The Government and R&D Tax Credit – and How You Can Benefit

The government’s role when it comes to research & development tax credit has always been clear-cut. Without certain government policies, the tax relief brought about by claiming R&D tax credit would not even be available today. The US government is keen to promote innovation and development in the country, and one way of doing this is by encouraging companies to engage in more research & development activities by giving them tax credits and incentives.

The latest news from the government regarding R&D tax credit

One proof of the government’s commitment to promoting R&D in the US is the recent Senate Finance Committee’s passing of the legislation which extends certain tax provisions, one of which is the research & development tax credit. This legislation extends through 2015, and would be retroactively effective until the start of 2014 so that there would be no gaps when it comes to the claiming of benefits.

And there’s more good news, especially for small and medium-sized enterprises: in addition, the Senate Finance Committee has accepted an amendment which allows small and medium-sized businesses to claim research & development tax credit against Alternative Minimum Tax for the years 2014 as well as 2015. This amendment also lets start-up companies claim research & development tax credit for the very first time and gives them the opportunity to take as much as 250,000 dollars of research & development tax credits against their yearly payroll tax. To qualify for this special Start-Up Innovation credit, an enterprise should be operating for less than five years and have fewer than five million dollars in its gross receipts.

How your company can benefit from the government’s R&D tax credit

Today, more and more enterprises are beginning to take advantage of the government’s R&D tax credit. And while it may be difficult to understand how you can qualify at the beginning, a little bit of knowledge and research goes a long way. If you feel that you already have an existing activity that can qualify as research & development, then you can find this out for sure by ascertaining four criteria: whether your R&D activities are done for a purpose which is permitted, whether it is done in order to eliminate uncertainty, whether it undergoes a particular process of experimentation, and whether it is inherently technological (based on the hard sciences, and not the soft sciences). Once you have passed these set criteria, then it is easier for you to begin the process of claiming R&D tax credit for your enterprise.

The important aspect to remember is that claiming R&D tax credit from the government becomes easier if you break it down into different, smaller components. But you need to assess the above-mentioned criteria first, and make sure that your enterprise falls under all of those. Keep in mind as well that there are other R&D activities which may not qualify, such as research that is done after a product or service has already been commercially launched, or research done in order to duplicate an existing component of the business, among others.

The best way to determine your qualification for research & development tax credit is to consult with a professional R&D tax specialist. Swanson Reed is comprised of an expert team of tax specialists who are more than willing to help you ascertain your R&D tax credit qualification. Speak with a representative today to find out how your company can take full advantage of the government’s R&D tax credit program.