The research tax credit may, in many cases, save taxpayers substantial tax dollars. This credit is calculated based on a percentage of a taxpayer's qualified research expenses over a base amount.
The burden of substantiating expenditures and costs for the base period can be costly, time-consuming and difficult. The Alternative Simplified Credit ("ASC") provides another method that taxpayers may elect to use in computing the amount of the research credit. Heretofore, the election to use the ASC could not be made on an amended tax return. New IRS regulations will allow the election to use the ASC in certain circumstances. While these regulations apply to elections with respect to tax years ending on or after June 3, 2014, a taxpayer may rely on the regulations to elect the ASC for a tax year ending before June 3, 2014 if the statute of limitations for assessment of tax has not expired for that year. Special rules apply for controlled groups, and a taxpayer may not make an ASC election on an amended return for a tax year for which the taxpayer previously claimed a research credit.
These new favorable regulations expire June 2, 2017.
If you have any questions about this alert please contact Michael Greenwald at MGreenwald@FriedmanLLP.com or contact your engagement partner.