Facts and Benefits of R&D Tax Credits
The Research and Development Tax Credit or the R&D Tax Credit was made by congress in the year 1981 as a part of the Economic Recovery Tax Act that helps companies in staying competitive in the international market. Also, this kind of credit was permanently made official in January 1, 2016. However, there are only few small to mid-sized companies that are taking its full advantage because of the misrepresentation of it on credit laws and also because of the lack of information.
Through this article, you will learn on some of the reasons with why a R&D Tax Credit is really beneficial:
Increase your Bottom Line
With this kind of tax credit, it could actually help reduce the state tax and federal liabilities of a firm. Any company that is involved in R&D actually could acquire about 10 – 15% or maybe more of the ROI for their qualifying business activities. Such credits are in fact considered as assets as well because it helps to increase the market value of a company and will also strengthen it as an acquisition target. The money is then going to be saved and will be invested towards new R&D projects that helps in generating cash flow and growth for the company for any future operations. Such kind of tax credit in fact is an offset against tax liabilities and this could be carried for up to 20 years.
Motivate on Innovation
Credit like these in fact are made available to firms that process, develops, improves, invents, designs and many others more. The companies are then rewarded for the improvements and such credit could then help in generating high paying positions as well as company profits. All of such components will then produce a consistent innovation that is needed in order to remain competitive, which is why the IRS would want to give your company ROI.
The IRS in fact helped to broaden the definition of R&D. The Qualified Research Activity (QRA) have an activity which falls in the IRS Four Part Test. Such test will need a new or an improved business component to where it must be technological in nature, eliminate on uncertainty and process experimentation.
Maintaining your Business’s Competitiveness
There are actually a lot of states nowadays who are offering R&D tax incentive for supplementing Federal Research & Development Tax Credit. Any company could take advantage of such credit and be able to claim upwards in R&D Tax Credits, which makes it one of the biggest tax credits that are available. Incentives such as this will actually allow companies to produce innovative technology that is going to allow a country in remaining competitive in the globalized economy of which we have today.