Why R&D Tax Credits are Beneficial
In 1981, the Research & Development Tax Credit or (R&D) Tax Credit was created as a part of the Economic Recovery Tax Act, which is considered a way to aid companies to be able to stay competitive in the marketplace. Another thing is that such credit was made official last January 1, 2016. But, there are only few small to mid-sized companies who actually are taking the full advantage of the R&D Tax Credit due to the misrepresentation about it on tax credit laws or simply because of the lack of information.
Below are some of the reasons why getting R&D Tax Credit is beneficial:
Increase your Bottom Line
The R&D Tax Credit could help reduce the federal and state tax 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 will then be saved and be invested to new R&D projects that will then generate growth and cash flow for the company for their 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
This kind of credit is in fact made available for companies that develops, improves, process, invents, designs and many more. The companies will then be rewarded on the improvements and this credit will then help to generate high paying positions and also company profits. Components like these will then be produced for a consistent innovation that is crucial to be able to remain competitive, which would be why the IRS wants to give your company an 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. The test needs to be new or should be an improved business component to where it has to be technological in nature, be able to eliminate uncertainty and also on the process of experimentation.
Maintaining your Business’s Competitiveness
There are many states today that are offering R&D tax incentive in supplementing Federal Research and 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.