On August 16th, President Biden signed the Inflation Reduction Act (IRA) into law, and although there were many provisions, there are a few that stand out for business owners. One of which being that there are additional funds for the Internal Revenue Service (IRS). We will explain what this means to taxpayers, specifically ones claiming business tax credits and what they can do to protect themselves from IRS examinations.
Are you an elder sibling? Do you have one? If so, then you know the oldest child of a family is often fated into an involuntary role: the confident, the mentor, the counselor. The younger brood look to the first-borns to show them the way.
Fifty-four years ago, the U.S. government established the Agriculture Improvement Act – or ‘Farm Bill’ - to address agricultural, conservation, forestry, nutrition, and food policy. Since it’s implementation, congress reviews and updates legislation approximately every five years.
Being one of the Seven Natural Wonders of the World, Arizona’s Grand Canyon National Park is a breathtaking and humbling vision to behold. But to fully appreciate its wonder, hiking down into the canyon is a must. With dozens of trails available to visitors, hiking the canyon is a popular activity. However, despite all its beauty, taking to the trails that snake down along the walls of the Grand Canyon can be a demanding, even treacherous endeavor.
The Federal Credit for Increasing Research Activities (“R&D”) tax credit has been available to companies since 1981, but the complex computational rules surrounding the credit have traditionally been a hurdle for companies to claim the benefit.
Client Profile:
| Industry: Internet Security Software |
Previous R&D Provider: None (completed internal) |
According to the U.S. Department of Agriculture, U.S. companies produce over $300 billion of agriculture products annually. Many of these companies are not aware that their research and experimentation activities and related expenses to develop these new or improved products might be eligible for valuable federal and state research and development (R&D) tax credits. For many U.S. agriculture companies, the R&D tax credit can significantly reduce their income tax liability and increase much needed cash flow into their businesses. Below is a case study of a taxpayer in the agriculture business who was able to utilize hundreds of thousands of dollars of R&D tax credits by identifying and documenting their R&D activities.
Manufacturing companies are a perfect fit for federal and state R&D tax credit. While over 60% of the companies claiming federal R&D tax credits are in the manufacturing industry, many manufacturers are still unaware that their company’s manufacturing activities are eligible for the credit. You do not have to be a high-technology or medical research-intensive company to enjoy the financial benefits of these valuable R&D tax credits. For many U.S. manufacturing companies, the R&D tax credit remains one of the quickest ways to accelerate their growth and bottom line profitability.
Starting in 2018, federal corporate tax rates will be reduced from 35% to 21%. While the new lowered corporate tax rate would suggest that credits against tax, such as the R&D tax credit under Internal Revenue Code (IRC) Section 41, would be less valuable as corporations would likely have lower taxes to offset. While this certainly could be the result for some corporate taxpayers, the R&D tax credit actually increases as a result of these new statutory provisions.
The R&D Tax Credit and the software industry complement each other but companies need to know what activities are potentially qualified in order for them to take full advantage of these benefits and opportunities.
