R&D Tax Credits
The R&D Tax Credit was introduced in 1981 and is available at both the federal level and in 38 states (including California). In 2004, Treasury finalized Regulations for claiming the R&D Tax Credit that eliminated the “Discovery Test” and relaxed the documentation requirements. The Alternative Simplified Credit (ASC) was introduced shortly thereafter. These changes have been very taxpayer-friendly and allowed many companies the opportunity to claim the R&D Tax Credit for the first time. In December 2015, “The Protecting Americans from Tax Hikes” (PATH) Act made the federal R&D Tax credit permanent, after its multiple expirations and renewals since inception. The California R&D Tax Credit continues to be available as a permanent tax credit. The R&D Tax Credit rewards companies that devote time and resources to product development or process improvements and is calculated on qualified wages, supplies and contract research. Although the perception is that the R&D Tax Credit is intended for Silicon Valley, it is claimed by companies in variety of industries including (but not limited to):
- All manufacturing
- Tool & die
- Chemical companies
- Software development
- Waste management
- Food processing
- Architectural and engineering firms
The credit is generally equal to 13% of qualified costs and is a dollar for dollar match on both federal and state taxes owed. Taxpayers can carry forward the credit for up to 20 years and may amend any open prior tax years to claim refunds. In 2006, more than 15,000 companies claimed the credit with a benefit of over $8 billion.
We take project lists and tie expenses to them with evidence such as contemporaneous documents and testimony. We work with the client to determine project-based costs even though they do not have a job costing system. This meets the most compelling argument by the Internal Revenue Service (IRS) and Franchise Tax Board (FTB) head on and sets us apart from our competitors. We provide an assessment of benefits at no cost and offer both contingency and flexible fee arrangements to conduct a full study. As a warranty of our services, we also offer audit support. Our tax controversy and audit defense team, which includes former IRS and FTB agents, ensures that our work will stand up to examination.