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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.

“I’m sold on R&D tax credits,” you might be thinking.  “But why should I go with Capstan?  They’re good for cost seg, but this isn’t cost seg…”

You should consider Capstan R&D precisely because we’re good for cost seg.  The client-focus, the meticulous methodology, and the best-in-class work product on which you’ve come to rely has finally arrived in the R&D Tax Credit arena.

You should consider Capstan R&D precisely because we’re good for cost seg.  The client-focus, the meticulous methodology, and the best-in-class work product on which you’ve come to rely has finally arrived in the R&D Tax Credit arena.

Capstan R&D follows the Capstan Course to success.  We seek to truly understand your needs, your goals, your plans, your industry.  We make it our business to understand your business, so we can create a strategic plan tailored to meet your needs.   As always, our work starts and ends with you.

Our team then works closely with stakeholders and their tax professionals, preparing a precise report that meets all requirements for a successfully calculated and claimed R&D credit.  Finally, just as we do with our cost seg studies, Capstan stands by our quality work product with the Capstan Warranty.

Have a question? Contact Bruce Johnson, Capstan Tax.

As a founding partner at Capstan Tax Strategies, Bruce works closely with commercial real estate owners, investors, and accounting firms to provide practical, creative and client-specific solutions.

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