R&D Tax Credit Still Not Permanent After 2014 Tax Extender Package

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The U.S Senate this week extended a series of tax breaks for 2014 including the R&D tax credit. Randy Crabtree, a Partner at Tri-Merit, LLC, a leading specialty tax service provider, explains why he is among many who believe the R&D tax credit must be made a permanent part of the U.S. Tax Code.

The U.S. Senate this week approved the anticipated tax extender package that made it through the House just over a week ago. Included in the bill is a provision to extend the federal R&D tax credit. First introduced as part of the Economic Recovery Act of 1981, the R&D tax credit has been extended more than a dozen times over the last three decades but never made a permanent part of the U.S. Tax Code. Once signed by the President, this latest legislation will extend the credit through December 31, 2014 which will allow eligible credits to be claimed on 2014 tax year returns.

While last night’s action does not provide American businesses with a long-sought level of certainty regarding their investment in R&D efforts and their annual budgeting process, it does provide some relief for those looking to benefit from past spending on R&D in 2014.

Randy Crabtree, a Partner with Arlington Heights, Illinois based Tri-Merit, LLC, an industry leader in R&D Tax Credit services, sees this Congressional action as incomplete for industries across the U.S. “The R&D tax credit is a job creator,” said Crabtree. “It encourages innovation and product development and plays an important role in keeping investment strong in the U.S. While another extension provides some financial assistance, it does not answer the long-term need of our country’s commitment to jobs, innovation and economic growth.”

Crabtree has joined the National Association of Manufacturers efforts to discuss the tax credit with elected officials in Washington, D.C. on several occasions and anticipates lobbying efforts to continue. “The U.S. has fallen behind many other countries in making tax credits available. We need to reestablish our economy as a world leader in jobs, new technology and product development.”

R&D tax credits are targeted at the development of new or improved products and processes of a fundamentally technological nature. The savings from the credits can be re-invested in additional R&D efforts, furthering growth and innovation in the U.S. economy. In general, a qualifying company is eligible to deduct from its corporate income taxes an amount equal to 20 percent of qualified research expenses above a base amount. Qualified research expenses can include employee wages, supplies, and contract research expenditures.

According to the Tri-Merit website (http://www.tri-merit.net) industries that may be eligible for the credit include aerospace, manufacturing, pharmaceuticals, architecture, engineering, machining, food science, software, telecommunications, energy, electronics, medical devices and many more.

“Businesses should contact their CPAs immediately to discuss their potential for R&D tax credits for 2014,” Crabtree said noting that while this legislation impacts the federal R&D tax credit, there could be impact among the 40 states that also offer a tax credit program. “One of the critical factors in eligibility is sound record-keeping. We work with many leading CPA firms across the country and provide them with industry-leading best practices to make annual studies of eligible expenses much simpler.”

For more information on Tri-Merit, LLC or R&D tax credits at the federal or state levels visit http://www.tri-merit.net.

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Danny Anderson
Tri-Merit, LLC
+1 (847) 909-6510
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Randy Crabtree
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