The R&D tax credit : latest news

At EPSA USA, we specialize in helping innovative companies of all sizes optimize their R&D Credit claims.

Many companies do not think they can take advantage of the R&D credit because they don’t believe they do R&D.

The definition in the Tax Code (Section 41) is actually pretty broad and if a firm is improving or developing a Product, Process or Software that is technical in nature, they likely are eligible.

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The R&D tax credit – An introduction

The Credit for Increasing Research Activities, more commonly referred to as the Research and Development (R&D) Tax Credit, was enacted in 1981 and made permanent in 2015 with the passing of the Protecting Americans from Tax Hikes (PATH) Act.

  • Enacted to encourage businesses to keep innovation in the United States
  • Available to nearly ALL industries
  • Requires an analysis of current year expenses (as well as prior three years, if available)
  • Credit can be claimed for current year, and retrospectively for any open tax years
  • Unused credits can be carried back one year, and can be carried forward up to 20 years

Who? What? Where?

consultants working

The definition of research and development is fairly broad and encourages companies from a variety of industries to claim the credit.

In addition, to the federal R&D credit, many states have their own credits.

Who can qualify for the R&D Tax Credit ?

Companies in the following industries commonly qualify for the R&D credit.
Click to learn more about what industry specific activities are eligible.

What is needed to claim the R&D Credit?

To claim, a company’s activities must meet the four part test:

  1. New or improved business component: product, process, formula, invention, software, or technique
  2. Elimination of uncertainty: Appropriate design, methodology, or capability
  3. Process of experimentation: Systematic trial and error
  4. Technical in nature: Principles of physical or biological sciences, engineering, or computer science

Eligible expenses:

  • Wages
  • Supplies
  • Rental or Lease of Computers/ Cloud hosting
  • Contract research

Where can you claim the R&D Tax Credit?

Explore our Interactive Map of state specific R&D credits (MD and DE labels switched)

USA map

What EPSA USA does for you

  • Investigate all relevant buckets of R&D expenditures (wages, supplies, contractor expenses, etc.)
  • Explore both the Alternative Simplified Credit (ASC) and Regular credit methodologies, and electing to use, each year, the method that provides the most beneficial credit
  • Evaluate various state specific credits in addition to federal credit
  • Review all eligible projects using a Statistical Sample procedure, as defined by Revenue Procedure 2011-42, allowing the taxpayer to capture all eligible expenses instead of just a subset of expenses

What our clients say:

“EPSA’s project team not only educated us throughout the process but ensured that all the deadlines for the project were always met. Having gone through their process, I can say that the process is streamlined, and a worthwhile project to ensure that we can claim the R&D Tax Credit.”
Gries Architectural Group Inc.

“Before working with EPSA USA we did not know we were eligible for the R&D Tax Credit, however after working with them for the past year we have found that this tax credit has been extremely beneficial to our business.”
Krieger + Associates Architects