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
• Ensure the credits generated by those expenditures are properly calculated
• Support those activities and expenditures on IRS or state taxing authority examination
• Develop and implement procedures and technologies to improve the efficiency and effectiveness of identifying, documenting, calculating, and supporting those and future credits