5/16/25
New Beginnings
On March 31, 2025, Meritum Consulting, a Houston-based firm specializing in business tax credits, unveiled a press release announcing the addition of two outstanding professionals to our leadership team—Craig La Grappe and Adrienne Balfour. Alongside our Kirk Chen, they’ll help guide us into an exciting new chapter of growth in 2025 and beyond.
Craig La Grappe has joined us as Executive Vice President of Business Development. With extensive experience in scaling business credit firms and delivering substantial tax savings to clients across the country, Craig is set to drive our revenue growth, expand strategic partnerships, and develop national contracts.
Adrienne Balfour is now our Executive Vice President of Operations and General Counsel. As a seasoned attorney with more than 15 years of experience in R&D tax credit law and audit defense, Adrienne will oversee client engagement and ensure we maintain full compliance with evolving tax regulations—minimizing audit risks while continuing to deliver top-tier service.
Kirk Chen, who brings a unique blend of engineering and legal expertise to the firm, is incredibly proud to welcome Craig and Adrienne aboard. Together, our leadership team now brings over 75 years of combined experience in the business tax credit space, united by a commitment to professionalism, innovation, and client success.
Looking ahead, we're planning to expand our offerings, grow our U.S.-based team, and launch new cost-saving products to help more businesses thrive through business tax credits and incentives.
We’re excited for what’s next—and grateful to continue supporting innovative companies nationwide.
Press Release
If you have any questions or would like more information, please contact us at [email protected].
On March 31, 2025, Meritum Consulting, a Houston-based firm specializing in business tax credits, unveiled a press release announcing the addition of two outstanding professionals to our leadership team—Craig La Grappe and Adrienne Balfour. Alongside our Kirk Chen, they’ll help guide us into an exciting new chapter of growth in 2025 and beyond.
Craig La Grappe has joined us as Executive Vice President of Business Development. With extensive experience in scaling business credit firms and delivering substantial tax savings to clients across the country, Craig is set to drive our revenue growth, expand strategic partnerships, and develop national contracts.
Adrienne Balfour is now our Executive Vice President of Operations and General Counsel. As a seasoned attorney with more than 15 years of experience in R&D tax credit law and audit defense, Adrienne will oversee client engagement and ensure we maintain full compliance with evolving tax regulations—minimizing audit risks while continuing to deliver top-tier service.
Kirk Chen, who brings a unique blend of engineering and legal expertise to the firm, is incredibly proud to welcome Craig and Adrienne aboard. Together, our leadership team now brings over 75 years of combined experience in the business tax credit space, united by a commitment to professionalism, innovation, and client success.
Looking ahead, we're planning to expand our offerings, grow our U.S.-based team, and launch new cost-saving products to help more businesses thrive through business tax credits and incentives.
We’re excited for what’s next—and grateful to continue supporting innovative companies nationwide.
Press Release
If you have any questions or would like more information, please contact us at [email protected].
3/21/25
Don't Forget About State R&D Tax Credits
If your business performed any product development or manufacturing process development work, not only would you likely qualify for the federal R&D Tax Credit, but your state may also provide your company a state R&D Tax Credit as well.
Depending on how they are defined, currently a little more than 2/3 of the states offer their own R&D Tax Credit. And if your business' development activities meet the qualifications for both the federal and state definitions of R&D, then your business may be entitled to lucrative tax credits to offset both your federal and state tax liabilities.
Meritum Consulting tracks all the latest developments pertaining the R&D Tax Credit at both the federal level as well as every state jurisdiction too. Let our experts help you explore your full R&D Tax Credit potential!
If you have any questions or would like more information, please contact us at [email protected].
If your business performed any product development or manufacturing process development work, not only would you likely qualify for the federal R&D Tax Credit, but your state may also provide your company a state R&D Tax Credit as well.
Depending on how they are defined, currently a little more than 2/3 of the states offer their own R&D Tax Credit. And if your business' development activities meet the qualifications for both the federal and state definitions of R&D, then your business may be entitled to lucrative tax credits to offset both your federal and state tax liabilities.
Meritum Consulting tracks all the latest developments pertaining the R&D Tax Credit at both the federal level as well as every state jurisdiction too. Let our experts help you explore your full R&D Tax Credit potential!
If you have any questions or would like more information, please contact us at [email protected].
11/12/24
The Hurricane Beryl 2023 Tax Filing Deadline is February 3, 2025
If your business filed for an extension on its 2023 tax return and was affected by Hurricane Beryl, the filing deadline is February 3, 2025. While you still have plenty of time, don't miss out on an opportunity to contact us to make sure you're taking advantage of every possible tax credit and program available to you and your business. If possible, you can even amend past years' tax returns for such credits, so long as you are still within the 3-year statute of limitations to amend.
