Before leaving for the 2013 year-end recess, Congress failed to renew the federal research credit and the other expiring tax provisions collectively referred to as “tax extenders.”
“The last time the research credit expired was December 2011, and it wasn’t reauthorized until the Taxpayer Relief Act of 2012 was signed into law on Jan. 2, 2013,” said Jeff Malo, WTP Advisors’ research credit services practice leader. “So companies conducting R&D in the U.S. have at least a full year before they should seriously question whether there will be a research credit for 2014 and beyond.”
For three decades, the federal credit for increasing research activities has provided an extra incentive for businesses to take the risk of funding new products and technologies.
If the federal credit is not renewed, analysts project a decline in new innovation and a spike in the number of companies who move their research and development operations overseas to take advantage of more lucrative tax incentives in other countries, says WTP Advisors.
According to WTP Advisors, it’s likely that the federal research credit will be available for qualified research conducted in 2014.
“We would hate to see taxpayers lose the efficiency of implementing a forward-facing model for their 2014 federal research credit because they are waiting to see if Congress will pass legislation,” said Malo.
WTP Advisors advises clients to continue gathering the documentation needed to claim the federal research credit.
WTP Advisors, a global tax and business advisory firm, works on a like-kind exchange program, a tax program for offsetting costs on vehicle inventory.