The IRS Proposes Changes To Form 6765, Credit For Increasing Research Activities, & Requests Feedback From Stakeholders By October 31st

On Friday, September 15th the Internal Revenue Service (the “Service”) released a preview of proposed changes to several sections of IRS Form 6765, titled “Credit for Increasing Research Activities” and is requesting feedback from stakeholders by October 31st. As a background, the Federal-Level R&D Tax Credit program was originally introduced into the Internal Revenue Code through President Ronald Reagan’s Economic Recovery Tax Act of 1981 and the program has continued to evolve both from a quantitative and qualitative perspective over the past four decades.
The Service has provided a preview of their proposed changes to Form 6765 in an effort to solicit feedback from stakeholders in advance of the formal draft release expected later this year. Just some of the proposed changes address previous feedback received from taxpayers and tax professionals alike in recent years during IRS examinations. It should be duly noted that each year, the Service receives thousands of tax returns from taxpayers claiming the Federal-Level R&D Tax Credit. R&D Tax Credit issues are currently examined in a substantial number of cases year-over-year and consume significant resources from both taxpayers and the Service alike. To provide more effective tax administration of the Federal-Level R&D Tax Credit program, the Service must ensure taxpayers truly comprehend the complete scope and application of the program’s requirements to support claiming the R&D Tax Credit with a sustainable tax return filing position per Circular 230. To that end, the proposed changes to Form 6765 will require taxpayers to identify, gather, and document additional data on this enhanced form before filing their tax returns. The primary proposed changes to Form 6765 include:
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The Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”) significantly enhanced the Research and Development Tax Credit Program (“RTCP”) on a myriad of levels by making the RTCP a permanent tax incentive within the Code and considerably restructured the program to: Read More

On October 3rd of 2016, the Internal Revenue Service (hereinafter “the Service”) issued Final Treasury Regulations setting forth guidance on research and development efforts in connection to Internal Use Software (hereinafter “IUS”) for purposes of claiming the Research & Development Tax Credit (hereinafter “RTC”) under I.R.C. § 41.

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For all those individuals currently preparing his/her own 2015 Tax Return, please be aware of the significant changes in Finance Act 2014, especially in the areas of:

1. Research & Development Tax Credits

2. Capital Allowances for the Provision of Specified Intangible Assets

3. Three Year Relief for Start-up Companies

4. Employment and Investment Incentive (EII)

5. Company Residence

R&D Tax Credit

Up to 1st January 2015, Section 766 TCA 1997 provided that the Read More

Tax Advisor - Peter Scalise

On December 18th of 2015, President Obama signed into law a sweeping $1.14 trillion dollar funding bill that will keep the federal government operating through September 30th of 2016. In connection to the tax aspects of this comprehensive and pivotal legislation, the Protecting Americans from Tax Hikes Act of 2015 (hereinafter the “PATH Act”) accomplished considerably more than the typical tax-extenders legislation passed in previous years and truly signifies a dynamic paradigm shift as the PATH Act makes permanent over twenty leading tax incentives while extending other tax incentives over either a five year period or a two year period.

In particular, the PATH Act meaningfully enhanced the R&D Tax Credit Program (hereinafter “RTC program”) on a myriad of levels. As an overview, the RTC program was initially added to the U.S. Internal Revenue Code (hereinafter the “Code”) in 1981 through the Economic Recovery Tax Act of 1981 as a temporary provision of the Code. The RTC program had most recently expired on December 31, 2014. A tremendous paradigm shift to the RTC program was made possible through the PATH Act which not only renewed the RTC retroactively for all of calendar year 2015 but most importantly made the RTC program permanent. In addition, the enhanced RTC program has been considerably restructured to: Read More

The federal income tax credit for certain R&D expenditures (primarily wages and supplies) has been a temporary provision since first enacted in 1981 (it first expired in 1985 and has been extended about 14 times since). The temporary credit seems odd considering the following:

• Every President and probably most legislators since 1985 have called for a permanent credit.

• Unlike most other credits, there is economic justification for the credit beyond only incentivizing R&D in the U.S. There are spillover effects from a company’s R&D activity and the credit helps compensate for them. Read More