News and Insights

President Obama Signs Bill Extending Federal R&D Tax Credit Through 2011

Tax Development Jan 07, 2011

On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Act”). Among other provisions, the Act renews and retroactively reinstates the federal Research and Development (R&D) tax credit under Internal Revenue Code Section 41, which expired December 31, 2009. The Act provides that the reinstated R&D tax credit will continue through December 31, 2011. In addition, the Act extends provisions of Internal Revenue Code Section 168(k), allowing taxpayers to elect refundable research credits in lieu of receiving bonus depreciation on certain property in order to monetize R&D tax credit carryforwards.

The passage of this Act follows the enactment earlier this year of the Small Business Jobs Act of 2010 (“Small Business Jobs Act”). Under the Small Business Jobs Act, beginning in 2010, eligible small businesses may use any general business credits to offset their Alternative Minimum Tax (AMT) liabilities. The elimination of the restriction on the use of business credits to offset AMT, together with the extension of a business’ ability to elect a refundable research credit in lieu of bonus depreciation, makes the R&D tax credit available to companies that otherwise might not be able to benefit from the credit due to AMT and net operating loss concerns.

Ryan’s Research and Development Tax Credit services utilize leading quantitative and qualitative review techniques to minimize onsite disruptions, while properly identifying and substantiating qualified R&D costs. Ryan provides a customized time analysis and documentation process that is able to develop nexus, even where no project accounting exists, and provides the detailed documentation, including responses to the Mandatory Information Document Requests ("IDR") from the Internal Revenue Service, required to achieve a sustainable research credit. In addition, Ryan provides tailored recommendations to maximize future credits, as well as defense of R&D tax claims.


Andy Hammons