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2012 Taxpayer Relief Act Extends Research Credit

Posted 7:06 PM by

The 2012 Taxpayer Relief Act signed into law by President Obama Jan. 2, 2013, extended several of the business tax breaks that had expired as of Dec. 31, 2011.  The Research and Expense Credit is one of the tax breaks retroactively extended in the Act. The credit now applies to qualified research expenses paid or accrued after Dec. 31, 2011, and before Jan. 1, 2014, thus allowing companies to take advantage of the tax benefits for a few more years. 

The calculation of the credit will remain the same. Therefore, entities are allowed a credit of up to 20% of its qualified research expenditures over a base amount, which is calculated over a set measurement period. Congress, however, has implemented changes allowing more flexibility in situations where the business is a member of a controlled group or where ownership changes occur. For members of a controlled group, the credit is now determined proportionately to each member’s share of the aggregate research expenses. The rules are also relaxed for those that acquire a new business or major portion of a business. The credit now allows the expenses and gross receipts of the predecessor owner to be included for the calculation of the measurement period. The Alternative Simplified Method calculation is still available in determining the research credit at the election of the taxpayer. 

Indiana also provides a Research and Development Credit for taxpayers who have qualified research activities within the state of Indiana. The Indiana credit is 15% of the first $1 million in qualified research expenses and 10% for qualified research expenses above $1 million. The Indiana credit is calculated in a similar fashion to the federal credit. 

If your company is involved in research and development, you may be able to benefit from the Research Credit, For more information, please contact your KSM advisor.

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Katz, Sapper & Miller’s Tax Services Group has a well-earned reputation for providing strong and successful advocacy in federal and state tax matter. Dedicated to guiding our clients through the complex tax environment, we can help you maximize cash flow with limited liability. Learn more.

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