With Congress permanently extending the research and development (R&D) credit as a result of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act),Â more U.S. businesses may now be eligible for a significant tax savings opportunity based on qualified research expenses. While start-ups and small businesses may see a greater benefit from the changes to the credit, industries such as construction, manufacturing and technology could take advantage of this tax incentive.
Aimed at incentivizing U.S. businesses investing in research and experimentation, the dollar-for-dollar credit against taxes owed or paid was finally made permanent after 16 years of temporary extensions. The PATH Act also broadened the impact of the credit on start-ups and small businesses with two major provisions:
Unfortunately, many falsely believe they must have a laboratory or other formal R&D process to qualify for the credit when, in fact, that simply isnâ€™t the case. The key pivotal factor is whether your efforts and intellectual capital designed, considered or actually created something new, or at minimum, incrementally changed something so it is now considered new.
Consider these four questions to determine if your activities potentially qualify for the R&D tax credit:
If youâ€™ve answered yes to the questions above, it is highly likely your business contains qualifying R&D criteria and the Internal Revenue Service owes you money. With a three-year look-back period on the table, which could include a businessâ€™ most profitable years, it possibly is a significant amount.
Contact Doeren Mayhewâ€™s dedicated Tax Incentives Group toÂ help evaluate your company’s eligibility and get you the credit you deserve.
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