Pop Quiz! What’s Your R&D Tax Credit IQ?

Written by Corporate Tax Incentives. Updated Feb 2, 2019.

PopQuizNothing like a pop quiz to wake you up and get one’s juices flowing! You probably landed on our blog site thinking you could just passively sit there and read about the R&D Tax Credit, an income tax credit that can provide a dollar-for-dollar reduction in a company’s federal tax liability. Well, not today dear reader…not today.

Take a moment to put your thinking cap on and get ready to demonstrate what you know…or think you know…about the Federal Credit for Increasing Research Activities under Internal Revenue Code §41 and 174, also known as the “R&D Tax Credit”.

Already Claiming R&D Tax Credits? New Corporate Tax Rates Provide Additional Benefit

Congress created this tax incentive to reward success and spur continued innovation and growth. Don’t pay more tax than you should. What you don’t know may be costing you!  

True or False: Companies of all industries and sizes are eligible for the federal R&D tax incentive.

TRUE - Any company that designs, develops, or improves products, processes, techniques, formulas, inventions, or software may be eligible.

True or False: R&D Credit only applies to scientific research, like technology or pharmaceuticals.

FALSE - From a tax perspective, the definition of research is much broader to satisfy the legal tests for the R&D tax credit. Much of the work performed by technical personnel, such as design engineers, CAD designers, production supervisors, operation technicians, CNC engineers, and so on, potentially qualifies as research activity.

Which of the following typically represent research activity that can qualify for R&D tax credits?

a.  Developing new, more efficient systems or processes, or the optimization and improvement of                     existing plant operations
b.  Development of energy-efficient or green features
c.  Incorporating new technologies and materials to improve product designs
d.  Developing, evaluating, and testing samples and prototypes
e.  All the above

Answer is E – Much of the research activity that your business performs is potentially eligible for the credit.

True or False: R&D Credits are only for companies that discover something new.

FALSE - Most businesses that qualify for the R&D tax credit are improving their existing products or processes. No Einstein’s needed to claim R&D tax incentives.

Which of the following is not a qualified expenditure as it relates to qualified research activities?

a.  Salaries and wages
b.  Supply costs
c.  Concert tickets
d.  Contractor costs
e.  Equipment rental/lease

Answer is C - The R&D tax credit has the potential to increase your company’s tax savings when you capture all qualified expenses, but it won’t get you in to a concert.

True or False: For almost 20 years, CTI’s elite tax professionals have maximized credits and incentives for small and medium size businesses with proven project methodology and unparalleled personalized service.

TRUE - Partner with CTI’s team of attorneys, CPAs, engineers, and scientists with ‘Big 4’ experience to identify which activities are eligible for the R&D credit and what expenses can be used to maximize tax savings for your business.

Show your high IQ by choosing to work with CTI

Partnering with CTI’s experienced tax consultants is a sure way to secure greater tax credits and power success for your business. Schedule your complimentary consultation today.


What Can R&D Do For You?  Discover a practical approach to maximizing your federal research and  development tax credit. Download Guide

Topics: R&D Tax Credit

Corporate Tax Incentives

Written by Corporate Tax Incentives

CTI is a tax incentives specialty firm that secures greater tax credits for businesses with our proven project methodology and unparalleled personalized service. For almost 20 years, our elite tax professionals have proactively engaged clients to deliver unmatched value with transparency and efficiency thorough secure in-house software, comprehensive audit-ready deliverables, and 24x7 access to real-time dashboards. We are tax consultancy experts passionate about maximizing credits and incentives for powering the success of your business.