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Summing It Up

Keeping you ahead of the curve with timely news & updates.


R&D Credit Rules for Internal Use Software Finalized

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New Rules Represent Significant Easing of Requirements on Businesses That Would Like to Claim the R&D Credit

New call-to-actionRegulations finalized by the IRS on October 3 suggest that the costs a business incurs to develop software for internal use may be more likely to qualify for the Research and Development (R&D) Tax Credit than many taxpayers previously understood.

Internal use software (IUS) has always been held to a higher standard than other types of research when it comes to qualifying for the R&D credit. But the new IRS guidance clearly suggests some software development costs that were previously thought to be IUS were in fact likely to be exempt, and the new guidance also eases some requirements on IUS software when it comes to qualifying for the credit.

The new rules don’t change the four criteria that qualify an activity for the R&D Credit:

  • It must be intended to discover information that would eliminate uncertainty concerning the development, improvement, or design of a product or business component.
  • It must be undertaken to discover information that is technological in nature.
  • The intended result must be useful in the development of a new or improved business component.
  • Substantially all of the activities must relate to a process of experimentation.

Once an activity meets these criteria, IUS must meet three additional criteria—referred to as the high threshold of innovation test—to qualify for the credit:

  • The activity must involve significant economic risk.
  • It must meet a high threshold of innovation.
  • No comparable third-party software is available for purchase.

The concept of IUS, because of the final regulations, is going to largely be restricted to general administrative functions, such as:

  • Financial management
  • Human resources management
  • General day-to-day support services of your company

Clarification of the 3-Point Criteria

The IRS has made it easier and less controversial to comply with the three additional criteria above that IUS must meet to qualify for the credit. For instance, the IRS concluded that the high threshold of innovation doesn’t require that you make a revolutionary discovery or that the software development be successful.

The IUS development involves “significant economic risk” if you commit substantial resources and there is substantial uncertainty, because of technical risks, that you might recover those resources within a reasonable period. “High threshold of innovation” is defined as resulting in a reduction of costs or an increase in speed, either of which are substantial or economically significant.

The new rules, which are largely consistent with the proposed regulations, clarify that some types of internally developed software are not IUS. For example, software you might have developed to interact with third parties or to enable third parties to initiate functions or review data on your business’ systems do not need to meet the additional IUS criteria to qualify for the R&D credit. The determination of whether the software was developed for third party use is based in large part on the intention of the company at the start of the software development effort.

Examples of software that may not qualify as IUS include:

  • Bank transaction software
  • Software apps for a mobile device
  • Software developed by a manufacturer to enable its customers to order products online

Furthermore, software developed to be sold, leased, or licensed is generally not treated as software developed primarily for internal use.

New call-to-actionOn the whole, these new rules represent a significant easing of requirements on businesses that would like to claim the R&D credit for software that they develop themselves or pay outside contractors to develop. If your business incurs costs for software development, this is a great time to take a closer look at those costs in light of the new rules to find out if you may be eligible for additional credits.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

 

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What to Prepare for and Expect From Your First Meeting About the R&D Tax Credit

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New call-to-actionDid your company develop any new products for the year? Make significant enhancements to products or processes? If you’re in financial management in any way in your company, you owe it to yourself and your firm to investigate if you qualify for the Research & Development (R&D) Tax Credit.

If you rely on the hard sciences or use technology in your business to create or improve products or processes, you might be able to reduce your federal taxes by a portion of the related costs incurred.

Investigating your eligibility for the credit includes an initial meeting with an R&D credit expert. What should you prepare for your initial meeting? Expect to be able to provide the following:

Access to Key Personnel Who Were or Are Involved in the R&D Activities

This might be one person or multiple individuals depending on your company size. In bigger companies, a team approach can often foster a better discussion, bringing ideas together and identifying other areas where one or more individuals in the company might be engaged in R&D activities.

Your key personnel must be available for meetings and interviews, and should also be able to identify who performed R&D-type work during the year and be able to assist in quantifying their time spent in this work. The identification should include both internal resources (employees) and external resources (outside contractors).

We have had great success with three to five attendees in these meetings with our clients, often one person from finance and others from the R&D activities.