Contact your CPA to verify which years are available for amendment, and let us help you determine any tax credits you are owed.
If you have any questions or would like more information, please contact us at [email protected].
If your business filed for an extension on its 2023 tax return and was affected by Hurricane Beryl, the filing deadline is February 3, 2025. While you still have plenty of time, don't miss out on an opportunity to contact us to make sure you're taking advantage of every possible tax credit and program available to you and your business. If possible, you can even amend past years' tax returns for such credits, so long as you are still within the 3-year statute of limitations to amend.
Contact your CPA to verify which years are available for amendment, and let us help you determine any tax credits you are owed.
If you have any questions or would like more information, please contact us at [email protected].
9/1/24
The 2023 Tax Filing Deadline is Fast Approaching
If your business filed for an extension on its 2023 tax return, the filing deadline is fast approaching. It is paramount that you give us a call to ensure you're not leaving any specialty business tax credits on the table before filing your tax return. If possible, you can even amend past years' tax returns for such credits, so long as you are still within the 3-year statute of limitations to amend.
Contact your CPA to verify which years are available for amendment, and let us help you determine any tax credits you are owed.
If you have any questions or would like more information, please contact us at [email protected].
If your business filed for an extension on its 2023 tax return, the filing deadline is fast approaching. It is paramount that you give us a call to ensure you're not leaving any specialty business tax credits on the table before filing your tax return. If possible, you can even amend past years' tax returns for such credits, so long as you are still within the 3-year statute of limitations to amend.
Contact your CPA to verify which years are available for amendment, and let us help you determine any tax credits you are owed.
If you have any questions or would like more information, please contact us at [email protected].
2/3/24
Happy Tax Season!
Tax Season doesn't have to be something you dread. If you own a business that holds patents, designs and/or develops products or manufacturing processes, or if you or your company has either recently purchased or remodeled real estate property, be sure to let us help you identify some incredible tax savings opportunities!
Tax Season doesn't have to be something you dread. If you own a business that holds patents, designs and/or develops products or manufacturing processes, or if you or your company has either recently purchased or remodeled real estate property, be sure to let us help you identify some incredible tax savings opportunities!
9/29/23
Who could benefit from a Cost Segregation Study?
A cost segregation study can be beneficial for a range of businesses and real estate investors, but it is particularly advantageous for those who meet certain criteria and have specific objectives. Here are some scenarios and types of individuals or entities that should consider conducting a cost segregation study:
A cost segregation study can be beneficial for a range of businesses and real estate investors, but it is particularly advantageous for those who meet certain criteria and have specific objectives. Here are some scenarios and types of individuals or entities that should consider conducting a cost segregation study:
- Commercial Real Estate Owners: Owners of commercial properties, such as office buildings, retail centers, warehouses, and industrial facilities, can benefit significantly from cost segregation. These properties often have a variety of components that can be reclassified for shorter depreciation periods.
- Residential Real Estate Investors: Individuals or entities that own residential rental properties can also benefit. Residential rental properties generally have components like appliances, carpets, and lighting fixtures that can be reclassified for faster depreciation.
- Real Estate Developers: Developers who construct new buildings or undertake substantial renovations may be able to accelerate depreciation deductions by properly allocating costs to shorter-lived assets within the property.
- Hospitality Industry: Hotel and motel owners can benefit from cost segregation, as these properties often have a significant amount of personal property and specialized fixtures and equipment that qualify for shorter depreciation schedules.
- Manufacturers and Industrial Facilities: Businesses in the manufacturing and industrial sectors can apply cost segregation to their facilities, separating out machinery and equipment for faster depreciation.
- Medical Facilities: Healthcare providers with owned properties can consider cost segregation to identify shorter-lived assets within their buildings, such as specialized medical equipment.
- Franchise Owners: Franchisees with real estate holdings can explore cost segregation to optimize their tax planning and reduce their tax liabilities.
- Recent Property Acquisitions: Those who have recently acquired real estate properties should consider cost segregation to maximize the depreciation deductions available in the early years of ownership.
- Taxpayers with High Tax Liabilities: Individuals or businesses with significant tax liabilities may find cost segregation particularly attractive because it can lead to immediate tax savings.
- Passive Investors: Passive investors who may not have substantial involvement in the day-to-day management of real estate properties can still benefit from cost segregation to enhance their return on investment.
- Property Flippers: Investors who buy, renovate, and sell properties quickly may use cost segregation to optimize their tax situation during the ownership period.
2/1/23
Never say never...
I'm pleased to announce that Meritum Consulting is back and better than ever!
We are actively engaging with clients in order to explore their R&D Tax Credit and Employee Retention Credit potential.
