Claiming the Section 41 R&D Credit After the PATH Act: 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 Wednesday, November 29, 2017

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 identify activities that may be treated 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-size businesses, the R&D Tax Credit is one of the most underutilized of all tax benefits. Calculation of qualified research expenses (QREs) is challenging, and the statute precludes 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 five years of prior receipts may offset R&D Credit amounts against payroll tax expenses.

Additionally, IRS regulations on internal use software provide clear guidance and favorable rules for including internal use software in qualified research activity (QRA) determinations.

Section 41 allows a credit for a percentage of a QRE that a taxpayer incurs engaging in QRAs. The Code provides 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 guide 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. IRS regulations on internal use software inclusion in QRA 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
  • Sampling strategies for including wage QREs and other indirect costs in the credit calculation
  • Considerations for small businesses claiming a Section 41 R&D Credit

Faculty

Schenzel, Christina
Christina Schenzel
Tax Partner
PwC

Ms. Schenzel is a Tax Partner within PwC’s Specialized Tax Services (“STS”) Atlanta practice and a...  |  Read More

Garcia, Angelique
Angelique Garcia

Manager
Warner Robinson

Ms. Garcia focuses her practice on managing and implementing R&D Tax Credit studies. Previously, at a consulting...  |  Read More

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