The Research and Experimentation Credit: New Rules Make It Easier for Businesses to Qualify

By Fiore, Nicholas J. | Journal of Accountancy, March 2002 | Go to article overview

The Research and Experimentation Credit: New Rules Make It Easier for Businesses to Qualify


Fiore, Nicholas J., Journal of Accountancy


For the past 20 years, a research and experimentation (R&E) credit has been part of the tax law. Unfortunately, because of its complexity, many businesses (particularly smaller ones) have failed to take advantage of this credit. Recently issued proposed regulations should make it easier to qualify.

R&E CREDIT

In general, businesses can claim a credit for the amount of any qualified research that exceeds a base amount.

Expenses qualifying for the R&E credit include in-house expenses for wages, salaries and supplies (but not computer hardware), computer leasing or time-sharing costs and certain contract research. The costs must be incurred on preproduction research for a new or substantially improved business component in physical, biological, engineering or computer science. Costs incurred after a product is ready for commercial sale or use do not qualify. Costs incurred to duplicate or adapt an existing product, those related to style, taste, cosmetic or seasonal design factors and those related to research conducted in the social sciences also do not qualify.

QUALIFYING TESTS

A company must meet four tests to claim the R&E credit:

* Sec. 174 test. The costs must be trade or business expenses for experimental or laboratory research. These generally include all costs incident to a product's development or improvement.

* Business component test. The discovery must be intended for developing a new or improved business component.

* Discovery test. The purpose of the research must be to discover information that is technological in nature.

A taxpayer meets this test if the intent of its research efforts is to eliminate uncertainty in the development or improvement of a business component.

* Process-of-experimentation test. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Research and Experimentation Credit: New Rules Make It Easier for Businesses to Qualify
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.