Category Archives: American Tax Credit News

Season’s​ ​Greetings​ ​from​ ​your​ ​friends​ ​at​ ​TCA!

Tax Credit Advisors BulbWith​ ​all​ ​the​ ​news​ ​developing​ ​in​ ​Washington​ ​about​ ​the​ ​proposed​ ​tax​ ​overhaul,​ ​it’s​ ​important​ ​to remember​ ​that​ ​the​ ​existing​ ​tax​ ​rules​ ​are​ ​fully​ ​in​ ​place​ ​for​ ​the​ ​2017​ ​filing​ ​year.​ ​That​ ​means​ ​that when​ ​you’re​ ​filing​ ​your​ ​taxes​ ​next​ ​year,​ ​it​ ​is​ ​important​ ​to​ ​consider​ ​the​ ​federal​ ​Research​ ​Credit and​ ​the​ ​various​ ​state​ ​credits​ ​that​ ​might​ ​also​ ​apply.

The​ ​federal​ ​research​ ​credit​ ​dates​ ​back​ ​to​ ​1981,​ ​and​ ​you​ ​can​ ​expect​ ​to​ ​receive​ ​tax​ ​credits​ ​for eligible​ ​experimental​ ​development​ ​costs​ ​that​ ​your​ ​business​ ​performed​ ​during​ ​the​ ​2017​ ​filing year​ ​that​ ​are​ ​properly​ ​documented.​ ​This​ ​important​ ​incentive​ ​program​ ​​can​ ​amount​ ​to​​ ​​as much​ ​as​ ​​ten​ ​percent​​ ​of​ ​your​ ​qualified​ ​spending​ ​on​ ​people,​ ​materials,​ ​and​ ​related​ ​investments dedicated​ ​to​ ​figuring​ ​out​ ​how​ ​or​ ​whether​ ​you​ ​can​ ​make​ ​something​ ​new​ ​or​ ​improved​ ​by experimental​ ​means.​ ​This​ ​applies​ ​not​ ​only​ ​to​ ​new​ ​products,​ ​but​ ​also​ ​to​ ​improved​ ​ones,​ ​as​ ​well as​ ​new​ ​and​ ​improved​ ​processes,​ ​software​ ​and​ ​equipment.​ ​Also,​ ​because​ ​this​ ​is​ ​a​ ​tax​ ​credit​ ​and not​ ​merely​ ​a​ ​deduction,​ ​the​ ​credit​ ​value​ ​results​ ​in​ ​a​ ​​dollar​ ​for​ ​dollar​​ ​reduction​ ​in​ ​your​ ​tax​ ​bill!

In​ ​addition​ ​to​ ​the​ ​federal​ ​credit,​ ​numerous​ ​state​ ​credits​ ​are​ ​also​ ​in​ ​place.​ ​No​ ​matter​ ​where​ ​in​ ​the US​ ​you​ ​are​ ​located,​ ​we​ ​would​ ​be​ ​happy​ ​to​ ​help​ ​you​ ​figure​ ​out​ ​whether​ ​you​ ​qualify​ ​for​ ​these programs,​ ​and​ ​to​ ​help​ ​you​ ​file​ ​successful​ ​claims​ ​if​ ​you​ ​do.​ ​These​ ​federal​ ​and​ ​state​ ​benefits​ ​are intended​ ​to​ ​encourage​ ​companies​ ​to​ ​keep​ ​engineering,​ ​manufacturing,​ ​and​ ​software​ ​jobs​ ​here in​ ​the​ ​United​ ​States.

