Research & development credit services
The R&D tax credit is a credit against regular federal and many states' income or franchise taxes. Enacted in 1981 to stimulate research & development in the United States, the credit is for trades and businesses that increase their spending on qualified R&D activities and, more specifically, increase the percentage of their sales they spend on qualified activities.
Generally, potentially-qualified R&D activities include employees’ and contractors’ attempts to develop or improve products, processes, or software through experimentation intended to eliminate uncertainty by discovering technological information. The focus is primarily on the activities of software developers and engineers, and physical, biological, and computer scientists.
Unfortunately, quantifying and documenting the R&D tax credit in a manner sufficient to retain those credits upon Internal Revenue Service (“IRS”) or state taxing authority examination has proven to require substantial effort. Our experience is that most companies don’t have the internal resources and/or up-to-date legal expertise to identify and document effectively all their qualified activities and expenditures. As a result, many companies understate and/or under-document their credits, losing some or all of them on examination.
PwC’s national R&D team helps companies to
- Identify and document their qualified activities on examination
- Identify and document the “qualified research expenditures” associated with those activities
- Help clients to properly calculate credits generated by qualifying R&D expenditures
- Provide supporting documentation for those activities and expenditures to comply with IRS or state taxing authority requirements
- Work with clients to develop and implement procedures and technologies that may help them to identify, document, calculate, and support their R&D credit claims accurately and efficiently