Misconceptions, apprehension surround R&D tax credit

When it comes to the research and development (R&D) tax credit, the mindsets of many business owners, CEOs and CFOs often fall into two camps: They either have apprehension and resistance to taking the credit, or they currently utilize the credit, but are complacent with their current provider and think they are getting the maximum amount to which they are entitled under the law.

Let's be clear. The R&D credit was enacted into law because the government wants innovative and technological businesses to claim it. But why do some companies not take it or pump the brakes when the notion to capture the money owed to them is brought up?

Here are four reasons why people don't explore their options:

• "We're happy with our provider." If you're taking the credit and are happy with your provider, then three cheers to you! However, are you getting every dollar allowable by law? Frankly, in our experience, you almost certainly are not. Although many CPAs know about the credit, most have very limited knowledge about how to get every dollar that you're entitled. Further, they often lack the legal expertise to prepare the documentation necessary to substantiate a company's position. Indeed, this is the reason ABGi partners with hundreds of CPA firms whose clients enjoy the benefits of ABGi's specialization.

Many providers can deliver good results, but they put their clients through the paces with outdated methodologies. The client is saddled with hours and hours of administering documents, reports, and testimony. This results in higher fees and less productivity. ABGi uses the business component approach, which generally results in a dramatic decrease in the amount of time the client spends on the study. In doing so, this modern approach results in less time, more credits and ultimately increased ROI.

• "We could be subject to an audit." There are common misconceptions when it comes to the fear of an audit. Very few companies that utilize the R&D credit ever go to audit. Even if you're one of the unlucky few, there's nothing to fear as long as the R&D firm you have partnered with is properly prepared. Well-established, reputable firms know the credit and the industries they serve. They take legal, technical and ethical positions, resulting in confidence that all credits will be sustained in the rare event of an audit. This is why ABGi defends its clients, if audited, as part of every agreement at no additional cost.

ABGi's attorneys and tax controversy team are some of the best in the country in the R&D space. Many are former trial lawyers and "Big Four" trained. The firm offers audit defense as part of its value proposition.

• "We don't qualify." Oftentimes, assumptions are made from old information. The R&D tax credit has been around since 1981 and gone through substantial revisions. The credit applies to businesses that are involved in developing a product, process, formula, invention, software or technique.

Most companies don't have R&D laboratories and instead perform R&D in their office, field, manufacturing facility or production floor. Wherever experimentation occurs, R&D may be found. Most oil and gas companies are involved in the development of science-based innovations. If the company is always working to improve its products or processes, it may qualify.

• "There's no time, or it takes too much time." Charles Buxton once said, "You will never find time for anything. If you want time, you must make it." If the company's leadership wants the monetary benefit, then you must find the time to do it. It seems unthinkable that companies would pass on hundreds of thousands or millions of dollars they can legally claim. This is money that would allow them to bid more competitively, pay for capital expenditures, or grow by hiring and keeping high-quality jobs in the U.S.

ABGi realized this overwhelming burden on the client more than a decade ago and developed a proprietary methodology to make the process both client friendly and efficient. This approach has resulted in increased credits, less time consumed to conduct the R&D study and a seamless customer experience.

For a free R&D tax credit consultation and analysis of the potential returns your company might expect, email greg.miller@abgi-usa.com or visit www.abgi-usa.com.