Are you an employer who chose to maintain your payroll despite the hardships brought on by COVID-19? Do you manufacture or develop products or software in the US? If you answered YES to any of these questions, make sure you contact us so that we can leverage our 14 years in the specialty tax credit and incentives consulting industry to make sure you're not overpaying your taxes.
We believe in quality and doing the work in full accordance with the tax code, rules and regulations, legislation, and subsequent court cases that govern these tax credits.
I'm pleased to announce that Meritum Consulting is back and better than ever!
We are actively engaging with clients in order to explore their R&D Tax Credit and Employee Retention Credit potential.
Are you an employer who chose to maintain your payroll despite the hardships brought on by COVID-19? Do you manufacture or develop products or software in the US? If you answered YES to any of these questions, make sure you contact us so that we can leverage our 14 years in the specialty tax credit and incentives consulting industry to make sure you're not overpaying your taxes.
We believe in quality and doing the work in full accordance with the tax code, rules and regulations, legislation, and subsequent court cases that govern these tax credits.
4/15/20
End of an era...
In the months before the COVID-19 pandemic disrupted all of our lives, I was fortunate enough to touch base with old friends and acquaintances at ABGi-USA, a global business tax consulting firm with services spanning the US, Canada, South America, and Europe.
I spoke with their leadership and came away believing in their strategy, transparency, and commitment to excellence for their clients for the years to come. Namely, the manner by which they were executing their business model fully aligned with how I envisioned Meritum Consulting could operate and grow into in future decades.
By joining ABGi-USA, I realize that I can both fasttrack and expand on my goals of commitment to excellence and operating with integrity for my clients, all while taking on new challenges and opportunities for personal and professional growth.
As such, as of April 2020, Meritum Consulting will cease operations.
In the months before the COVID-19 pandemic disrupted all of our lives, I was fortunate enough to touch base with old friends and acquaintances at ABGi-USA, a global business tax consulting firm with services spanning the US, Canada, South America, and Europe.
I spoke with their leadership and came away believing in their strategy, transparency, and commitment to excellence for their clients for the years to come. Namely, the manner by which they were executing their business model fully aligned with how I envisioned Meritum Consulting could operate and grow into in future decades.
By joining ABGi-USA, I realize that I can both fasttrack and expand on my goals of commitment to excellence and operating with integrity for my clients, all while taking on new challenges and opportunities for personal and professional growth.
As such, as of April 2020, Meritum Consulting will cease operations.
1/29/19
2018 R&D Tax Credit Studies
Now that 2019 has arrived and W-2s have been generated and sent to your employees, it's that time of year again to explore the potential tax benefits of the Research & Development Tax Credit.
Did you design or develop any new products, manufacturing processes, formulas, or software in 2018? Did you design or develop any improvements to existing products, manufacturing processes, formulas, or software in 2018? Did you pursue or consider the possibility of patenting a product idea or methodology in 2018?
If you answered "YES" to any of the questions above, it would certainly be in your best interest to speak to someone knowledgeable on the R&D Tax Credit and to find out whether or not and how you might potentially benefit from this program.
As we've discussed in the past, the R&D Tax Credit was created by Congress in an effort to keep design and manufacturing jobs and innovation right here in the United States. As such, companies can receive a potential tax benefit for the wages of employees tasked with design and development, supplies that were wholly consumed during the development process, as well as a portion of the qualified invoices from 3rd party contractors who assisted with the design and development.
Yes, many people are aware of the R&D deduction. But don't miss out on your chance to take the R&D Tax Credit as well!
Now that 2019 has arrived and W-2s have been generated and sent to your employees, it's that time of year again to explore the potential tax benefits of the Research & Development Tax Credit.
Did you design or develop any new products, manufacturing processes, formulas, or software in 2018? Did you design or develop any improvements to existing products, manufacturing processes, formulas, or software in 2018? Did you pursue or consider the possibility of patenting a product idea or methodology in 2018?
If you answered "YES" to any of the questions above, it would certainly be in your best interest to speak to someone knowledgeable on the R&D Tax Credit and to find out whether or not and how you might potentially benefit from this program.
As we've discussed in the past, the R&D Tax Credit was created by Congress in an effort to keep design and manufacturing jobs and innovation right here in the United States. As such, companies can receive a potential tax benefit for the wages of employees tasked with design and development, supplies that were wholly consumed during the development process, as well as a portion of the qualified invoices from 3rd party contractors who assisted with the design and development.
Yes, many people are aware of the R&D deduction. But don't miss out on your chance to take the R&D Tax Credit as well!
