December 28, 2015
Congress enhanced the r&d tax credit opportunity for taxpayers with the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015.
1) the credit was made permanent
2) the credits can be used to reduce payroll taxes for certain companies
3) the credits can be used to reduce AMT for certain taxpayers
These changes are the most sweeping enhancements benefiting taxpayers since the r&d credit was enacted.
One of the biggest roadblocks preventing the immediate use of the credits has just been removed. Many taxpayers generated sizable credits only to carry them forward year after year since the rules prevented them from reducing their alternative minimum tax liability. With this restriction removed many taxpayers will be able to convert their credits into cash much more quickly.
Start-up and smaller companies with less than $5 million in sales no longer need taxable income to use their credits. They can now reduce their payroll tax liability by their r&d credits.
May 21, 2015
The House voted on May 20th to permanently restore the research and development tax credit. The House passed a similar bill in May 2014, which was negotiated into a one-year extension applying only to 2014. The fate of this House bill waits to be seen, but President Obama has threatened to veto the House bill.
December 23, 2014
The research and development tax credit officially expired at the end of 2013. The Tax Increase Prevention Action of 2014 (TIPA) was passed by Congress on December 16th and signed into law by President Obama on December 19th. The r&d credit was approved retroactive to the beginning of calendar year 2014. Similar to last year, the extension is for one more year and expires on December 31, 2014. This marks the 16th time Congress has extended the R&D credit since it was first created in 1981.
December 2, 2014
FedEx Corporation v. United States, No. 08-2423 (2009)
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Internal-use software can be qualified
Union Carbide v. Commissioner, T.C. Memo (2009)
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Process-related r&d is qualified
Trinity Industries, Inc. v U.S., U.S. District Court, N.D. Texas, 2010-1 U.S.T.C. 50,219 (2010)
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One-off’s can be qualified
TG Missouri Corporation v Commissioner 133 T.C. No 13, (2009)
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Tooling can be qualified
U.S. v Arthur R McFerrin; Dorothy F McFerrin, No. 08-20377 (2009)
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Include “trial and error”
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Direct supervision of r&d activity qualified
Shami v Commissioner (T.C. Memo 2012-78)
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Executives may be included (and Cohan rule used) if they play role in r&d
Bayer Corp. v. United States (No. 2:09-cv-00351) 2012
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Limits use of sampling for identification of qualified business components
Suder v. IRS – T.C. Memo 2014-201 (2014)
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Senior mgt may be included
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Wage allocations may be estimated by knowledgeable & credible persons (reinforced Cohan rule)
