Research Tax Credit

The research tax credit is one of the largest business tax incentives available to taxpayers today. The research tax credit was first enacted in 1981 in response to a perceived slow down in U.S. research and a loss of economic competitiveness. It is hoped that the incentive would foster technological innovation in the United States, maintain United States research capabilities, and create and retain jobs in the United States.

Since first enacted, the research tax credit has been extended for short one or two year periods, has expired, and has been re-enacted numerous times. Despite its temporary status, the research tax credit has been very popular with taxpayers and politicians. Indeed, the research tax credit has consistently received high praise from industry groups and bipartisan support from politicians. There have been several proposals to make the research tax credit permanent; however, as of this writing, none of the proposals have been enacted into law.

The complex rules associated with the research tax credit prevents many taxpayers who qualify for the credit from taking advantage of the credit. This is especially true for small and medium sized businesses that do not have the expertise or resources to compute the research tax credit. Many taxpayers who do take advantage of the credit can only do so if they hire outside tax advisers to compute the credit for them.

There is a small industry of tax advisers who specialize in the research tax credit. These tax advisers are often part of a small team within large and regional accounting firms or tax consulting firms that specialize in the research tax credit. These tax advisers use varying methods to compute and document research tax credits. The process usually results in the creation of a technical report or research tax credit study.

We support taxpayers and tax advisers by providing them with tools and resources to carry out research tax credit studies.