit Reduces Overall Credit Received

New Hampshire has had an R&D tax credit system available since 2008, but has not put the effort into ensuring it keeps up with the demand. More New Hampshire businesses received their R&D tax credit this year than ever before, but less than two-thirds of them received the full amount they are entitled to.

The demand for the credit has been increasing steadily, while the cap for the credit remains the same. In 2021, 276 businesses are set to receive the credit, compared to the 230 businesses in 2020. The cap on the credit remains at $7 million. In 2020, businesses received 76% of the credit they were entitled to. In 2021, this will likely be reduced to 64%.

The credit, without a total state cap, would provide each business with their full credit of 10% of it’s R&D spending up to $50,000. With the total state cap and the estimated 64% allowance, any business who should receive the $50,000 will get $31,948 instead. 

So is there any chance of increasing this state cap? It seems unlikely based on legislation talks the previous year. Rather than suggesting an increase or removal of this cap, Rep. Timothy lang, R-Sanbornton, introduced Bill 210. Bill 210 would roll back the allocation to $2 million – a move meant to pay for increasing the exemption for the 5 percent interest and dividends tax. While Bill 210 did not make it out of the House Ways and Means committee, the bill has been retained to be acted on in this session. 

In 2008, the R&D tax credit was capped at $1 million and held at this level until 2016, at which point businesses were receiving just 27% of the credit they were entitled to. The cap was raised the following year. We seem to be on the same trajectory, with the percent steadily declining until the cap is hopefully, eventually increased.

Are you developing new software for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

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