Internal Documentation Concerning Your R&D Activities

Any contemporaneous documentation that monitors the activities qualifying as research activities will help to support the claim for the R&D credit. The more you can share the better—it’s less documentation that we the consultants have to do, and it will reduce the time R&D personnel spend with us on interviews and in other meetings. Examples might include blueprints or marketing materials, project write ups, status reports, modifications, etc. Detail highlighting unique features of your R&D is also generally very helpful. A product catalog with only pictures won’t be sufficient enough to stand on its own.

We understand that you probably won’t have all of this information at the initial meeting, but the more you have the better. As the R&D study progresses, we will work with company personnel to complete the information.

Your documentation should include financial information. Wages (box 1 of Form W-2) is usually the most important part of your potential R&D credit financial information. This includes wages paid to employees directly involved in R&D and employees in direct supervision or support of R&D.

Recording of your R&D activities to separate accounts is helpful. For example, bifurcating R&D material and supplies (property eligible for depreciation is excluded) and non-R&D materials and supplies saves time and effort at year’s end when calculating the credit.

The same point holds true regarding separate accounts for outside contractors for work in any of the four parts. In addition, copies of contracts with outside contractors showing who retains rights is important. As this can be a significant expenditure for many companies, copies of your larger contracts also help at initial meetings.

If you use a job-time tracking system, codes to signify R&D work vs. non-R&D work will assist in determining the project list and qualifying costs at the end of the year. If you don’t use a job-coding system, each eligible employee should keep a list of projects that may qualify for the R&D credit. (Some companies keep a simple Word document to track monthly R&D-related financials.)

If you find you need to retrofit your internal R&D documentation, you can begin to go back and build the records with a list of projects that your teams worked on that you believe are R&D. You will also need a list of employees in R&D with reasonable estimates of how much time they spent on the R&D projects, along with any other materials or outside contractor costs.

Open Communication

New call-to-actionAfter our initial meeting all parties should practice timely follow up to questions, within a week generally. There must also be full disclosure of activities, especially work performed within the U.S. versus outside of the U.S. Only the former can qualify for the R&D credit.

Talk to our experts about your business' potential to claim the R&D credit today.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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The 4-Part Test to Qualify for the R&D Tax Credit

R&D Tax Credit Test - Buffalo CPA Firm

New call-to-actionThe Research and Development (R&D) Tax Credit, recently made permanent, can be a financial boon as you work to improve cash flow in your business. As we've discussed in previous posts, if you rely on the hard sciences or use technology in your business to create or improve products or processes, you might be able to reduce your federal taxes by a portion of the qualified costs incurred.

A four-part test can help you determine if your company’s activities qualify for the R&D credit.

#1: Permitted Purposes

To qualify for the R&D credit, the activity must relate to a new or improved business component’s function, performance, reliability, quality, or composition. You don’t necessarily have to discover an innovation or advancement that’s new to your industry, only what may be innovative or new to you and your company’s processes or products.

#2: Technological in Nature

The activity performed must fundamentally rely on principles of physical sciences, biological sciences, computer science, or engineering. For example, if you’re in food production, simply adding more salt to your product won’t necessarily qualify—but a method based in hard sciences to enhance your product’s flavor might, as would similar methods designed to keep food fresher longer.

#3: Elimination of Uncertainty

The activity must be intended to discover information to eliminate uncertainty concerning the capability or method for developing or improving a product or process, or the appropriateness of the product design.

#4: Process of Experimentation

The qualifying activities must constitute the process of experimentation involving: simulation; evaluation of alternatives; confirmation of hypotheses through trial and error; testing and/or modeling; or refining or discarding of hypotheses.

Beyond definitions stipulated by the four-part test, examples of activities that might qualify for the credit include those to advance the design of an existing product or process, or those to correct significant design defects or obtain significant cost reductions or enhanced function. Costs of design, construction, and testing of pre-production prototypes and models can also qualify.

For example...

Let’s say you’re a manufacturing firm developing eyewear and you want to increase productivity 10% to 15%. Your costs for doing an evaluation of the raw materials, considering new molds, and determining such factors as the proper heating and cooling temperatures for that raw material and/or molds may qualify for the R&D credit.

