Enacted in 1981, the original research credit required taxpayers to meet a single qualifying test.

In order to claim the credit, a company must have documentation from 1984 to 1988.

As a general business credit, the research credit can be carried back one year and carried forward 20 years.

Wages and compensation of officers and directors cannot be included within the research credit.

Improvements to existing products can qualify for the research credit.

Process Improvements cannot qualify for the research credit.

R&D that does not lead to a viable product cannot qualify for the credit.

Temporary or Leased employees are excluded from the research credit.

Qualified research expenditures for prototype development include material cost, component cost and labor cost.

In order to receive a credit, a company’s research efforts and activities must be increasing year-over-year.

BONUS QUESTION!

The Federal R&D Tax credit was signed into law in 1981 by President Ronald Reagan.