The US Tax Court (the Court) recently issued a decision, holding that the Petitioners were not entitled to a research and development (R&D) credit under Internal Revenue Code (I.R.C.) § 41. Petitioners in the consolidated cases are shareholders in an S-Corporation, Catalytic Products International, Inc. (“CPI” or “the Company”), that designs and supplies air pollution control systems. CPI claimed a research credit under I.R.C. § 41 in connection with 19 projects, based on both employee wage expenses and supply expenses incurred in connection with the projects and systems the Company suppli ..read more

A new court opinion issued by the U.S. Tax Court emphasizes the importance of contract review for the analysis and substantiation of an R&D tax credit claim. The opinion alludes to additional requirements to demonstrate a taxpayer's economic risk when conducting research. Moreover, the court points to precedence to emphasize that terms and conditions within any contract agreement are most important, and no implications or assumptions should be needed or considered to substantiate a credit claim ..read more

The total number of Research and Development (R&D) tax claims increased by 10.54% from 2021-22 on 2020-21 with abuse still rife, Her Majesty's Revenue and Custom (HMRC) priority to tackle dubious claims have seen delays to processing times ..read more

The time to reverse the changes made by the 2017 Tax Cuts and Jobs Act (TCJA) is quickly running out. These changes force companies to begin amortizing research and development expenses over a period of 5 years rather than deduct them entirely in the year in which it was claimed. A measure to help offset the revenue lost from cutting the corporate tax rate from 35% to 21%, the change to I.R.C. section 174 removes the option of a current year deduction in full ..read more

Signed into law by President Biden in August of 2022, the Inflation Reduction Act (IRA) is intended to lower inflation by investing in various areas that will facilitate growth, promote jobs, and strengthen the American economy.  ..read more

It has been a tough few years. Between an unprecedented and painful economic contraction due to the COVID-19 pandemic and the subsequent supply-side shocks and inflationary pressures, businesses are eager to find ways to save money and improve their bottom line by any means, while also seeking to innovate to better perform in an ever-increasingly competitive environment. For many businesses, this includes renewed exploration of local, state, and federal incentives to help reduce tax liabilities. For a large number of industries, research and development (R&D) tax credits may provide an eff ..read more

Now more than ever, recent court precedence has created the need to partner with a firm that understands your industry to maximize Research & Development tax credits. This article explains the result of Little Sandy Coal vs. Commissioner and why it’s important to every organization ..read more

Little Sandy Coal v. Commissioner – reiterate the pitfalls of claiming the Research & Development (R&D) Tax Credit without sufficient documentation. In both cases, the courts completely disallowed the taxpayers’ R&D tax credit despite recognition that the taxpayers undertook R&D activities and had some level of R&D expenses. The issue was that the taxpayers did not meet their burden of proof to show that all of the activities and associated expenses qualified, and the taxpayers did not provide a reasonable basis for estimating what portion could be properly included ..read more

, the Tax Cuts and Jobs Act (TCJA) of 2017 included a delayed provision that requires taxpayers to begin capitalizing and amortizing research and experimental (R&E) expenditures under Section 174 for tax years beginning after December 31, 2021. Prior to this provision, taxpayers had the option to deduct R&E costs in connection with the taxpayer’s trade or business during the taxable year incurred. Starting in tax year 2022, R&E costs will need to be capitalized and amortized over a 5-year period for domestic expenses and over a 15-year period for foreign research, beginning with th ..read more