United States

Research Tax Credits - They Are Here To Stay!

What Has Been Made Permanent

Thirty-four years after its original, temporary enactment, the section 41 tax credit has finally been made permanent. On December 18, 2015 President Obama signed into law the Consolidated Appropriations Act, 2016 reinstating the credit retroactively for qualified research expenses (QRE) paid or incurred on or after January 1, 2015. The current methods of computing the research credit have not changed. Along with the permanent reinstatement of the research credit, certain businesses can get special tax benefits.

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Benefits for Start-ups and Mid Market Companies

For tax years beginning after 2015:

  • Nonpublic C Corps. and S Corps., Partnerships, and Sole Proprietorships with average annual gross receipts of $50 million or less may be allowed to offset their alternative minimum tax (AMT).
  • Certain startup companies (Qualified Small Business) with annual gross receipts of less than $5 million and no gross receipts in the fifth prior tax year (or earlier) may be able to elect to apply up to $250,000 of ther research credit against their payroll tax liability instead of their income tax liability.
  • Businesses that meet the average annual  gross receipt threshhold and anticipate being AMT taxpayers for 2016 tax year may be able to reduce their 2016 estimated tax payments each quarter.

Specific rules must be followed to qualify for these benefits, therefore  KPMG LLP recommends preplanning to understand how your company may qualify for either of these benefits.

More about KPMG's Research Credit Services


Contact Us

Contact Michael Brossmer
Michael Brossmer

Partner, Research Credit Services
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Contact Edward Jankun
Edward Jankun

Managing Director, Research Credit Services
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