There was congressional intent in the making of the Research & Development Tax Credit. This federal tax incentive was provided by Congress to all US companies. This would help offset the cost of innovating here on US soil. One main reason for this lucrative tax credit is to help protect US jobs. These jobs include engineering, science, manufacturing, and coding.
The IRS wants to make sure that you are doing research and development by Congress's definition and that you are claiming the correct amount.
This credit has evolved over the years and the definition of R&D has changed. Year-end estimating of R&D work used to be acceptable by IRS standards, but that all changed in 2008. The IRS then published guidance as to what they want to see in exam. The fundamental of what they want to see revolved around “contemporaneous nexus.” Now, we are currently in the fourth generation of this credit, starting in 2016, which made the R&D credit permanent for the first time ever. There is now no AMT restriction for midsize companies. Also, it is now a refundable credit for startup companies and you can use this credit to offset your FICA match payroll taxes.
This is all improving to help protect American innovation and protect jobs that are here.
If any project initiative goal agenda you are working on passes the “four-part test,” then it is most likely R&D work. See IRC Section IRC 41(d). Some activity will be excluded because of statutory exclusions, but there is a lot that can be captured with this lucrative credit.
The R&D credit is currently being captured by many companies around the United States. See how it can help you and your company today!