The so called fiscal cliff for the RTC has been averted, at least for the near future. Title III Business Tax Extenders was adopted by the U.S. Congress on January 1, 2013 and has been extended to December 31, 2013 (retroactive for December 31, 2012). This is great news for business. The credit is available for any business performing research and innovation in the U.S. and is an incentive to keep high quality jobs here in the United States of America!
The Research & Development Tax Credit had expired as of December 31, 2011 and received a two year extension. Businesses can now take advantage of the credit for another tax year.
Many other issues were before Congress in order for the US to avoid falling over the fiscal cliff and compromises were reached in the Research & Development’s Tax Credit’s extension. Unfortunately, there were not any increases in the percentage of each dollar that can be claimed nor did the credit become permanent. The credit can be up to 20% of the excess qualified research expenditures for the taxable year over a base amount.
Additionally, there are new rules that will apply to business acquisitions for the 2012 and 2013 tax years. Title III amended the RTC statute by tightening pre-acquisition qualified research expenses and gross receipts when calculating the RTC where an acquisition or disposition of a company is involved.
For U.S. business, the Research and Development Tax Credit is one of the most powerful business incentives for business in the U.S. There have been numerous regulations clarifying definitions of what qualifies for the RTC and many restrictions have been removed in interpreting the requirements of the program over the last several years.
These changes are constant, and ongoing, but despite the recent positive changes and clarifications, the legislation is still very complex. Many businesses are unaware of the effect of changes in legislation, and as a result do not properly take advantage of the credit as they are unclear or unaware of its applicability to their business.
With growing competition from the European and BRIC countries when it comes to attracting and retaining R&D work and intellectual properties, “with the adoption of this bill the US business community at least maintains its position in the worldwide race for innovation and growth”, stated Serge de Blois, CEO of Braithwaite Global Inc. this morning.
Braithwaite Global Inc. is an independent firm providing R&D tax credit recovery expertise to leading Fortune 500 companies for over 25 years. With offices in the U.S., Canada, United Kingdom, Ireland, France and Brazil our comprehensive services include: R&D tax credit recovery, planning, claiming, training, audit support and advocacy.