Things​ ​to​ ​keep​ ​in​ ​mind​ ​when​ ​considering​ ​research​ ​and​ ​development​ ​tax​ ​credits​ ​here​ ​in​ ​North America:

Many​ ​industries​ ​benefit​ ​from​ ​Research​ ​and​ ​Development​ ​tax​ ​credits

It’s​ ​important​ ​not​ ​to​ ​discount​ ​your​ ​industry​ ​just​ ​because​ ​it​ s​​eems​ ​​like​ ​you​ ​might​ ​not​ ​qualify.​ ​Any company​ ​that​ ​engages​ ​in​ ​experimental​ ​development​ ​can​ ​be​ ​eligible.​ ​The​ ​important​ ​thing​ ​is​ ​that the​ ​experimentation​ ​must​ ​be​ ​intended​ ​to​ ​develop​ ​or​ ​improve​ ​an​ ​existing​ ​product​ ​or​ ​process.​ ​For example,​ ​even​ ​a​ ​manufacturer​ ​of​ ​wire​ ​coat​ ​hangers​ ​can​ ​qualify​ ​so​ ​long​ ​as​ ​the​ ​aim​ ​of​ ​the experimental​ ​effort​ ​is​ ​to​ ​develop​ ​a​ ​new​ ​or​ ​improved​ ​technical​ ​capability.​ ​Such​ ​a​ ​company​ ​might try​ ​to​ ​reduce​ ​scrap​ ​rates,​ ​or​ ​improve​ ​cycle​ ​times,​ ​or​ ​reduce​ ​part​ ​weight,​ ​or​ ​engage​ ​in​ ​any​ ​of​ ​a number​ ​of​ ​other​ ​activities,​ ​all​ ​of​ ​which​ ​can​ ​be​ ​eligible​ ​for​ ​tax​ ​credit​ ​support.

Your​ ​company​ ​does​ ​not​ ​have​ ​to​ ​be​ ​of​ ​a​ ​certain​ ​size​ ​to​ ​be​ ​eligible​ ​to​ ​claim​ ​research​ ​and development​ ​tax​ ​credits

Big​ ​or​ ​small​ ​businesses​ ​can​ ​claim​ ​tax​ ​credits,​ ​as​ ​long​ ​as​ ​the​ ​processes​ ​they​ ​are​ ​developing​ ​and testing​ ​meet​ ​the​ ​eligibility​ ​criteria.​ ​Millions​ ​of​ ​tax​ ​credit​ ​dollars​ ​are​ ​left​ ​on​ ​the​ ​table​ ​every​ ​year because​ ​many​ ​companies​ ​think​ ​they​ ​are​ ​too​ ​small​ ​to​ ​claim​ ​these​ ​credits.​ ​Large​ ​conglomerate corporations​ ​aren’t​ ​the​ ​only​ ​ones​ ​that​ ​can​ ​perform​ ​research​ ​and​ ​receive​ ​funding.​ ​It’s​ ​important to​ ​know​ ​that​ ​even​ ​your​ ​small​ ​business​ ​can​ ​compete​ ​and​ ​claim​ ​research​ ​and​ ​development​ ​tax credits​ ​as​ ​well.​ ​Most​ ​US​ ​taxpayers​ ​who​ ​engage​ ​in​ ​experimental​ ​development​ ​can​ ​qualify regardless​ ​of​ ​company​ ​size.

Canadian​ ​companies​ ​can​ ​also​ ​benefit​ ​from​ ​tax​ ​credits

We​ ​also​ ​offer​ ​our​ ​services​ ​in​ ​Canada,​ ​where​ ​the​ ​federal​ ​Scientific​ ​Research​ ​and​ ​Experimental Development​ ​(SR&ED)​ ​credit​ ​serves​ ​a​ ​similar​ ​purpose.​ ​A​ ​number​ ​of​ ​provincial​ ​credits​ ​are​ ​also available​ ​and​ ​we​ ​would​ ​be​ ​happy​ ​to​ ​help​ ​you​ ​navigate​ ​the​ ​rules​ ​and​ ​requirements.​ ​This​ ​is​ ​all about​ ​keeping​ ​jobs​ ​here​ ​in​ ​North​ ​America!

