Guest Author: Jon Kaplan, Intrepid Advisors
Many businesses in Pennsylvania currently take advantage of the state Research and Development (R&D) Tax Credit. This tax incentive was created to promote innovation and job growth in the state by providing tax relief to businesses engaged in qualified development activities. Fortunately, the Pennsylvania Department of Revenue has broadly defined research and development activities to include industries such as manufacturing, software development, A/E firms, biotechnology, medical devices, and many more. Entities including C-corps, S-corps and LLCs may all participate in this program, providing the tax credit application is submitted to the Department of Revenue by September 15th. The application process requires the submission of detailed qualified research expenses (QREs) and supporting documentation, which is typically produced by a specialized tax credit professional.
In addition to the Pennsylvania state R&D tax credit, the Internal Revenue Service also provides a federally managed tax credit focused on the development of products, fabrication processes, software, as well as types of scientific research and development. This federal tax credit is in addition to the Pennsylvania state credit. Generally speaking, if your business qualifies for one of the programs, it will likely qualify for both programs. Unlike the state program, the federal R&D tax credit is claimed upon filing the corporate tax return. The federal tax credits may be used to offset tax liability, carried forward up to 20 years, and in some cases used to offset the FICA portion of payroll taxes. This credit may be taken every year, and the credit size is limited only by the amount of QREs a business has in any particular tax year.
For Pennsylvania businesses that are filing their 2019 returns on extension with a due date of September 15th, 2020, there is still time to claim both the state and federal R&D tax credits. Specialized tax credit professionals can perform an analysis of your business and quantify the portion of your research expenses that qualify for these programs. These firms work with your CPA and provide them with the tax forms, supporting documentation, and ongoing support to ensure your tax credits claimed correctly and in a timely manner.
For more information on how DVIRC and its strategic partner, Intrepid Advisors, can assist you with claiming R&D tax credits, contact us here.
About Intrepid Advisors:
Intrepid Advisors is a specialized business advisory firm offering expertise and consulting services relating to the federal and state research and development tax credits. Our firm is comprised of technologist, engineers, and accounting professionals who specialize in assisting manufacturers, engineering firms, and other technology companies benefit from the federal and state research and development incentive programs. Over more than 30 years of continuous operation, Intrepid Advisors has recovered over $450,000,000 for our clients and have never had a credit disallowed by the IRS.