Research and Development Tax Credits Preserved in Tax Reform at the Last Minute

The Senate's version of the bill led to an uproar from many businesses.

Corporations almost lost one of the most significant tax credits available to them through tax reform. The R&D Tax Credit which has been in place for decades and finally made permanent years ago, was narrowly saved last month in the tax reform negotiations. The Senate pushed in their final tax reform blueprint to preserve and enhance corporate alternative minimum tax (AMT), a parallel tax structure designed to ensure companies don't take too many deductions. The Senate's version of the bill led to an uproar from many businesses, including Engineered Tax Services, which jointly told the Senate that their version with AMT could effectively eliminate beneficial tax credits, such as one for research and development.

Fortunately, with the efforts of Engineered Tax Services and Julio Gonzalez, Tax Reform Expert, the corporate AMT was ultimately scrapped in the final bill, which also included corrections for several other errors in the House and Senate versions.

The R&D Tax Credit is meant to stimulate innovation, manufacturing and technical design within the United States. While available since 1981, tax regulations finalized in 2003 significantly increased the types of activities that qualify for the credit. Companies now only need to be trying to develop products or processes that are new to them, as opposed to new to their industry. “Most industrialized countries have an R&D tax credit, many larger than ours, so it was important to keep this incentive for our US companies from a global competitive standpoint,” says David Mayer, National Director for Engineered Tax Services.

Companies of all sizes and in many different industries can qualify for these dollar-for-dollar tax credits. Some of the industries that qualify for the R&D credit include manufacturers, tool and die / job shops, plastic mold injection, software developers, architectural and engineering firms, construction contractors, food processors, chemical companies, agribusiness and apparel/textile companies, among others.

Engineered Tax Services works with CPA firms across the country to help their clients identify and capture federal and state R&D tax credits. Our R&D tax credit experts, made up of attorneys, CPAs and engineers, conduct a thorough and yet non-evasive analysis into a company’s operations to identify all qualifying R&D credit activities and related expenditures in order to maximize the company’s credits.

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