According to a recent industry report, the U.S. pharmaceutical industry spends more than $100 billion annually on research and development (R&D) activities involving the development, design and testing of new or improved pharmaceutical drugs. Many of these activities qualify for federal and state R&D tax credits; is your company taking advantage of this opportunity to reinvest in the growth of your company?
Businesses in industries across the spectrum are missing out on tens – even hundreds – of thousands of dollars in money-saving opportunities each year because of misconceptions about industry and/or qualifying activities. If you are a business owner who is unsure if your activities qualify for R&D tax credits, make sure to check out our most recent e-book: "The Business Owner’s Guide to R&D Tax Credits"
Whenever a firm offers a specific, highly detailed service, it is a good practice to draw on the expertise of a specialist. That is why we recommend that CPA firms partner with an outside expert to manage the nuts and bolts of an R&D tax credit study for their clients. Most firms don’t have the expertise or time necessary to perform this type of credit study, and it’s far more cost-effective to outsource the effort.
Companies engaged in research and development (R&D) activities in the state of Texas can receive reductions in either applicable sales tax or franchise tax with certain qualifications. The Texas R&D credit represents an outstanding opportunity for taxpayers to receive credit for qualified research expenses they are conducting. This incentive is in addition to the federal R&D tax program, which Congress made permanent in 2015.
A growing trend for biotechnology and pharmaceutical companies is the move away from putting most investment resources behind one or two super drugs. Instead, they are diversifying behind a more comprehensive portfolio of products. Not surprisingly, there is a host of R&D activities that must take place to vet and launch each product, and many of these activities may qualify for the R&D tax credit.
The IRS has issued final rules that clarify whether software that a company develops for its own internal use can qualify for the research and development (R&D) tax credit. In issuing its final regulations, the IRS also addressed the issue of whether software that a company develops for use by other companies can qualify for the tax credit.
Now that you’re convinced you can achieve firm growth by helping your clients find valuable tax credits, how do you bring your colleagues on board with you? That’s easy—demonstrate profitability! R&D tax credits are extremely profitable, more so than many traditional services.
As a business owner, as long as you meet the IRS’ four-part test for eligibility, you may qualify for hundreds of thousands of dollars that you can use to further grow and invest in your business. Despite this lucrative opportunity, there is still one thing that holds some companies back—the fear of being audited. Understanding this concern, Tax Point Advisors provides the following answers to the question, “Will filing for R&D credits increase my chance of being audited?”
Like the federal government, the state of Arizona provides a generous research and development (R&D) tax credit as an incentive to those who conduct R&D activities within the state. In Arizona, the R&D incentive provides an income tax credit for increased R&D activity within the state. Companies may also be eligible for a “basic research” credit if their payments made in cash to a qualified university or scientific research organization for research conducted in Arizona exceed a base period amount.
How do you know which of your clients (or prospects) are likely candidates for federal and state R&D tax credits? IRS code changes have broadened the definition of qualifying activity—and keep in mind that over 70% of states now offer a credit, adding value to the consideration of an R&D tax credit study.