written by Jennifer Cochran

The Research and Experimentation (R&E) Tax Credit is a tax incentive for companies to increase their research and experimentation within the company. Research and development credits are often overlooked by small business because they assume that an on-site laboratory is necessary. If you have an engineer or software developer on staff there is a good chance you will qualify for the credit.

The following is a list of questions to help determine if the credit can be utilized by your business:

  1. Does the research discover information that is technological in nature and useful in developing a new or improved business component?
  2. Do substantially all elements of the activity constitute a process of experimentation?
  3. Is the purpose of the research to create new or improved function, performance, reliability, or quality?
  4. Did the research take place after commercial production?
  5. Is the research an adaption of an existing component?
  6. Does the research represent the duplication of a business component?
  7. Does the research represent a survey or a study?
  8. Was the research conducted outside the U.S., Puerto Rico, or and U.S. providence?
  9. Is the research in the area of social science or the humanities?
  10. Was the research funded by a third party?
  11. Did the research involve the development of software primarily for internal use?

If you answered YES to question 11 and answer YES to the next three questions you may still qualify for the Research Credit.

  1. Is the software used for qualified research or involve a qualifying production process?
  2. Is the software used to provide computer services?
  3. Does the software meet the high threshold of innovation test?

If you answered yes to the questions listed above there is a good chance you qualify for the credit. Please contact Jennifer Cochran for additional analysis 417-881-0145.

Click here to read another article about R&E tax credits: The Research & Experimentation Tax Credit written by Jay Logal and Jennifer Cochran.