The R&E Tax Credit (or “R&D” or “Research” Tax Credit) rewards taxpayers for the development and/or improvement of a product, process, formula, invention, technique or software. The credit has been in existence since the early 1980s and was created to incentivize companies to invest in technologies that facilitate product and process development, leading to growth in productivity, profitability, investment in equipment, and job creation.Although originally intended for companies within industries that fit the more traditional definition of research such as pharmaceutical and defense, recent changes in the regulations have opened up the credit to a wider variety of manufacturing, engineering and professional services companies.
- The credit may be claimed for the current tax year, as well as retroactively for all open tax years
- Unused tax credits may be carried forward for up to 20 years
- The credit also offsets the alternative minimum tax for qualified small businesses
- Eligible startups can use the credit to offset up to $250,000/year in payroll taxes
- In addition to the federal credit, currently, around 35 states have a state credit
RubinBrown’s Research & Experimentation Tax Credit Service Group specializes in helping companies take advantage of R&E Tax Credits and developing the processes to continue doing so in the future.
R&E Tax Credit Industry Utilization
The R&E Tax Credit is utilized in various industries including:
- Biotechnology & agricultural
- Computer hardware & software
- Food & beverage
- Life sciences
- Medical devices
- Tool/Die & machine building
Additionally, the R&E tax credit is also utilized in the contracting and professional services fields including construction firms, mechanical, electrical, and plumbing (MEP) contractors, and architectural and Engineering companies.