Spring 2015 issue of Horizons

Why Now? If you have not considered the research credit in the past, now is a great time to review your activities to determine your eligibility. From a legislative view, the President signed another extension of the research credit in December 2014. The credit has broad bipartisan support and has been extended numerous times over the years. By continually extending the credit, with talk of even making it permanent, Congress has shown its commitment to the research credit program to help support U.S. innovation. The U.S. Treasury Department has been doing its part lately by issuing rules that make the credit more attractive in terms of the calculations, as well as expanding the definition of qualified activities. In June 2014, the Treasury issued rules allowing a taxpayer to claim what is known as the Alternative Simplified Credit (ASC) calculation on an amended return for which no credit claim had previously been made. Prior to this, taxpayers were restricted from using the ASC calculation method on amended returns for which no credit claim had previously been made. One month later, in July 2014, the Treasury issued rules that expanded the definition of supply costs that qualify for the credit.

More recently, the Treasury has issued long awaited proposed regulations on software, providing clarity and guidance for taxpayers developing both internal use software, as well as external use software. Over the last several years, the courts have provided several taxpayer-friendly decisions helping companies claim the research credit. In October 2014, the tax court issued a decision providing more guidance and clarity on the research credit. In Suder v Commissioner , the court reaffirmed the use of estimates in calculating the credit, provided guidance on reasonable salaries for officers’ compensation in relation to the credit, allowed eleven of twelve representative projects as qualifying for the credit and allowed amounts paid to law firms for patent research and prosecution as eligible research expenditures. As evidenced by all of this activity, there have been many changes with the R&E tax credit in the last year alone. Even if you have taken the credit in the past, you will want to make sure you are in compliance with all the recent changes and that you are maximizing the credits available to you.

RubinBrown’s Research & Experimentation Tax Credit Services Group RubinBrown’s Research & Experimentation Tax Credit Services Group specializes in helping companies take advantage of R&E Tax Credits and developing the processes to continue doing so in the future.

Richard Wile, MBA Partner-In-Charge R&E Tax Credit Services Group 314.290.3367 richard.wile@rubinbrown.com

Rich Pickett Manager R&E Tax Credit Services Group 314.678.3610 richard.pickett@rubinbrown.com

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