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Trends in Tax Credits: Investment and R&D Credits

Investing in the growth of your company is important. Have you looked into the R&D credits available for your business? While keeping pace with compliance requirements and capitalizing on tax credits and incentives in an environment that is dynamic, complex and demanding, the rewards can be significant and far outweigh the cost and effort.

Invest in Your Growth

Credits for corporate investment in employee training, new construction or renovation, and even investments in film production are among common tax credits focused on growth, expansion and education. Research and development investments to spur growth through innovation also represent potentially significant ROI for companies seek to capitalize on federal and state credits and other incentives.

Research and Development Tax Credits

The Protecting Americans from Tax Hikes (PATH) Act of 2015 permanently extended the research and development tax credit available under Section 41 of the Internal Revenue Code (the “R&D Credit”). Effective January 1, 2016, it also broadened the ability of many businesses, especially small-to-midsize businesses, to take advantage of the R&D Credit.

  • Tax benefit and a dollar-for-dollar tax savings up to 20% of qualified R&D spending above a base amount calculated from prior years.
  • Man states also offer R&D credits for qualifying research activities performed within their borders.

Training Assistance

Many states offer companies tax credits, grants or other reimbursements for eligible expenses incurred in conducting qualified activities in connection with training and upgrading your workforce.

Qualified training may include training on new technology, new equipment, new software and software upgrades, total management program, lean manufacturing, six sigma, and ISO standards.

Cost Segregation: New Construction and Renovation

Building owners and renters can better identify asset components in order to achieve tax savings, which increases cash flow.

  • Potential benefit: Up to 20 cents present value tax benefit for every $1 of cost shifted.
  • Twenty cents present value tax benefit for every $1 of cost shifted from 39-year property to 5-year property.
  • Eighteen cents present value tax benefit for every $1 of cost shifted from 39-year property to 7-year property.
  • Eleven cents present value tax benefit for every $1 of cost shifted from 39-year property to 15-year property.

Statutory Credits

Many states also offer credits for relocating to or expanding business activities within their borders. The purpose of these credits is to encourage businesses to expand and invest in their operations and workforce within the state. Companies can receive credits for creating jobs, making targeted investments and countless other business activities.

Film Production

Many companies and advertising agencies develop and produce commercials to promote their brands, products and services. Film incentives are state-level incentive programs designed to encourage investment in commercial production. Incentives include: tax credits, cash rebates, grants, sales tax exemptions and fee-free locations.

  • Companies can offset as much as 25-40% of production costs.

To learn more about tax credits that can benefit your manufacturing business, check out our blog on Federal Employment Incentives.

Dana Fox is the Vice President of Alliances with ADP. ADP has over 40 years of tax credit experience across national, state and local levels, ADP has helped its clients capture over $1 billion in tax credits in a single year. To learn more, visit  https://www.adpinfo.com/rd-tax-credit.

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