At PTCS LLC, we help companies explore the substantial tax savings opportunities associated with federal and state research and development tax credits.
The R&D Tax Credit is one of the most significant tax incentives available to taxpayers. The benefits of this credit are numerous:
- The R&D Tax Credit is not an income tax deduction; it is a bottom-line, dollar-for-dollar credit against income tax due. The credit can result in a significant reduction of current federal and state tax liabilities and can potentially result in a cash refund.
- Businesses can claim R&D Tax Credits for all open tax years. For companies that are in a net operating loss (NOL) position, R&D Tax Credits are potentially available for additional years.
- The R&D Tax Credit is not a “use it or lose it” credit. Federal R&D Tax Credits can be carried forward for 20 years. Certain state credits have no expiration and can be carried forward indefinitely.
- Companies that claim the R&D Tax Credit see immediate earnings-per-share (EPS) and overall effective tax rate (ETR) benefits.
Claiming R&D Tax Credits is not without risks. Due to the high level of audit scrutiny tax authorities apply to these credits, it is critical that companies choose an R&D Tax Credit service provider with a proven process for calculating and documenting claims — and a proven track record of sustaining those claims upon audit.
PTCS LLC's approach to gathering and compiling R&D Tax Credit documentation is a systematic process that focuses on identifying and interviewing the appropriate personnel within a client's organization. Information gathered during these interviews becomes the foundation for the written memoranda that are generated for the purpose of documenting R&D projects and the qualified R&D activities performed associated with those projects. Our approach also relies on intelligent utilization of pre-existing internal (contemporaneous) documentation to support claims that credit-worthy activities have occurred. We can help identify internal reports that will have the maximum positive impact in supporting credits claimed. This cost-saving approach allows our clients to save time and money documenting R&D credits by taking advantage of reports that have already been generated for other business purposes.
While each engagement is unique, a typical R&D Tax Credit project includes the following steps:
Organizational Review and Product/Process Background Research
Our team thoroughly reviews our client's organizational structure prior to beginning the R&D Tax Credit documentation process. A roadmap is generated which identifies the key contacts within the organization who will be interviewed as part of the documentation process.
Creation of Key Reports and Identification of Existing Contemporaneous Support Documents
Payroll and G/L (expense) data is formatted into custom reports to be utilized during the data collection process. These reports (once populated with data) will ultimately become the support for a tax credit calculation. Concurrent with this process, we identify existing reports and other contemporaneous documentation that can be utilized to directly support R&D Tax Credit claims.
R&D Tax Credit Seminar
A company-specific tax credit presentation is prepared for Engineering Management personnel detailing the benefits of the R&D Tax Credit and providing background regarding the regulatory foundation of the credit.
Interview Process and Documentation Generation
PTCS LLC personnel meet with key individuals within the organization gathering support data for the R&D credit calculation. Detailed, technically accurate written memoranda are generated for all pertinent departments describing the nature of R&D projects undertaken.
All R&D Tax Credit support documentation is organized into custom electronic binders along with a detailed summary of the data collection methodology utilized by PTCS LLC. The final deliverable is presented in a format that is 100% audit-ready and can be handed over to an exam team upon request.