Similarly, if you have a product run by software, costs of developing new software to make that product more reliable and more efficient might quality for the credit. If you’re an architectural or engineering firm, costs of researching and incorporating green technology might qualify.

Other activities potentially qualifying for the credit: conceptual formulation, design, and testing of possible product or process alternatives; launch activities involving a new component or process; or design time, tool design and testing, prototype building, and similar activities. Also:

  • Engineering efforts to develop new plant processes or technical redesign of an existing plant layout that result in substantial production gains;
  • Efforts to solve production problems where there was uncertainty as to the best solution; and
  • Design and testing involved in improving the configuration or altering the composition of an existing product or process to increase efficiency or decrease cost.

Some activities do not qualify for the R&D credit, including funded research (for example, funded by a government grant), ordinary testing and inspection, research done outside the U.S., reverse engineering (unless such engineering involves an enhancement, in which case a percentage of your R&D costs may qualify for the credit), adaptation of an existing business component to a particular customer’s requirement or need (for example, adapting a computer program you sell to a particular customer’s requirement), or research with a non-functional focus such as improving or changing style, taste, or cosmetic changes.

Also not qualifying: research after commercial production; management studies or activities; and efficiency or consumer surveys.

Qualified costs include wages paid to employees directly involved with, in direct supervision of, and in direct support of the R&D; materials and supplies used and consumed in the process; and work performed by outside contractors in any of the four parts of the test qualify as long as you retain substantial rights in what the contractors do.

The R&D credit can apply to companies in many industries. We can help you explore the potential of the R&D credit for current and prior open tax years and talk about how your efforts to grow your business could generate cash savings on your federal (and state) tax returns. Contact us to learn more.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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The Process to Claim Your Possible R&D Tax Credit

Claiming the R&D Tax Credit - Buffalo CPA FirmAfter years of being temporarily extended, the Research and Development (R&D) Tax Credit has been made permanent, a policy change that might suggest wider IRS acceptance of true R&D credit claims.

Improving your business often has underpinnings in potential R&D credible activities. Every company wants to grow and differentiate itself – and one of the common denominators for differentiation is improvement in technology, whether it is to create a new or improved product or process. If you rely on the hard sciences or use technology in your business to create or improve products or processes, you might be able to reduce your federal taxes by a portion of the related costs incurred.

How to See if You Qualify for the R&D Credit

First, it’s very helpful to take a critical look at activities that anyone in your company is undertaking to pursue an idea that would make a process more efficient, more streamlined, greener, and so on. Or perhaps you’re testing the feasibility of a new or improved product, looking at overhauling an outdated software, or exploring how to communicate more effectively with your client base through the internet.

Another helpful step is to identify and review those documents that address/substantiate project initiatives and their progress (or even lack of progress—setbacks can actually be a sign that you probably have some credible R&D activity). These documents can include project reports, engineer reports, data updates, feasibility studies, outside contracts, project aspiration memos, or memos that show your company had to change the course of the project or even abandon the project altogether.

New call-to-actionFrom our experience, accumulating the data and information required to support R&D activities can be fairly easy using, for instance, such readily available financial data as payroll records and supply usage compilations that went into any department or project undertaken for an R&D initiative. It might also be wise to investigate the entire history of the project. It's not unusual to discover there are unclaimed R&D credits for prior years as well.

Don’t assume that your potential credit would be too small to be worth your research time.

Even if your company has only one engineer working on a project, that engineer might need two support staffers and a supervisor. (Experienced advisers can help you determine if your applying for the credit is worthwhile.)

Keep your data and documentation simple by focusing on criteria the IRS is looking for when claiming the R&D credit. If the documentation is not there, your R&D credit team can still vet those business improvement ideas for credibility and potential by talking to project leaders or those who have been involved with the ideas on improvement.

Another key to exploring and securing the R&D credit is efficiency and finding the right advisers to guide you through claiming the credit, both when filing the refund claim and in the unlikely event of an IRS audit. Our firm has had remarkable success in retaining the R&D credits claimed if initially challenged by the IRS. We do our homework up front. For example, we have conversations early on that explore succinctly our clients’ potential for claiming and supporting their R&D credible activity.

