Posted by Jeffrey Feingold on 01.03.24
In today's competitive business landscape, it is crucial for companies to stay ahead of the curve and maximize their potential. One way to do so is by taking advantage of Oregon's 2024 R&D Tax Credits. In 2023 Oregon introduced a new refundable Research and Development (R&D) tax credit (HB2009), for its state taxpayers, to encourage them for qualifying work performed on semiconductors. Although the timeline to apply for these tax credits has passed for the current tax year (December 1, 2023), now is the time to start gathering your information and applying for the credit for the upcoming 2024 tax year.
Understanding the importance of R&D tax credits
R&D tax credits are a powerful tool for businesses to leverage their innovative efforts and maximize their potential. By understanding the importance of these tax credits, companies can make informed decisions that can significantly impact their financial outcomes.
First and foremost, R&D tax credits allow businesses to recoup a portion of their research and development expenses. This is particularly beneficial for companies operating in industries that require extensive R&D investments to remain competitive. By offsetting these expenses, businesses can free up capital that can be reinvested in further research or other growth initiatives. Furthermore, R&D tax credits promote innovation and technological advancement. By incentivizing Oregon businesses to invest in research and development, these credits foster a culture of continuous improvement, which can lead to new products, processes, and services. It's important to note that R&D tax credits go beyond merely reducing tax liabilities. They serve as a recognition of the vital role that research and development play in driving economic growth and stimulating job creation. By leveraging these tax credits, businesses can contribute to the overall prosperity of the state while simultaneously bolstering their own success.
Along with Oregon now offering state R&D credits, the Federal research and development (R&D) tax credits can also deliver an immediate and significant benefit to a company as a result of innovative activities. While the tax credit originally pertained to basic research expenses, such as those occurring in a laboratory setting, subsequent modifications have simplified the credit and made it available to a wider variety of businesses including those working with semiconductors.
R&D tax credits can immediately benefit a company in several ways:
• A source of cash for reinvestment or other needs
• Significant reduction to current and future tax liabilities
• Credits may carry forward up to 20 years
• Offset Payroll Liability
Qualifying for Oregon Semiconductor R&D Tax Credits
This new refundable Research and Development (R&D) tax credit (HB2009) marks a notable shift since the state's previous R&D credit expired in 2017. To qualify for Oregon semiconductor R&D tax credits, companies must engage in activities that meet specific criteria set forth by the state. These activities typically include the development of new products, processes, or technologies that aim to improve efficiency, performance, or functionality within the semiconductor industry. It's crucial for companies to meticulously document and substantiate their R&D activities to ensure compliance with the eligibility requirements set by the Oregon Department of Revenue.
To be eligible to register for the Research and Development Tax Credit for Semiconductors, a taxpayers must: 1. Be a Qualified Semiconductor Company; 2. Incur qualified research expenses or basic research payments; and 3. Be subject to personal income taxes under ORS chapter 316 or corporate excise taxes under ORS chapter 317. Statutory/Other Authority: ORS 285A.075, Statutes/Other Implemented: Chapter 298, Sections 2-5 (2023 Oregon Laws), HB2009 (2023).
How Does a Taxpayer Become a Qualified Semiconductor Company?
Taxpayers must apply to the Oregon Business Development Department, annually to be certified as a qualified semiconductor company and pay a related fee. The application must include a description of how the taxpayer meets the definition of a qualified semiconductor company as well as how proposed R&D will support the taxpayer in administering a business directly related to semiconductors. The form, manner, and fees related to this application are to be developed by Business Oregon.
Key details of the Oregon R&D tax credit:
The state tax credit is available from January 1, 2024, to January 1, 2030. The tax credit is intended for qualified semiconductor companies conducting research within the state of Oregon, and the current rate is set at 15% of the increase in qualified research expenses and fundamental research payments.
Maximum credit and refunds available:
• The cap on the credit is $4 million.
• The refundable portion varies based on the company's size in Oregon:
• 75% refundable for companies with fewer than 150 employees.
• 50% refundable for 150 to 499 employees.
• 25% refundable for 500 to 2,999 employees.
Any unused credits can be carried forward for up to five years. This new R&D tax credit offers a substantial opportunity for semiconductor companies to reduce their tax liabilities while encouraging innovation and growth within Oregon.
Collaborating with Tax Point Advisors in 2024
Accurate documentation and reporting are essential for successfully claiming R&D tax credits in Oregon. Companies must maintain detailed records of their R&D activities, including project descriptions, technical specifications, testing results, and associated expenditures. By keeping thorough and organized documentation, companies can effectively substantiate their R&D tax credit claims in the event of an audit, reducing the risk of potential challenges from tax authorities. Collaborating with the right professionals can significantly contribute to your success in qualifying for Oregon's 2024 R&D tax credits. Working with Tax Point Advisors, you can ensure that you are taking advantage of all the available opportunities to maximize your potential for qualifying for Oregon's 2024 R&D tax credits. Tax Point Advisors have a track record of successfully helping businesses qualify for R&D credits and can provide references or testimonials from satisfied clients.
Find Out if Your Activities Qualify
The R&D tax credit can be a lucrative incentive for innovative businesses in Oregon. Plus, given the new permanent nature of the federal tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving tax credit opportunities.
Request a free assessment to determine qualifying R&D tax credit eligibility.
Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, call us at 800-260-4138 or please leave us a message below.
