Archive for R&D Tax Credits

Might You Be Eligible For An R&D Tax Credit?

Might You Be Eligible For An R&D Tax Credit?

R&D Tax Credits?  We’re a bottling plant, not a science lab.  I doubt we’re eligible…”

A common misconception is that the R&D Tax Credit is only available to businesses engaged in traditional scientific experimentation – pharmaceuticals, biomedical research, and the like.  However, the federal tax credit is intended to incentivize companies in a plethora of industries to develop new and improved products and processes.   This powerful, permanent, dollar-for-dollar reduction isn’t just for the so-called “white-coat industries.”

And it’s worth looking into… The credit provides improved cash flow, offering up to 10 cents in benefit for every qualifying dollar identified in a performed study.  It may be carried back one tax year and forward up to 20 years.

A business in almost any industry can be eligible, if it meets the Capstan Criteria:

1.       Research is happening to create or improve a business component.  (A “Business Component” is whatever the business is trying to develop, be it a product, process, technique, formula, etc.)

2.       The research is trying to eliminate uncertainty.  (How can we make this?  Can we even make this?)

3.       The research involves experimentation of some kind where different alternatives are evaluated.  (Scientific laboratory work, 3D modeling, architectural design, computerized simulations, etc.)

4.       The research is technological in nature.  (Keep in mind, that doesn’t mean that the final product is part of a technical field.  The fidget spinner, for example, is just a toy.  But researching the shiniest paint that won’t flake off the toy does require a technological analysis.)

Once eligible, a business can take Qualified Research Expenses (QRES), which are the costs involved in performing the research.  Wages, supplies/materials, cloud hosting, and third-party contractor fees can all be expensed using the R&D Tax Credit.

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The IRS Issues Revised R&D Tax Credit Instructions

The IRS Issues Revised R&D Tax Credit Instructions

On December 15th, the Internal Revenue Service issued an early release draft of instructions for IRS Form 6765 entitled “Credit for Increasing Research Activities”, to properly reflect legislation regarding the determination of qualified wages that impacts Lines 5 and 24 from the December of 2020 revision.

It should be duly recalled, pursuant to legislation enacted in December of 2020, wages for qualified services do not include:

  • Wages paid to or incurred for any employee after December 31, 2020 and before July 1, 2021, if the employer uses the same wages to claim the Employee Retention Credit (“ERC”) on an employment tax return such as IRS Form 941 entitled “Employer’s Quarterly Federal Tax Return”; and
  • Wages paid to or incurred for any employee generally after December 27, 2019 and before April 17, 2021, if the employer uses the same wages to claim the 2020 qualified disaster ERC on IRS Form 5884-A entitled “Employee Retention Credit for Employers Affected by Qualified Disasters”.

As a reminder, do not file draft forms and do not rely on draft forms, instructions, and / or publications for filing until finalized by the Service. The draft instructions for IRS Form 6765 can be reviewed at https://www.irs.gov/pub/irs-dft/i6765–dft.pdf The Service is also currently accepting comments in connection to the draft instructions at https://www.irs.gov/forms-pubs/comment-on-tax-forms-and-publications All tax filing forms and instructions are expected to be finalized by the Service before the end of January 2022.

Have a question on R&D Tax Credits? Contact Peter J Scalise.

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R&D Tax Credits – IRS Form 8974, IRS Form 6765, IRS Form 3800 And The Tax Cuts And Jobs Act

John Dundon: R&D Tax Credits

Hold On! Resist the urge to gloss over the title so fast! Do whatever it takes to clear your head and FOCUS for 6,000 words or so on R&D Tax Credits – IRS Forms 8974, 6765, 3800 & the TCJA.

Understanding the tax reporting and compliance procedures of this very interesting tax credit is GOOD BUSINESS for 3 VERY IMPORTANT Reasons:

  1. MONEY – Taxpayers Save BIG
  2. OPPORTUNITY – More Taxpayers Qualify
  3. TIMING – Applicable statues changing in 2022
Money

Since becoming law in 1981 the R&D tax credit has proven to be quite a valuable tax planning tool yielding billions of dollars in federal and state benefits for LARGE US businesses with big compliance budgets.

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R&D Tax Credits – IRS Form 8974, IRS Form 6765, IRS Form 3800 And The Tax Cuts And Jobs Act

JOHN DUNDON - IRS Forms On R&D Tax Credits

Hold On! Resist the urge to gloss over the title so fast! Do whatever it takes to clear your head and FOCUS for 6,000 words or so on R&D Tax Credits – IRS Forms 8974, 6765, 3800 & the TCJA.

Understanding the tax reporting and compliance procedures of this very interesting tax credit is GOOD BUSINESS for 3 VERY IMPORTANT Reasons:

  1. MONEY – Taxpayers Save BIG
  2. OPPORTUNITY – More Taxpayers Qualify
  3. TIMING – Applicable statues changing in 2022

Money

Since becoming law in 1981 the R&D tax credit has proven to be quite a valuable tax planning tool yielding billions of dollars in federal and state benefits for LARGE US businesses with big compliance budgets.

Opportunity

Now that the tax credit is permanent and can be applied towards employment tax, planning opportunities abound for medium size and smaller companies – including startups!

The intended consequence of the 2015 PATH Act is prevailing and it turns out more small businesses are putting systems in place to comply with tax credit audit standards.

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A Spotlight On The Extension And Expansion Of The California Film & Television Tax Credit Program 3.0

Peter J Scalise, Tax Credits And Incentives, Film & Entertainment

Overview of Film Production Tax Incentives

Motion Picture and Television Production Tax Incentives (hereinafter “MPIs”) are tax incentives that are available at the U.S. Federal Level, at most of the U.S. Multi-State Levels, and on a Global Level through nearly a hundred participating countries worldwide and should certainly be incorporated into the tax planning process for movie and television studios to properly tax affect their costs of production.

Three Primary Phases of Film Production

The three primary phases of qualified filmmaking production include the “Qualified Pre-Production Phase”, the “Qualified Production Phase”, and the “Qualified Post-Production Phase”. It should be duly noted that it is fairly common practice in the movie and television studio industry to shoot the aforementioned phases of qualified production throughout several locations (e.g., Qualified Production Phase in the City of Los Angeles, California, USA and the Qualified Post-Production Phase in the City of Vancouver, British Columbia, Canada). Consequently it is critical to be cognizant of tax incentives available, as applicable, not only state by state within the United States but also country by country worldwide in order to reduce a movie or television studios global effective tax rate.

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