We also look at a company’s ability to actually generate cash refunds when claiming the credit. In a limited number of cases, the R&D credit may not generate a cash refund upon filing an amended return to claim such credits. In those cases we explore the amount of benefit and when it is expected to be realized before undertaking an R&D credit study. This rarely occurs and the IRS, beginning in 2016, has further expanded the group of companies eligible for receiving a cash benefit from the credit. Beginning this year, certain small businesses with annual revenues under $50 million may qualify to claim the credit against its alternative minimum tax liability. Prior to this companies paying AMT had to carry forward the credits for use in future years. In addition, certain small business with less than $5 million in gross receipts may offset payroll taxes by the R&D credit.

We can help you explore the potential of the R&D credit for current and prior open tax years and talk about how your efforts to grow your business could generate cash savings on your federal (and state) tax returns via the R&D credit. Contact our R&D credit experts today.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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Time to Investigate Your Possible R&D Tax Credit

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New call-to-actionIf you rely on the hard sciences or use technology in your business to create or improve products or processes, you’re probably familiar with Research and Development (R&D) Tax Credit that can be used to reduce federal taxes by a portion of the related costs incurred.

In 2015, after 35 years of being extended over and over, the R&D credit has been made permanent—a significant change in policy that suggests a wider acceptance by the IRS of bona fide R&D credit claims.

Beginning with the 2016 tax year, your small business might qualify to claim the credit against your alternative minimum tax liability. (Qualifying small businesses include partnerships, sole proprietorships, and privately held corporations with average annual gross receipts of less than $50 million, among other conditions.) Certain eligible small businesses can also use the R&D credit against the employer’s old-age, survivors, and disability insurance liability (aka FICA taxes).

In addition, the Treasury has issued taxpayer friendly regulations that provide guidance on claiming a credit for internal use software (IUS) used principally for general and administrative purposes. R&D credit eligibility for IUS credit is subject to a higher standard and the proposed regulation provided clarity and relaxed the more stringent standards for qualification. There was also guidance that clearly acknowledged that some software development that was thought to be IUS was in fact eligible for the credit under the normal rules—for example, software design costs to improve or allow for third party interfacing.

As a result, you may have a better chance than ever of claiming the credit, one of the most generous tax incentives that the federal government offers to businesses. Now is the time to take a fresh look at your firm’s R&D efforts and your projects over the last couple of years, including software development. Any R&D activities that attempt to bring innovation into the business or its' products or services itself can be eligible for the credit.

In short, costs related to any activity that uses a technical discipline to improve a product or process may qualify. Almost any combination of using hard sciences with uncertainty as to the feasibility or design of a new or improved product or process provides opportunity to claim the federal R&D tax credit. (Note that many states also provide tax incentives for R&D activity.)

Industries That Could Benefit From the R&D Credit

Most manufacturers still don’t know they might qualify for the tax credit, which is designed to reward manufacturers who are bringing a new or improved product to market or who make the manufacturing quicker, cheaper, or greener. All types of manufacturers could be eligible for R&D credit benefits in future and prior tax years.

Similarly, many architectural and engineering firms may overlook activities that could qualify for the credit: green building design and energy efficiency innovation; structural engineering; experimenting with materials, HVAC/plumbing/electrical system designs for increased efficiencies; and high-tech equipment/manufacturing installation and design improvements.

Lastly, as discussed above, (1) software design costs to improve or allow for third party interfacing and (2) costs associated with IUS that is highly innovative may also be eligible.

The federal R&D may be a perfect financial break for your business if you know what to look for and how to navigate terms such as “Permitted Purpose” and “Elimination of Uncertainty”—in other words, the process to claim the credit.

Contact Us

We can help unravel the complexity and get you the R&D credit for your open tax years. Contact us today.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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R&D Credit Rules for Internal Use Software Clarified

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IRS proposed regs indicate that more costs may qualify for the credit than many people realized.

New call-to-actionRules proposed by the IRS suggest that costs a business incurs to develop software for internal use might be more likely to qualify for the Research and Development Credit than many taxpayers had previously understood. Internal use software (IUS) has always been held to a higher standard when it comes to qualifying for the R&D credit. The IRS guidance clearly suggests some software development costs that were previously thought to be IUS were in fact likely to be exempt, and it eases some requirements on software that is IUS when it comes to qualifying for the credit.

