Facts and Benefits of R&D Tax Credits
The Research & Development Tax Credit or the R&D Tax Credit was made in 1981 as a part of the Economic Recovery Tax Act that helps companies to stay competitive in the global marketplace. Another thing is that such credit was made official last 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:
Helps Increase the Bottom Line
This kind of tax credit can actually help reduce the state tax and federal liabilities of a company. Any company which is involved in the R&D can in fact get about 10 – 15% or more of the ROI for their qualifying business activities. Credits like these are considered also as assets because it is able to help increase the market value of a company and it likewise helps to 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. Companies like these are then rewarded for the improvements and is able to help generate high paying positions and 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.
IRS Helped to Broaden R&D
IRS in fact had broadened the definition of R&D. A Qualified Research Activity (QRA) consist of any kind of activity that is part of 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.
Maintains your 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 would take advantage on such credit and be able to claim upwards on R&D Tax Credits, which then makes it one of the biggest tax credits that are now 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.