Many taxpayers report GAAP ASC 730 research and development (R&D) costs on their certified audited financial statements. The IRS Large Business and International Division (LB&I) on September 11, 2017 signed guidance that will allow these taxpayers to take advantage of a ‘safe harbor’ under which an adjusted amount of their ASC 730 R&D costs can be determined as sufficient evidence of qualified research expenses (QRE) for the Section 41 credit for increasing research activities (research credit). If a taxpayer complies with the requirements of the Directive, the LB&I examiners are not to challenge certain QRE amounts for the credit year as set forth in the guidance.
Partner, National R&D Tax Services Leader, PwC US
Partner, PwC US