Per the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), the credit for increasing research activities is now a permanent R&D credit. The PATH Act also contains provisions that allow for qualified small businesses (QSBs) to claim the credit against social security taxes paid by the employer up to $250,000 for tax years beginning after 12/31/2015. This credit may also be claimed against alternative minimum tax (AMT).
Who Can Benefit?
Any taxpayer that is a QSB may benefit from the advantages of the PATH Act. In order to qualify as a QSB, a taxpayer must have gross receipts of $5 million or less for the tax year in which the credit is being claimed. The taxpayer also must not have any gross receipts for any tax-year preceding the five-tax-year period ending with the credit year. This credit is particularly beneficial for small startup businesses that do not have income tax liability to offset the credit.
What Qualifies as an R&D Expenditure in the Construction Industry?
In order to qualify as an R&D expenditure, activities must meet a four-part test. The activity must:
- Have a permitted purpose
- Eliminate uncertainty
- Be technical in nature
- Include the process of experimentation
Some examples of activities that generally qualify as R&D expenditures include developing prototypes, modeling, experimentation with new building materials, and design work for energy efficient projects.
For more information on the qualifications and benefits of this tax credit, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form.