Claiming the Section 41 R&D Credit After the PATH Act: Leveraging Small Business Provisions

Calculation and Substantiation of QRAs and QREs, Using R&D Credits to Offset Payroll Tax and AMT Liabilities

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, December 1, 2016

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers and compliance professionals with a thorough and practical guide to the Section 41 Research and Development (R&D) Income Tax Credit. The panel will discuss how to determine what activities may be treated as as qualified research activities (QRAs), offer guidance on documenting and claiming the credit, detail new IRS final guidance on internal use software, and outline sampling strategies to allocate employee activities to QRAs. The event will focus on small to mid-size companies, and will give practical tools to assist tax professionals in claiming these valuable and often overlooked tax credits.

Description

For many small and medium sized businesses, the R&D Tax Credit is one of the most under-utilized of all tax benefits. There are several reasons for this: calculation of creditable expenses is challenging, and the statute has precluded taxpayers from claiming a credit if the business has either a net operating loss or is subject to the AMT.

Key provisions in the PATH Act make it easier for small businesses to utilize the R&D Credit. Section 41 now allows businesses with less than $50 million in gross receipts to offset R&D Credit amounts against AMT liability. Also, entities with less than $5 million in gross receipts and no more than 5 years of prior receipts may offset R&D Credit amounts against payroll tax expenses.

Additionally, the IRS just issued final regulations on internal use software for tax years ending after October 4, 2016. The new regs provide clearer guidance and offer favorable rules for including internal use software in QRE calculations.

Section 41 allows a credit for a percentage of a QRE a taxpayer incurs engaging in QRAs. The Code provides for a four-part test to determine whether an activity can be considered a QRA; expenditures, including wage expenses, that have sufficient nexus to the QRA can be included in calculating the expenditure base. Tax advisers can provide valuable counsel to taxpayers in utilizing this important and overlooked credit.

Listen as our experienced panel provides a thorough and practical review of calculating, claiming and substantiating a Section 41 R&D credit.

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Outline

  1. Overview of Section 41 Research & Development Credit
  2. Four-part test to determine QRAs
  3. New IRS regulations on internal use software inclusion in QRE calculations
  4. Sampling and allocation methods for QREs
  5. Documentation and substantiation of credit claim
  6. Small business strategies and applying credits against AMT or payroll tax liability

Benefits

The panel will discuss these and other important topics:

  • The four-part test to determining whether an activity can be considered a QRA for purposes of claiming a Section 41 R&D Credit
  • Documentation and substantiation requirements and practices from court cases in the absence of IRS guidance
  • Sampling strategies for including wage QREs and other indirect costs in the credit calculation
  • Strategies for small businesses to consider in claiming a Section 41 R&D Credit
  • Review changes to internal use software rules under the final regulations

Faculty

Brett Ritter
Brett Ritter
Tax Partner
PricewaterhouseCoopers
Bruce Warner
Bruce Warner

Managing Director
Warner Robinson

Mr. Warner’s career spans over 17 years of experience as tax counsel to a large corporation, and a former...  |  Read More

Kenneth (Mike) Flesher
Kenneth (Mike) Flesher
Tax Director
Swanson Reed

Mr. Flesher is a R&D tax consultant focusing on assisting companies with accessing the R&D credits they...  |  Read More

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