What is Research and Development Tax Credit?
If your company is located in any of cities in the state of Texas, like Houston, Austin, San Antonio.
The new regulatory bill that is passed by the Government of Texas helps businesses avail the research and development tax credit. If your business venture is in any of the Texas cities like Austin, Houston, San Antonio, Fort Worth or Dallas, you can claim for this benefit.
What expenses qualify for this benefit?
If your business ventures are experimental in nature, or it is into medical research you can easily qualify to avail this tax credit. Also, if your business produces outputs that help a large mass of people to improve safety, productivity or reliability then you can apply for the same. The expenses that qualify for this are mentioned by the IRC 41. All expenses can be claimed against these sections only.
If your company has developed any new machines, prototypes, software’s for the welfare of the larger masses and not commercial in nature, your company is eligible for this tax credit. Also, all types of companies can avail this benefit. It does not matter if your company is established or it is a startup. For startups the capital required to establish the required equipment and resources s very huge. Moreover, there is no guarantee of the outcome that will be generated. If such scenarios, it is better to avail this benefit for the startup as well.
This facility has been active since January 1st 2014. However, if your business venture does not fall in this entire year, you can calculate for the research and development tax credit on a prorate basis.
What is traditional tax credit?
If your company is an established company, and has been incorporated before the 1st of January 1984 and has 3 or more tax years with qualified research expenditures and revenue between January 1st 1984 and December 31st 1988, then you can qualify for this traditional tax credit.
Higher educational institutes
If your business research is taking any help for higher educational institutions such as secondary and higher secondary institutions, then you can avail an increased tax credit of 6.25% of the base amount.
Who cannot avail this benefit?
If your business venture or research is in the field of beauty or cosmetics, then the section of IRC clearly mentions that you are not eligible for this credit. Also, you cannot claim for this if your business or venture is fully or partially funded by any agency or by the government. You also cannot avail this benefit if the output of your business venture is any study or survey.
Carry forward system
If your business is eligible for this benefit, then you will be provided with a fixed credit amount. However, if you are not fully using this credit, you can opt to carry forward the same amount. This is called as ‘credit carry forward’. You can carry forward the unused credit for a maximum period of twenty years.
What is alternative Simplified Tax credit?
If your company cannot adequately substantiate for the qualified research expenditures, then you can go for alternative simplified tax credit. In such cases, you may take substantial help from tax professionals to determine your company’s status.
Texas R&D Tax Credit Solutions manages all facets of the Research and Development tax credit, from claim preparation and audit compliance to management of full claim disputes, to businesses and R&D companies in Texas, California, San Francisco, Dallas, Orlando and other parts of the USA. For more about Research and Development tax credit, visit Wikipedia.org.