The R&D tax credit is still one of the most significant tax incentives available today. The R&D credit increases cash flow, rewards companies for hiring technical employees, reduces NOLs (if applicable), it can be carried forward, and prior years credits will significantly reduce taxable income. It provides an incentive for companies to increase their innovation and improvement activities, being available to both public and private companies. Some industries that qualify include, but are not limited to:
There are several benefits to realizing the R&D tax credit, and the scope for identifying R&D is huge, existing in almost every sector. It’s especially important for many small and medium businesses, serving essentially as a means of financing growth and expansion.
The changes to IRC Section 174 are independent of existing R&D tax credits under IRC Section 41. Claiming an R&D tax credit delivers permanent benefit to a business and remain an important tax strategy.
The R&D Tax Credit doesn’t change – what really happened was the 2017 Tax Cuts and Jobs Act (TCJA) changes in the treatment of IRC section 174 related to research and experimentation costs states for tax years ending after December 31, 2021. Now, the R&E expenditures under the IRC section 174 must be capitalized and amortized. Specifically, costs for US-based R&E activities must be amortized over five years and costs for foreign R&E activities over 15 years – both using a midyear convention. So, all the values er can use for the R&D credit in section 41 of the US Code need to be capitalized.
The IRS and the Treasury issued Revenue Procedure 2023-11 providing updated guidelines for accounting method changes for specified research or experimental expenditures.
FI Group is a global tax consultancy that helps industry obtain tax credits and incentives, with more than 1,700 qualified employees, counting on specialists from different fields, committed to supporting companies of all sizes and in all sectors of activities. With its expertise in state tax credits and incentives, FI Group analyzes your research and development projects, determines the assistance you can claim, supports you in the preparation of tax files and declarations and provides you with technical support during possible tax examination.
Proprietary documentation and innovative technology simplify the process and maximizes the benefits.