As​ ​always,​ ​Tax​ ​Credit​ ​Advisors​ ​is​ ​here​ ​to​ ​help.​ ​If​ ​you​ ​want​ ​to​ ​find​ ​out​ ​if​ ​your​ ​company​ ​is​ ​eligible for​ ​research​ ​and​ ​development​ ​tax​ ​credits,​ ​we​ ​can​ ​assist​ ​you.​ ​Contact​ ​us​ ​today​ ​to​ ​get​ ​started.

New Tax Code Overhaul Proposals Could Affect You

Money EnvelopeThere is currently a lot of uncertainty about a proposed tax overhaul coming as early as this summer. With information on the web, social media, and other places, it can be hard to discern how this tax overhaul may affect you and/or your business. Call us with any questions and we’ll provide the best analysis we can as more information becomes available.

Overhauling tax codes is never an easy task. Along with the time it takes to pass these new rules and regulations through Washington, long-term effects may not be seen immediately, and any benefits or detriments can take years to fall into place. Tax Credit Advisors keeps up to date with all of these tax codes, rules, and regulations to know how to better serve you and make the most out of your dollars.

The Federal Research Credit has been helping manufacturing and software companies to keep engineering and software jobs here in the US since 1981, and was kept in place after the most recent overhaul in 1986. We are here to help you claim your benefits successfully both at the federal and state levels, no matter what happens in Washington.

Thank you as always for the opportunity to serve you!

Research & Development for Software Updated Regulations

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Binary Code image courtesy of DeviantART user hefeigal

On October 4, 2016, the IRS published new regulations in the Federal Register detailing the rules for claiming software development under the Section 41 Research Credit. These rules are provided in Treasury Decision 9786 (opens PDF in new window). In a nutshell, the new rules clarify three important points:

1) Software that is developed for sale to third parties qualifies for the credit as long as the effort satisfies the key criteria. That is, the software must attempt to achieve a new or improved capability that attempts to overcome technological uncertainty.

2) Some internal-use software that is intended to provide new or improved interaction with third party customers or other external entities can also qualify, provided that a process of experimentation was required in order to achieve the new capability.

3) Software that is intended solely for internal use, such as an inventory control system or the like) is generally not eligible for tax credit support unless the software itself represents a significant gain in the field of computer science.

These basic findings are not new, but the latest update provides clarity to passages that were formerly somewhat ambiguous. Ultimately, the goal of the federal tax credit is to encourage companies to take financial risks, and to do so here in the United States. It has long been recognized that those companies engaging in serious technological development efforts are more likely to weather the storms of downturns and to prosper under favorable economic conditions.

As always, we at TCA stand ready, willing and able to help you with any questions you have about this issue or anything else related to federal or state research credits. Contact us today via email or call us at 508-842-3232 for your free consultation.

New Support for Manufacturing and Software Jobs in the US!

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Binary Code image courtesy of DeviantART user hefeigal

The federal government took significant steps to improve funding for technical development to domestic companies. A major part of this effort involved the federal Research Credit, which is intended to encourage manufacturing companies, software developers and laboratories to keep engineering, manufacturing and other science-based jobs in the United States. The popular Research Credit program (authorized under section 41 of the Internal Revenue Code) was made a permanent part of the law and no longer subject to periodic expiration. This important incentive had been suspended many times since its inception, but is now a reliable support for companies seeking to evaluate the benefits of keeping high-skilled jobs here.

The federal “research credit” is now permanent.

In addition, the following major changes were made to enhance and improve the incentive nature of this important incentive program:

1) For companies with average gross receipts over the past few years of $50 million or less, the credit is now available against Alternative Minimum Tax (AMT) calculations.

2) For companies with average gross receipts under $5 million, the credit may also be taken against employment taxes. This provision allows even companies that incurred a loss during the year to claim benefits.

The overall goal of the program is to encourage companies to keep experimenting to develop new products, processes and equipment in an effort to improve technological capabilities. It is well known that companies investing in these areas are better able to survive downturns, and prosper in upturns, resulting in higher employment and better profitability. This results in a better economy for everyone and a brighter future!

