Is Your Company Sitting on Hidden Cash?

Maybe you’ve heard of the Research and Development (R&D) tax credit but didn’t believe you would qualify. You’re not alone! Based on our experience, that’s the most common reason why architects, engineers, and manufacturers miss out on the benefits of this credit.

Myth #1: My Company Doesn’t Do Anything That Would Qualify.

The primary purpose of the Federal R&D Tax Credit is to encourage and reward businesses that introduce a new or improved product to not only the marketplace but also those that improve the process. Consider, for a moment, has your company initiated a process to make a product quicker, less expensive, or more environmentally friendly. Most companies (unless they have been stuck doing things the same way for the past decade), may be a candidate for the credit.

Myth #2 – The Type of Research We Do Isn’t Covered Under the Credit.

The R&D tax credit extends to both basic and applied research. It’s a way to reward problem solvers.

Typically, applied research focuses on a specific problem or opportunity that may result in economic gain or social improvement. When a company conducts applied research, it considers things that might work and attempts to narrow down feasible solutions. In short, applied research answers a question to solve a problem.

On the flip side, basic research has a much broader scope. This research type involves scientists and/or researchers who will often rule out things that won’t work and identify products or processes that might work. Basic research attempts to learn things that aren’t necessarily part of a solution to a problem; rather, it is the gathering of knowledge that we don’t already possess.

Myth #3: My Company is Too Small to Take Advantage of the Credit.

Even small and mid-sized organizations can use the R&D credit to make a nice deposit into your cash flow. Thanks to recent legislation, the R&D credit is now permanent, much smaller, and business-friendly. Eligible Small Businesses (defined as a business with less than $50 million in average gross receipts for the three preceding years) are now able to use the R&D tax credit to offset their alternative minimum tax (AMT).

For more information on the R&D credit, watch Tom Moul’s on-demand webinars, The R&D Tax Credit for AE Firms or Manufacturing Tax Strategies for Growth.