Research and experimentation tax credits at both the federal and state levels reward companies for investing in innovation and improvements, regardless of the success or failure of the endeavor. These credits are not limited to those companies that solely provide product development. They are equally applicable to companies that develop new processes including improved efficiencies.
Hull & Knarr’s research and experimentation tax credit practice conducts retroactive engagements, current-year compliance work, and “a la carte” services including audit defense and contract reviews. Their professionals combine expertise in relevant engineering fields with insight into ever-changing IRS provisions and interpretations, enabling them to maximize research credits and reduce overall tax burden. Hull & Knarr provides documentation to withstand IRS and state tax authority scrutiny, as well as opportunities to expense capital costs under Section 174.
Do you qualify?
If your company engages in any of the following activities, it may be able to claim a research and experimentation tax credit:
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new product development |
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government-funded projects |
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certification testing |
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production process enhancements |
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process automation |
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creation of new manufacturing tools |
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redesign of existing products |
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new materials testing |
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production control software development |
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outsourcing of research activities |
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prototype development |
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conceptual design testing |
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development of new technology patent application |
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Retroactive Studies
Companies that qualify to for the R&E credit can typically go back three open tax years to claim credits that were generated during that time period. Often times, this results in refund checks at the federal (and certain state) levels for those companies who have been paying tax. Retroactive studies allow the taxpayer to establish a baseline on activities and methodologies for years going forward. Additionally, unused credits can be carried forward up to 20 years for those who have generated a credit, but who have not been in a tax paying position.
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Current Year Studies
Annual studies and reviews are becoming more commonplace due to the ever-increasing scrutiny of documentation by the IRS. For start-ups and/or companies who do not have contemporaneous documentation for years past, a current year study can be the foundation to build an audit-ready case to claim the credit now and for years to come. In addition, companies that have had a retroactive study performed can no longer assume that the same methodology can be utilized in going forward years.
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Risk Advisory Services
Many companies that have been taking advantage of the credit with claims that have not been ascertained through engineering-based studies can suddenly find themselves in a position where they need to substantiate their claims. For this reason, Hull & Knarr offers services such as audit defense and contract review as a more al a carte service offering. Hull & Knarr’s professionals have extensive experience representing their clients before the IRS and state regulatory agencies.
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