State-Level R&D Tax Credits Offer a Unique Opportunity to Double Dip

Have you been searching for additional cash flow opportunities to help expand and grow your business? Look no further, the Research & Development (R&D) Tax Credit may unlock significant savings for your business. While not an exclusive list, if you are in one of the following industries, you may potentially qualify for the R&D Tax Credit:

The R&D Tax Credit is a federal dollar-for-dollar cash savings for performing activities related to the development or design of a new or improved product, process, software, formula, invention, or technique. Not only can you use it against your federal tax liability when in a tax-positive position, but you can now monetize the R&D Tax Credit to offset the employer-portion of payroll taxes if you are a “start-up” business.

Did you know that approximately 30-35 states in the U.S. offer state-level R&D Tax Credits? While there are some distinct nuances, states generally follow federal regulations and IRS guidance on what constitutes qualified research expenses (QREs).

The federal R&D Tax Credit is already known as one of the most lucrative tax incentives offered by the U.S. government. However, state-level R&D Tax Credits offer a unique opportunity for taxpayers todouble-dipon R&D Tax Credits for their qualified research expenses here in the United States.

Not all state-level R&D Tax Credit programs are created equal. While some states, like Florida, require a formal application to be sent by 3/26 and is limited to only C-corporations, some states are quite generous in their R&D Tax Credit programs.

New Jersey offers a refundable option via the New Jersey Economic Development Authority whereby eligible Technology and Biotechnology companies that operate “in the Red” have an additional avenue for funding through the selling of NJ NOLs and R&D Tax Credits pursuant to the Technology Business Tax Certificate Transfer Program.

Not operating “in the Red?” You can add your New Jersey R&D Tax Credit to the Form 306 to begin monetizing the benefit by offsetting NJ state income taxes for C-corporations.

California offers an R&D Tax Credit that is similar to the federal R&D Tax Credit. If you incur California state-level income taxes and have employees in California who are performing qualified research activities, you most likely qualify for the federal and California R&D Tax Credit. Any unused credits can be carried forward indefinitely instead of expiring after a 20-year carryforward.

Massachusetts also offers an R&D Tax Credit that closely mirrors the federal R&D Tax Credit. The Massachusetts R&D Tax Credit amount is limited to the first $25,000 of corporate excise due, plus 75% of any excise due in excess of $25,000. If unused credits exceed these limitations, they can be carried over to the future tax years and applied against the corporate excise.

In 2014, the State of Texas encouraged economic development and offered any business engaged in qualified research to claim a franchise tax credit or sales/use tax exemption. The total R&D Tax Credit claimed in Texas may not exceed 50% of the amount of franchise tax due, but if your credit exceeds 50% of your current years franchise tax, it can carry forward up to 20 years until exhausted.

Whether you have never taken advantage of the R&D Tax Credit or are looking for a new provider, please reach out to one of our R&D Tax Credit experts to see what federal and state-level benefits your company might be missing out on. Our Firm’s experts are focused on the ins and outs of the R&D Tax Credit, working with researchers, scientists, engineers and software developers to understand their unique situations. The initial consultation iscomplimentary! What do you have to lose? Fill in the form below and one of our experts will be in touch.

Author: Austin Jensen, MBA | [email protected]