R&D Credit: Expanded Statistical Sampling for Small Businesses and Safe Harbor for LB&I Taxpayers

Determining QRA and QREs, Increasing R&D Expenditures, Documentation and Nexus, Calculations Under ASC Topic 730

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

Conducted on Thursday, June 28, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This CPE webinar will guide tax professionals and advisers on claiming the IRC Section 41 Research and Development (R&D) Income Tax Credit for small businesses and large business and international (LB&I) taxpayers. The panel will discuss new statistical sampling for multiple tax years for small companies, the safe harbor for large taxpayers for calculating certain qualifying research expenditures (QREs) provided under the recent LB&I directive, and techniques to assist in documenting and claiming R&D credits. In addition, our panel will highlight recent changes to the tax code, as a result of the Tax Cuts & Jobs Act (“TCJA”), which may impact companies’ decisions as to the timing of future R&D activities, as well as the treatment of the expenditures related to such activities.


The R&D tax credit provided under IRC Section 41 may apply to any taxpayer that incurs expenses for performing qualified research activities (QRA) within the U.S. Recent IRS adjustments to the use of statistical sampling by small businesses and the safe harbor provided by recent LB&I directives makes the process of calculating and obtaining the R&D credit easier for taxpayers, so long as specific guidelines are followed.

Statistical sampling only requires a portion of a company’s records for review and documentation to support qualifying expenses. Documentation required by the IRS for an R&D study must meet the requirements of a four-part test for an expense to qualify for the credit along with establishing a sufficient nexus with QRA. This process has proven to be challenging and costly for small businesses and startups who typically forego the credit based on the costs associated with efforts to support qualifying expenses.

The IRS now allows multiple tax years under one statistical sample study which reduces the required sample size and costs associated with documenting the credit. Tax professionals and advisers of small businesses and startups must consider methods in determining QREs and adhere to specific requirements to take advantage of this new approach to statistical sampling.

For larger companies, the LB&I Division released a directive that provides a safe-harbor method for calculating QREs allowing taxpayers to use R&D costs reported on financial statements under FASB Accounting Standards Codification (ASC) Topic 730, Research and Development. The method enables taxpayers to start with the R&D costs and make adjustments leading to QREs for claiming R&D credit under Section 41. Understanding the requirements of this method is essential to reducing costs and supporting the filing of credit claims for large taxpayers.

Listen as our experienced panel provides a thorough review of methods in determining QREs for multiple years for small and large businesses and best practices in calculating, claiming and substantiating a Section 41 R&D credit.



  1. Overview of Section 41 Research & Development Credit
  2. Four-part test to determine QRAs
  3. New sampling and allocation methods for QREs available to small and mid-size businesses
  4. Recent LB&I directive providing safe harbor for calculating QREs for large taxpayers
  5. Documentation and substantiation of claiming Section 41 R&D credit


The panel will review these and other key 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, as well as documentation and substantiation requirements and best practices
  • Sampling and allocation methods for QREs available to small and mid-size businesses
  • Safe harbor provided to large companies under recent LB&I directives to examiners and ASC Topic 730
  • Changes to the tax code resulting from TCJA that may impact companies’ decisions as to future R&D activities and credit claims


Bryson, Les
Les Bryson

Managing Director
Probity Tax Recovery

After graduating from Rice University with a B.S. in Chemistry and spending a few years in the laboratory,...  |  Read More

Garcia, Angelique
Angelique Garcia

Warner Robinson

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

Laughlin, Daniel
Daniel F. Laughlin


Mr. Laughlin is responsible for tax incentive engagements, including the R&D Tax Credit, Work Opportunity Tax...  |  Read More

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