“RIG’s expertise led to results that far exceeded our expectations.  As a result, we value the ongoing relationship.”

Matt Black, Tax Director
The McClatchy Company

Research and Development Credit

History

The R&D Tax Credit was introduced in 1981 and is a non-refundable dollar-for-dollar offset of income tax liability.  The credit is available at both the federal level and in most states (including California).  In 2004, Treasury finalized Regulations for claiming the credit that eliminated the “Discovery Test” and relaxed the documentation requirements.  The Alternative Simplified Credit (ASC) was introduced shortly thereafter.  These changes have been very taxpayer-friendly and allowed many companies the opportunity to claim the credit for the first time.  Congress extended the federal credit with the Economic Stabilization Act of 2008 through the end of 2009 and it is expected to be renewed in early 2010. The California credit continues to be available as well and is a permanent credit.

Qualified Research Activities (QRA’s)

The R&D tax credit can provide a tax-saving opportunity to companies that devote time and resources to operational activities including (but not limited to):

• New or innovative products
• Process improvements
• Design and engineering staff
• Prototype development
• Enhancement of existing products
• Patent development
• Qualification testing
• PhD research

Qualified Research Expenses (QRE’s)

After identifying QRA’s, the following related costs are captured to calculate the credit:

• Wages
• Supplies
• Contract Research

Qualifying Industries

This credit applies not only to high-tech companies employing scientists and engineers, but also companies in a variety of industries including (but not limited to):

• All Manufacturing
• Tool & Die
• Winemaking
• Chemical Companies
• Software Development
• Agribusiness
• Waste Management
• Food Processing
• Architectural and Engineering Firms

Tax Benefit

The credit is generally equal to 13% of QRE’s and is a dollar for dollar match on both federal and state taxes owed.  Taxpayers can carry forward the credit for up to 20 years and may amend any open prior tax years to claim refunds.  In 2006, more than 15,000 companies claimed the credit with a benefit of over $8 billion.

Our Approach

We take project lists and tie expenses to them with evidence such as contemporaneous documents and testimony.  We work with the client to determine project-based costs even though they do not have a job costing system.  This meets the most compelling argument by the IRS and FTB head on and sets us apart from our competitors.  We typically offer contingent fee arrangements based upon the credits utilized.  Unlike other providers, fees are not paid on a fixed fee or hourly basis nor are fees calculated based on credits generated.  We pride ourselves on completing our studies in a timely and efficient manner that is non-intrusive yet thorough in our methodology.  In addition, audit support is built into every contract.  Our tax controversy and audit defense team ensures that our work will stand up to examination.  It is, in effect, a warranty on our services.  Your company may be entitled to significant cash refunds for current operational activities.  Call or email us for a free consultation.