The new rules don’t change the four criteria that qualify an activity for the R&D credit:

  • It must be intended to discover information that would eliminate uncertainty concerning the development, improvement, or design of a product or business component.
  • It must be undertaken to discover information that is technological in nature.
  • The intended result must be useful in the development of a new or improved business component.
  • Substantially all of the activities must relate to a process of experimentation.

Once an activity meets these criteria, the business needs to determine if the activity relates to IUS. If it does, it must meet three additional criteria to qualify for the credit:

  • The activity must involve significant economic risk.
  • It must meet a high threshold of innovation.
  • No comparable third-party software is available for purchase.

Non-Internal Use Software

New call-to-actionOn one hand, the new rules clarify that some types of internally developed software are not IUS. Software that is developed to interact with third parties or to enable third parties to initiate functions or review data on a business’ systems likely no longer need to meet the additional criteria to qualify for the R&D credit. Examples of software that no longer needs to meet the three-part IUS test include bank transaction software, delivery tracking sites, and programs that allow a customer to search a business’ inventory.

Lowering the Bar for IUS

On the other hand, the IRS made it easier to comply with the three criteria that IUS must meet in order to qualify for the credit. The new rules allow that IUS meets the innovation test if the development “is or would have been successful,” a significant relaxation on the previous requirement that the development must be successful in order to meet the innovation standard.

R&D Credit for Manufacturers - Buffalo CPA On the whole, these new rules represent a significant easing of requirements on businesses that would like to claim the R&D credit for software that they develop themselves or pay outside contractors to develop. If your business incurs costs for software development, this is a great time to take a closer look at those costs in light of the new rules to find out if you may be eligible for additional credits.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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The Research & Development Credit: Do Any of Your Activities Qualify?

It’s all about the science of innovation, no matter what your business does.

R&D Tax Credit - Buffalo CPA FirmThe Research and Development (R&D) Tax Credit has been in the news a lot lately, especially because it was made a permanent part of the tax code in a long awaited move by Congress. Until that action, the credit was included as part of a group of provisions known as “extenders” that required frequent acts of Congress to keep them available to taxpayers. As a matter of policy this is significant and may suggest a wider acceptance by the IRS of bonafide R&D credit claims. Given this newfound reliability, it’s worth a look to see if any of your business’ activities might qualify for the credit.

New call-to-actionIn short, costs related to any activity that uses a technical discipline to improve a product or process may qualify for the R&D credit. The law requires that the taxpayer use some form of hard science principle to make throughput faster and/or more efficient and that there be some doubt as to the outcome. The credit is frequently used by taxpayers to offset the costs of research designed to improve their products or certain processes.

In many cases, architectural and engineering firms may overlook activities that could qualify for the credit and reduce their tax obligation. For instance, say a cloud services provider engages an architect and an engineer to design a more energy efficient server farm. Some of their costs related to the project, notably wages, could qualify. Also, if the architect designs and tests new floor plans and wall layouts in order to improve airflow, it may be able to claim the credit for costs related to that work.

In addition, (1) software design costs to improve or allow for third party interfacing and (2) costs associated with developing internal use business software that is highly innovative, may also be eligible for the credit.

Architectural/engineering/construction costs that should be evaluated for potential R&D credit benefits include:

  • Green building design
  • Energy efficiency innovation
  • Structural engineering
  • Experimenting with materials
  • HVAC/plumbing/electrical system design for increased efficiencies
  • High-tech equipment/manufacturing installation and design improvements

New call-to-actionIf your business engages in activities like these, you should discuss your eligibility for the R&D credit with a Freed Maxick professional familiar with its requirements. As long as the research is based on hard science and the outcome is not certain, you may qualify for significant tax savings.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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R&D Tax Credits—New Opportunities for Taxpayers

Manufacturers will also benefit from expanded R&D tax credit benefits.

New call-to-actionFederal tax rules have expanded in a manner that allows more activities to qualify for the research and development (R&D) tax credit and the taxes the credit can be used to offset.

More benefit from the credit means more cash available to manufacturers.

