Posted by Jeffrey M. Feingold on 01.27.14
Going green is one of the hottest topics today. With efforts around the globe to reduce greenhouse gas emissions, businesses are looking for ways to adapt their products and create new ones that will meet the needs. Adopting cleaner energy sources and upgrading plants and equipment is an expensive proposition for most companies. The cost can impact operations, investment strategies, financial reporting, and project funding. Going green has been viewed by many as the way to pull us out of economic problems, to create new jobs, to compete in a global market, and to save the planet. This has led the U.S. government to offer expanded tax credits for green building and green technology.
While there are a number of tax incentives at various levels of government for stimulating the infrastructure, research, start-up capital for green industries, and energy rebates for those who upgrade their plants, this article will deal with the federal R&D credits available to those in the green technology fields. Many states have followed suit and credited similar tax credits, but those will not be discussed in this article.
The R&D tax credit is a bottom-line, dollar for dollar reduction of taxes. It is not a deduction from taxable income. This is a very lucrative incentive for businesses. This is a major way that businesses can recover some of their costs in this industry. Look at these advantages:
The result is often hundreds of thousands of dollars for a business.
All of these industries and many more can qualify:
The definition of who qualifies has become clearer over time and has expanded. No longer is this credit just for those with labs and new patented products. The tax credit also applies to processes and methods used. These do not have to be new to the industry, only new to your company. A simple four-part test helps to determine qualified R&D activity:
Whether you are upgrading your company to be green or are developing new products and processes that are green, look closely at the R&D tax credits. They can make a huge difference in your bottom line. Consult your CPA, tax department, or call a company like Tax Point Advisors to see if you qualify.