Earlier this week, The US Department of the Treasury announced planned modifications to the Federal R&D Tax Credit (see TD 9666 here, press release from the office of Sen. Christopher Coons here) which will allow taxpayers to elect the Alternative Simplified Credit (“ASC”) method for calculating the R&D Credit on an amended tax return. Previously, taxpayers were limited to the “regular credit” method for calculating the credit when seeking R&D Credits for prior tax years. Now, with the ability to elect ASC, many taxpayers who were either unable or severely limited in their ability to capture prior years R&D Credits now have a ready-made solution. Many of our clients will likely now realize significant additional cash savings thanks to these modifications, and we anticipate greater interest in the R&D Credit going forward, since it is now easier to capture the benefit retroactively.
Here are some examples of companies who will likely benefit from the modifications:
- Companies that have been in business for more than 5-10 years and have not taken advantage of the R&D Tax Credit.
- Companies with a recent significant year-over-year increase in research and development expenditures.
- Companies that may have attempted to capture the R&D Tax Credit in prior years but ultimately failed or were greatly inhibited due to issues involving the R&D Credit “regular credit” method’s base amount and fixed base percentage calculations.
TRCG will continue to provide updates on this important topic as events progress. Until then, should you have any questions, please do not hesitate to contact us at email@example.com or 866.244.4170.