Over the past two decades, Tax Credit Advisors LLC has worked closely with manufacturers and software developers across the continent to identify, document and defend claims for this important set of incentive programs. Our goal is to help keep engineering, manufacturing and software development jobs here. Let’s see if we can help you! Our initial consultation services are absolutely free, so please call or respond via the “Contact Us” link above.

House of Representatives Passes Research Credit Extension

On May 20, 2015, the House of Representatives passed a measure that would extend the IRC Section 41 Research Credit. The bipartisan vote totalled 274 to 145. The measure aims to make the credit a permanent feature of the tax code. In order for this bill to pass the Senate, however, some means will have to be found to offset the estimated $180 billion cost that is expected to accrue over the next ten years.

The research credit has a long history, dating back to 1981 when it was enacted in an effort to bolster domestic investment in experimental development efforts here in the United States. Due largely to Senate budget rules, it has always been provided on a temporary basis. It has expired and been retroactively reinstated more than a dozen times over the past 34 years. The most recent expiration took effect on December 31, 2014.

The research credit has clearly helped to generate more spending on technical development efforts here at home over many years, and it enjoys broad bipartisan support in both houses of Congress. The net result has been to help keep engineering and manufacturing jobs here that otherwise would have gone overseas. If you support this program, please contact your Senators and urge them extend the Section 41 Research Credit.

Federal Research Credit Extended through December 31, 2014 (HR 5771 and S 83)

UPDATE: President Obama has signed the bill.

Good News! The federal Research Credit has been extended through 2014! As one of its final acts, the 113th Congress passed the “Extenders Bill”, providing continuing support for the federal Investment Tax Credit for Increasing Research Activities (the §41 Research Credit) through the end of this year on December 16th, 2014. The President has indicated that he will sign the bill into law. As a result, this important incentive program will apply to all qualified research expenditures incurred through the end of 2014. The measure passed in the Senate by a broadly bipartisan 76 – 16 vote.

This means that all of the work you have done to develop new and improved products, processes and equipment over the past year can earn tax credits, and this means that there is more money for you!

The federal Research Credit program has been in place since 1981, when it was first codified under IRC Section 44f. It was retained in 1986 under the new code as IRC Section 41. This important incentive is intended to encourage manufacturers and software companies to expand their technological capabilities, thereby keeping engineering and manufacturing jobs here in the US.

This program is also intended to encourage firms from other countries to bring jobs here.

In order to qualify, companies must show that they have engaged in experimental development in an effort to overcome technological uncertainty regarding new product, process or equipment technology. Most importantly, the work must be done *here* in the US.

If you qualify, we can help you to secure your benefits. We will help you identify eligible projects, document the qualified work you have done, help you to calculate your eligible expenses, and defend your claims! Contact Tax Credit Advisors today. 


Breaking News: Senate to Vote on R&D Tax Credit

The Senate is due to vote on the “Extenders Bill” which would provide continuing support for specific programs that expired at the beginning of the year, including the IRC Section 41 Research Credit. As of 10am EST on Monday, December 15, 2014, the vote was anticipated on or before Thursday, December 18th. The  enabling house bill is H.R. 5771. Meanwhile, the Senate will be busy with other year-end business, including votes on several executive branch appointments.

The federal Research Credit (formally known under IRC Section 41 as the “Investment Tax Credit for Increasing Research Activities”) is intended to encourage companies to keep engineering and manufacturing jobs here in the US. It enjoys broad bipartisan support and has been in place almost continuously since 1981, when it was codified as IRC section 44f. This program has led to many billions of dollars in net research investment

The credit provides a dollar-for-dollar reduction in taxes owed for companies that try to expand their technological capabilities. Qualified efforts include traditional new product development as well as systematic process improvements and related equipment development, including tooling, fixtures and related experimentation.