Key highlights from the R&D Credit expansion:

  • The Credit Is Now Permanent.
  • Eligible Small Businesses Can Use the Credit to Offset Alternative Minimum Tax.
  • Qualified Start-up Businesses Can Use the Credit to Offset FICA Tax.
  • IRS Noted Increasing Importance of Internal Use Software.
  • Website Design Costs for Third Party Interface.

R&D Credit for Manufacturers - Buffalo CPA For details—including examples of R&D activities, and specific New York State opportunities—download the full article from May's edition of The Bottom Line, co-authored by Freed Maxick CPAs and Tax Practice Directors, Samuel C. DiSalvo, CPA and Don L. Warrant, CPA.

Manufacturers conducting research activities should review their eligibility for federal and state level R&D credits. It is not uncommon for manufacturers to miss opportunities. For help minimizing or lowering your tax burden, contact us.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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New Opportunities for the Research and Development Tax Credit


R&D Tax Credits - Buffalo Rochester NYIn 2015, two new sets of published tax rules provided several favorable developments for U.S. taxpayers claiming the research and development (R&D) credits. Many taxpayers, including for example those who developed software interface for third parties to engage in business through the internet, could benefit from these rules.

Proposed treasury regulations, released on January 16, 2015, clarified the types of activities for developing internal use software (IUS) that are eligible for the credit. In addition, the “Protecting Americans from Tax Hikes” Act (PATH Act) enacted on December 18, 2015 established laws that promoted the ability of most taxpayers, including start-up businesses, to claim the credit.

Under the PATH Act, the following provisions were enacted into law:

  • The Credit is Now Permanent. The R&D credit, which had expired for amounts paid or incurred after December 31, 2014, was retroactively reinstated and made permanent. Fiscal year taxpayers whose tax year ended in 2015 might want to file amended returns to claim the credit for amounts paid or incurred on or after January 1, 2015, and before the end of their fiscal year.

  • Certain Small Businesses Can Use the Credit to Offset Alternative Minimum Tax. Beginning with the 2016 tax year, eligible small businesses (ESB) and their owners can claim the R&D credit against the alternative minimum tax liability. An ESB includes partnerships, sole proprietorships, and privately held corporations whose average annual gross receipts for the three-tax-year period preceding the tax year for claiming the credit does not exceed $50 million.

    R&D credits determined for a partnership or S corporation are not treated as ESB R&D credits by any partner or shareholder unless that partner or shareholder also meets the gross receipts test for the tax year in which the credits are claimed.

  • Certain Small Businesses Can Use the Credit to Offset Payroll Tax. Beginning with the 2016 tax year, a qualified small business (QSB) can elect to use the R&D credit against the employer’s old-age, survivors and disability insurance liability (i.e., FICA taxes). The election can be made for up to five tax years.

    The R&D credit is allowed to offset payroll taxes for the first calendar quarter which begins after the date on which the taxpayer files their tax return with the election. A QSB doesn’t include tax exempt organizations.
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    Generally, the portion of the credit eligible to offset payroll tax is limited to the lesser of $250,000, the current year credit, or for regular corporations, the amount of the credit carryforward from the tax year determined without regard to the election.

    The credit does not reduce the amount of the FICA payroll expenditure otherwise allowed as a deduction.

    Generally, a QSB is a company that has less than $5 million in gross receipts for the current tax year and no gross receipts for any tax year before the five tax year period ending with the current tax year.

The proposed regulations on internal use software included the following guidance:

  • IRS Noted the Increasing Importance of Computer Software for Businesses. The government explicitly narrowed the application of the IUS rules to general and administrative (backroom) functions. Activities associated with IUS have a much higher threshold and by limiting their application this effectively expanded the software activities eligible for the credit.

  • Website Design Costs. Many businesses develop websites to interface with third parties which may qualify for the credit. The IRS acknowledged that certain of these costs were never subject to the much more narrow IUS rules. As a result, taxpayers may have an opportunity to claim more credit. They should review their web design/third party interface costs for prior open years and file amended returns if they determine these costs were eligible for credit under the standard, less restrictive R&D credit rules.

For more insight, observations and guidance on the R&D Tax Credit, visit our Freed Maxick Guide to the Federal Research and Development Tax Credit webpage.

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