Research Credit - R&D Tax Credit

Research and Development Tax Credit

The R&D Tax Credit, first enacted in 1981, has been one of the most valuable credits leveraged by companies. Every year, the R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. Thousands of companies take advantage of the credit across several industries. Some of the common industries that qualify for the R&D tax credit include, but are not limited to:

  • Manufacturing & Fabrication
  • Software Development
  • Engineering
  • Architecture
  • Pharmaceutical
  • Machining
  • Aerospace & Defense
  • Food Science
  • Tool & Die Casting
  • Foundries
  • Automobile
  • Chemical & Formula


The Potential Benefits of the R&D Credit

There are several benefits to realizing the R&D tax credit.
These benefits can include the following:

  • Up to 13.5 cents of R&D tax credit for every qualified dollar
  • Dollar-for-dollar reduction in your federal and state income tax liability
  • Increased in earnings-per-share
  • Reduction of your effective tax rate
  • Improved cash flow
  • Credit carried forward up to 20 years
  • Recent regulatory developments make claiming the R&D tax credit for companies much more feasible
  • Look back studies can recognize unclaimed credits for open tax years
    (generally 3 or 4 years)

» Calculate your potential R&D Tax Credit Benefits

Find out if you qualify for the R&D Tax Credit

Can you or your clients claim the R&D Credit? Please fill out our proposal request form and one of our R&D experts will contact you. Thank you.




State R&D Tax Benefits

Many states offer the R&D tax credit which generally follows the federal regulations and IRS guidance on what constitutes Qualified Research expenditures (QREs). However, there are some states that are an exception to the federal guidelines, such as Connecticut and California. For example, Connecticut has a lower threshold defining expenditures under Section 174 which allows a greater amount of expenditures to qualify as for the R&D tax credit. California utilizes a different definition of gross receipts and only includes sales of real, tangible, or intangible property held for sale to customers in the ordinary course of the taxpayer’s trade or business delivered or shipped to a purchaser within California and does not include service-related receipts, rents or interest.

Summary of states offering R&D tax credit: States without R&D tax credit:
· Alaska
· Arizona
· Arkansas
· California
· Colorado
· Connecticut
· Delaware
· Florida
· Georgia
· Hawaii
· Idaho
· Indiana
· Iowa
· Kansas
· Kentucky
· Louisiana
· Maine
· Maryland
· Massachusetts
· Michigan
· Minnesota
· Nebraska
· New Hampshire
· New Jersey
· New Mexico
· New York
· North Carolina
· North Dakota
· Ohio
· Oregon
· Pennsylvania
· Rhode Island
· South Carolina
· Texas
· Utah
· Vermont
· Virginia
· Wisconsin
· Alabama
· District of Columbia
· Illinois
· Mississippi
· Missouri
· Montana
· Nevada
· Oklahoma
· South Dakota
· Tennessee
· Washington
· West Virginia
· Wyoming

Qualifying Activities

One of the common misconceptions surrounding the R&D tax credit is that participants must wear lab coats and use test tubes in order to qualify for the credit. This could not be further from the truth. In reality, the definition of R&D for tax credit purposes is fairly broad. Companies are able to qualify activities beginning with the development of concepts and extend to the point where a product, process, formula, or other business component is ready to be commercially released. If a company is engaged in any of the activities below, looking into a potential R&D credit may be a fruitful exercise. Companies engaged in the following activities should consider looking into the R&D tax credit:

  • Developing or engineering a new or improved product, process, formula, or software
  • Evaluating the feasibility of a product, process, formula, or software
  • Developing engineering architecture
  • Developing experimental models & prototypes
  • Testing an experimental product, process, formula, or software
  • Beta testing
  • Improving processes or the manufacturability of a product
  • Technical design reviews
  • Participating in technical meetings
  • Documenting the results of research
  • Maintaining research equipment
  • Compiling research data
  • Fabricating experimental models
  • Experimenting with new technologies
  • Creating more efficient and environmentally friendly designs
  • CAD or 3D Modeling
  • Supervising technical personnel engaged in R&D

Qualifying Expenditures

Qualifying expenditures include:

  • Wages: For those directly working on, supervising, or supporting the development process
  • Supplies: Items used or consumed during the development process
  • Contract Research: Outside vendors brought in to assist in the development process

Case Study

Green inc developed a new line of cookware using a new material that works like normal cookware and is biodegradable, so it causes no pollution when disposed of at the end of its useful life.

Results: Qualified cost included employee wages, contractors and supplies used to build prototypes. The current federal year tax credit is up to $30,000. » View the full Case Study

Meet the R&D Experts

With years of knowledge and experience, our experts will guide you every step of the way from the initial R&D process to securing the R&D Tax Credit. We will maximize and sustain your tax credit while reducing time and cost spent capturing information.

Lou Guerrero, MBT
Principal » Biography

Kevin Zolriasatain
Principal » Biography

Michael Maroney
Senior Manager » Biography

Paul McVoy
Senior Manager » Biography

Tetyana Guguchkina
Manager » Biography

Recent R&D Tax Credit News

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The KBKG Advantage

Companies have options when selecting an R&D tax credit consultant. Our approach to the R&D Tax Credit is the same consistent approach we use with our other services. We are a client centric firm with a primary objective of delivering value to our clients. We are a collection of former Big 4 accountants, and engineers with decades of experience providing R&D tax credit expertise to clients of all sizes. Our experience with the R&D tax credit and the taxing authorities have allowed us to create a strong deliverable aimed at providing you peace of mind.

Some of the other factors that are key to KBKG’s position in the market include:

Our Approach: KBKG does not employ a “canned” approach to R&D Tax Credit studies. We understand that all companies and accounting systems are different. As such, prior to beginning a study, we review your Company’s available information and structure and tailor our studies to the information available.

Quality Assurance: Our methodical documentation procedures will minimize any time required in the event of a revenue agent’s examination. In addition to our deliverable providing a full audit trail, our work papers are organized, indexed and secured. We’ve designed our deliverables and work papers to address many of the questions commonly asked during audit.

Webinar Education

As educators in the field of tax credits, incentives and deductions, we hold numerous seminars and webinars for CPAs, attorneys, investment firms, and other real estate professionals. To learn more about the R&D tax credit, please attend one of our complimentary R&D webinars and get 1 full CPE credit. The course will cover the fundamentals of the R&D Tax Credit, including the history and recent developments, project qualifications, calculating the benefits, the chronology of a typical project and common issues.

Webinar Details:
Cost: Complimentary. CPE Credit Hours: 1.0.
Knowledge level: Beginner. Field of study: Taxes. Delivery method: Group internet based

» View available dates and register for the class

Get More Information About the R&D Tax Credit
A free preliminary analysis can give you an idea of how the R&D Tax Credit can benefit your company.
» Contact us today for an Estimated Benefit and fee quote