R&D Tax Credits
MONETIZING TECHNOLOGY SINCE 2002
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What is the Credit?
The research and experimentation tax credit, also known as the research and development (R&D) tax credit, provides cash incentives for companies conducting R&D in the U.S. The credit was designed to encourage research and development in companies of all sizes, across many industries.
Since 1981, Congress, and many states, have encouraged technically innovative companies to take research and development tax credits. Large companies have long-established programs to take advantage of these credits. Small and mid-size companies have often failed to get their fair share.
Since 2001, the IRS has continued to issue regulations that make it easier for a broader array of companies to qualify their activities as R&D. In late 2015, Congress made the R&D credit permanent and provided two tax benefits for eligible small businesses.
Start-Ups and Small Business Opportunities:
Beginning in 2016, certain start-up companies are allowed to utilize the research credit to offset the employer's payroll tax (i.e., FICA) liabilities, to a credit cap of $250,000. These companies must meet certain criteria, such as having sales of less than $5 million per year. Eligible small businesses, defined as those with average sales of less than $50 million over the prior three tax years, can now use the credits to offset AMT.
New Requirements for Claiming Refunds:
Effective January 10, 2022, an R&D credit refund claim on an amended return must contain certain specified items of information before it can be deemed to meet the specificity requirements of IRS regulations, by containing sufficient information concerning the grounds and facts upon which the claim is based. This is a threshold requirement for the IRS to accept the claim as valid. Monetek's methodology comports with these new requirements.
What R&D Qualifies Today?
Today a company that is using some form of technology, such as engineering, to develop its products, services or manufacturing skills, is likely to qualify for R&D tax credits. Companies do not need patents or even an R&D department to qualify. In fact, the IRS continues to expand the definition of qualifying R&D. Companies are being encouraged to do their R&D in the U.S. and take these credits. Many states follow the federal R&D regulations and provide significant additional credit against state tax liability.