I’m introduced to the owners and leaders of manufacturing and technology-based companies virtually every day and I find it interesting there’s such a large number of businesses that are unaware or unfamiliar with the R&D tax credit and the financial benefits it can provide their companies. In particular, federal and state R&D tax credits allow companies that develop products, processes and software to offset their income taxes by as much as 20% of the costs incurred in their development efforts.
When can you recall new tax laws being good news for manufacturing? U.S. manufacturers and technology companies are only beginning to realize that federal income tax provisions contained in the Protecting Americans from Tax Hikes (PATH) Act of 2015 are certainly worth being excited about. The PATH Act, which was signed into law in December 2015, made the R&D tax credit a permanent piece of the federal tax code and created additional benefits for small and startup companies.
Without question, one of the major highlights of the recently enacted PATH Act of 2015 is the provision making the R&D Tax Credit permanent. The permanency of the credit provides the owners and leaders of manufacturing and technology companies the fiscal certainty necessary to make important decisions concerning their investments in innovation.
The R&D tax credit, which is regularly used by America’s largest companies, is vastly under-utilized by the nation’s small and mid-sized producers and innovation businesses. The reasons for not utilizing the research credit vary widely, though the principle causes relate to confusion about what expenses and activities qualify for the credit and the complexities associated with computing the credit.