5 R&D Tax Credit Questions from Michigan CPAs

Last week, TCG had the opportunity to exhibit and present on the topic of the Research & Development tax credit at the 2017 MICPA Management Information Business Show. Throughout this two-day event, we had the pleasure of meeting dozens of Michigan CPAs, and addressing many of their R&D tax credit questions.

Here are 5 of our favorites:

1. What types of industries typically qualify for the credit? While there are absolutely no restrictions to the type of businesses that can qualify for the credit, typically, its manufacturers and software developers who most often take advantage of it.

2. Is the R&D credit just for large businesses? No. Though a common misconnection that only large businesses can qualify, the R&D tax credit is available to businesses of any size or sector. In fact, just recently, new provisions were enacted that provide certain eligible small businesses an opportunity to offset not only income tax, but also Alternative Minimum Tax and Payroll tax.

3. Are there certain industries that I should watch out for? Yes. Due to Detroit’s booming automotive industry, Michigan is ripe with Tier I and Tier II automotive suppliers. Many are undergoing tremendous amounts of R&D in order to develop new or improved components that will be utilized for future vehicle programs. If you have clients in this industry, there is a high probability they would be eligible for this incentive.

4. If my client has missed out on this opportunity, is it possible to amend a return? Yes. Typically, the statute of limitations allows taxpayers to amend returns for up to 3 years.

5. What type of documentation is needed to substantiate an R&D credit claim? While the burden of proof is on the taxpayer, unfortunately, there is no bright-line test outlining documentation requirements. This means that you must be able to substantiate your claims, but how you choose to substantiate them is up to you. Due to vagueness in this area, it’s best to consult with an R&D tax credit specialist should you have concerns in this area.

So there you have it, 5 great questions from Michigan CPAs.

About the Author: Bethany Jones-Worner

Bethany Jones-Worner is Managing Director of TCG. With a decade of experience in Research and Development Tax Credit consulting, she’s helped her clients in the banking, software and manufacturing industries save millions.