The Federal Credit for Increasing Research Activities, or R&D Tax Credit, as it is commonly known, was enacted in 1981. Throughout its history, it has changed section numbers, been temporarily extended 16 times, lapsed for a year, and was finally made permanent by the PATH Act at the end of 2015. This dynamic business incentive has evolved so much over time due not only to the nature of tax law but also because of the historical bipartisan support it has enjoyed. Both political parties have leveraged the previously non-permanent credit as a tool for pushing through legislation that was otherwise unpopular with the other side of the aisle. However, the original intent of the R&D Tax Credit in the Kemp-Roth Tax Cuts (Economic Recovery Tax Act, or “ERTA”) of 1981 was not to create a legislative chess piece so politicians could quibble over “budgetary constraints”. The intent was to provide a tax break for businesses and simultaneously encourage domestic innovation by U.S. taxpayers.
With all the changes to the R&D Tax Credit over the last decade, from the fall of Tier 1 and contingent fees to Trump’s Tax Reform and the onslaught of specialty providers and consultants, where does that leave the American taxpayer? What do business owners and tax preparers need to know about the R&D tax credit now in order make the best investment of their time and money? Les Bryson tackles this and more in: The Current R&D Landscape: What Do We Do Now?