It is our firm belief that this important incentive program should be extended and made permanent. We believe that a strong commitment to research and development is of strategic importance to the US, and that our best approach is to encourage companies to hire here, to train here, and to encourage our best and brightest to stay here.

So what does this mean to you?

For decades, skilled jobs have been shipped overseas. We often hear that making goods here in the US would make them too expensive. The truth is that the extra cost for most items is *less* than one tenth of one dollar per unit for t-shirts and less than ten dollars for refrigerators. It simply isn’t true that US labor is too expensive. The federal research credit is our best hope for keeping engineering and manufacturing and software jobs here in the United States.

We are closely monitoring the events in the Senate and will provide more news when it becomes available.

The 2014 Northeast Lean Conference

On October 1 and 2, Tax Credit Advisors attended the 2014 Northeast Lean Conference in Springfield.






It was truly a pleasure to gather again with out friends at GBMP for their annual conference celebrating Lean Manufacturing and related process technology development. We saw some old friends and made some new ones. Maybe we’ll see you there next year? For information about upcoming GBMP events, please visit Tell them Otto and Karen sent you!


Development Tax Credits: Renewal and Expansion

If your business regularly files for research and development tax credits, you may already be aware that the federal credit expired yet again at the end of 2013. We at TCA anticipate that the federal credit will be renewed for 2015 and will also be extended retroactively for 2014, as has always happened in the past, despite the current gridlock and partisanship in Congress. Politicians on both sides of the aisle recognize that tax credits that encourage and reward technical development are crucial in helping American companies to keep pace with global innovation and competitiveness. In fact, political support for making the program permanent continues to grow.

Why do we need to expand the research and development tax credit program? The United Stated lost close to one-third of its manufacturing jobs from 2000 to 2011. In addition, investments by foreign companies looking to build offices or factories in America declined an average of six percent per year during that span. As a result, innovation-based competitiveness has sharply declined, leaving America ranked as forty-third in a list of forty-four nations for “rate of progress” in innovation. [1]

While these numbers may seem downright scary, it is widely recognized that a stronger and more permanent federal research credit program would make a significant difference. Since research and development tax credits were first implemented in 1981, each dollar of credit has led to at least one dollar of additional R&D spending. Essentially, the program pays for itself, and helps offer a strong incentive for US-based companies to continue funding innovation here, rather than sending such work off shore or forgoing technical development altogether. Improved support for these activities would spur greater levels of investment and innovation, leading to more and better jobs here at home.

Other countries offer similar incentives, and in comparison, the United States ranks only 27th in generosity of R&D incentive programs for domestic companies. In many cases, U.S. companies maximize their benefits at around 6.5% of Qualified Research Expenditures, far below incentives offered by some global competitors. For example, the Canadian research and development program offers 20 cents on the dollar for R&D conducted by larger companies inside of Canada, and 35 cents on the dollar for smaller start-ups (known in Canada as CCPCs, or Canadian Controlled Private Corporations). Moreover, the current U.S. program continues to expire every few years and therefore is not as reliable an incentive for prospective planning as a permanent program.

The hard-working people in our manufacturing and technology sectors deserve better. TCA continues to support an expanded federal tax credit program.

[1] “The Race America Must Win” by Robert Atkinson

Research Credit Extended Through 2013

As part of the “fiscal cliff” legislation passed in January, the federal Research Credit was extended through December 31, 2013. The bill also extended several other expiring provisions of the tax code. This is the 15th time that the Research and Development tax credit has been renewed since its inception in 1981.

President Barack Obama has stated that he wants to make the Research and Development tax credit permanent to allow firms to feel confident when making decisions to invest in domestic R&D in longer term planning. If successful, this proposed legislation would reduce uncertainty faced by firms engaged in technological development, allowing them to invest in experimentation without worrying that vital funding might evaporate. If you are interested in helping to ensure passage of this provision, please call or write to your elected representatives.