Federal and State R&D Tax Credits
Ron Wainwright will update participants on the latest developments and opportunities regarding federal and state R&D tax credits. Mr. Wainwright brings to the discussion expert knowledge and over 25 years of experience working directly with clients and IRS authorities. He will provide a quick refresher of the R&D credit if you are not familiar with this tax credit, and then discuss relevant examples and nuances within federal and state credits.
· Did you know that only 1/3 of eligible companies actually claim the Research and Development Credit? The federal credit is typically equal to 14-20% of qualifying expenses and the majority of companies that claim the credit do not receive the full amount they are entitled to. Additionally, 36 states, including Florida also offer similar credits. Gain a better understanding of what constitutes a qualifying expense and how to qualify by attending this webinar
· Refresh your understanding of what qualifies as R&D and learn how much your business may be eligible to receive
· Apply the start-up company criteria to determine if clients may use credits against payroll tax
· Many states also offer incentives for research and development. Learn how to potentially claim R&D credits on both your state and federal return
What is the R&D Tax Credit? 00:04:23
Four Myths Surrounding the R&D Tax Credit 00:04:10
History of the Credit 00:08:27
Examples of State R & D Tax Credit 00:11:28
PATH Act Enhancements 00:12:42
R&D Credits Permananent and Retroactive 00:16:05
AMT Offset with R&D Credits 00:21:00
AMT Offset with R&D Credits - Example 00:23:21
AMT Offset with R&D Credits - Treasury Questions 00:24:24
Example - Small Business 00:25:11
R&D Credits Elected as Payroll Tax Credit 00:26:04
R&D Credits Elected as Payroll Tax Credit (cont.) 00:28:15
R&D Credits Elected as Payroll Tax Credit - PATH Act and IRC 41(h)(3) 00:28:57
R&D Credits Elected as Payroll Tax Credit - Example 00:30:20
R&D Credits Elected as Payroll Tax Credit - Example (cont) 00:31:31
Example Start Up 00:31:41
Why Now and Not Before? 00:32:36
Qualifying Industries Examples 00:36:32
General Manufacturing 00:37:08
Food Science 00:39:15
Software Development 00:41:16
Internal Use 00:42:09
IRC Section 41 - The Four-Part Test 00:42:48
Business Component Test 00:43:28
Business Component 00:43:57
Technical Uncertainty Tests 00:44:54
Excluded Activities 00:45:16
Example - General R&D 00:46:03
Form 6765 Example 00:46:10
How Much Potential Savings? 00:47:12
Qualified Research Expenditures (QRE’S) 00:48:40
Determining Qualifying Wages 00:50:25
Contract Research 00:51:50
R&D Credit Considerations 00:53:01
Presentation Closing 00:59:06
- Alternative Minimum Tax (AMT) 00:21:00
- IRC 38(c)(5)(C) 00:21:17
- Low Income Housing Tax Credit 00:09:11
- PATH Act 00:12:25, 00:12:42
- Qualified Restoration Expenses (QRE) 00:20:05
- Research and Development Tax Credit (R&D) 00:02:58, 00:14:01
- Section 174 00:12:28
- Tax Cuts Jobs Act 00:08:37
Alternative Minimum Tax (AMT): Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax.
IRC Section 38(c)(5)(C): Defines an “eligible small business” as a business with average annual gross receipts of $50 miliion or less for the three preceding taxable years. This includes a corporation with stock that is not yet publicly traded, a partnership, or a sole proprietorship.
Low Income Housing Tax Credit (LIHTC): The Low-Income Housing Tax Credit (LIHTC) is a dollar-for-dollar tax credit in the United States for affordable housing investments. It was created under the Tax Reform Act of 1986 (TRA86) and gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans. LIHTC accounts for the majority (approximately 90%) of all affordable rental housing created in the United States today.
PATH Act: The Protecting Americans from Tax Hikes (PATH) Act was created to protect taxpayers and their families against fraud and permanently extend many expiring tax laws. The law, which was enacted in December of 2015, affects the timing of certain refunds filed before February 15, 2017.
Qualified Restoration Expenses (QRE): Qualified Restoration Expenses (QRE) are the expenses which are eligible for consideration in the calculation of Tax Credit totals.
Research and Development Tax Credit (R&D): The R&D tax credit is for taxpayers that design, develop, or improve products, processes, techniques, formulas, or software. It's calculated on the basis of increases in research activities and expenditures—and as a result, it's intended to reward companies that pursue innovation with increasing investment.
Section 174: Section 174 generally allows taxpayers to deduct R&E expenditures as they are paid or incurred or to treat them as deferred expenses that can be amortized of a period of no less than 60 months.
Tax Cuts and Jobs Act: The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, Pub.L. 115–97, is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs Act, that amended the Internal Revenue Code of 1986.
A Tax Partner with more than 25 years of experience in the area of taxation, Ron serves a diverse client base including multi-national, public and closely held companies. Clients who rely on Ron’s guidance inhabit a number of industries including manufacturing, distribution, technology and life sciences, real estate and construction, and private equity. Based in the Firm’s Raleigh office, Ron guides clients through a number of taxation matters including international and domestic tax provisions,... View Full Profile