11/8/18
SEMA Show 2018 Wrap Up
We've just returned from another successful and exciting trip to the SEMA Show. This year marked our fourth time as a lecturer/presenter in conjunction with SEMA's Education Department. Once again, many thanks to Zane Clark and his team for organizing another exciting and successful year! And we're still so thrilled and honored to be able to contribute to such a fantastic organization full of passionate members.
Once again, we were fortunate enough to meet up with many familiar faces as well as new contacts and to continue educating the SEMA community on their potential R&D Tax Credit benefit. We weren't able to stay as long this year, so I know there are plenty of people we didn't get a chance to touch base with, but we hope to be in contact with you soon.
Our presentation was another success with quite a few attendees representing many businesses of all sizes and complexity from across the country. The audience participation was superb. They asked fantastic questions; their energy was infectious, and we sincerely hope everyone not only learned a few things but also had a good time. (Well, as good of a time as anyone could have learning about a niche area of tax law.) We also really enjoyed getting to meet and chat with several audience members afterward to answer their questions and better get to know them and their businesses.
And now that everyone has returned home and the dust has somewhat settled, we look forward to circling back with many of the folks we met during SEMA Show 2018 to discuss in further detail how the R&D Tax Credit could be of potential benefit to you and your company starting with the upcoming 2018 tax returns due next year.
We've just returned from another successful and exciting trip to the SEMA Show. This year marked our fourth time as a lecturer/presenter in conjunction with SEMA's Education Department. Once again, many thanks to Zane Clark and his team for organizing another exciting and successful year! And we're still so thrilled and honored to be able to contribute to such a fantastic organization full of passionate members.
Once again, we were fortunate enough to meet up with many familiar faces as well as new contacts and to continue educating the SEMA community on their potential R&D Tax Credit benefit. We weren't able to stay as long this year, so I know there are plenty of people we didn't get a chance to touch base with, but we hope to be in contact with you soon.
Our presentation was another success with quite a few attendees representing many businesses of all sizes and complexity from across the country. The audience participation was superb. They asked fantastic questions; their energy was infectious, and we sincerely hope everyone not only learned a few things but also had a good time. (Well, as good of a time as anyone could have learning about a niche area of tax law.) We also really enjoyed getting to meet and chat with several audience members afterward to answer their questions and better get to know them and their businesses.
And now that everyone has returned home and the dust has somewhat settled, we look forward to circling back with many of the folks we met during SEMA Show 2018 to discuss in further detail how the R&D Tax Credit could be of potential benefit to you and your company starting with the upcoming 2018 tax returns due next year.
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And as promised, for SEMA members who were unable to attend our Education Days session, or for those who were able to attend and would like a PDF copy of the presentation, please click on the SEMA 2018 Presentation link to the right to download a copy..
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10/9/18
SEMA Show 2018
We're looking forward to another eventful and exciting trip to the SEMA Show. This will be our fourth year in a row as a lecturer/presenter. We won't be participating in the "Ask an Expert" sessions this year, but we're certainly available to meet privately until the afternoon of Oct. 30th. For a one-on-one conversation, please feel free to email us at [email protected].
We look forward to seeing many familiar faces as well as meeting new contacts and to continue educating the SEMA community regarding their potential Research & Development Tax Credit opportunities.
Based on recent changes to tax law, for this year's presentation we will devote the entirety of the presentation to introducing the R&D Tax Credit. The IC-DISC (Interest Charge - Domestic International Sales Corporation) export incentive was virtually eliminated by the new tax plan passed in December of 2017.
If you're attending SEMA Show 2018 we hope you'll join our discussion on October 29, 2018 at 2:30PM in room N256, and I hope you have another fantastic and successful show!
We're looking forward to another eventful and exciting trip to the SEMA Show. This will be our fourth year in a row as a lecturer/presenter. We won't be participating in the "Ask an Expert" sessions this year, but we're certainly available to meet privately until the afternoon of Oct. 30th. For a one-on-one conversation, please feel free to email us at [email protected].
We look forward to seeing many familiar faces as well as meeting new contacts and to continue educating the SEMA community regarding their potential Research & Development Tax Credit opportunities.
Based on recent changes to tax law, for this year's presentation we will devote the entirety of the presentation to introducing the R&D Tax Credit. The IC-DISC (Interest Charge - Domestic International Sales Corporation) export incentive was virtually eliminated by the new tax plan passed in December of 2017.
If you're attending SEMA Show 2018 we hope you'll join our discussion on October 29, 2018 at 2:30PM in room N256, and I hope you have another fantastic and successful show!
2/25/18
2017 R&D Tax Credit Studies
Now that 2018 has arrived and W-2s have been generated and sent to you employees, it's that time of year again to explore the potential tax benefits of the Research & Development Tax Credit.
Did you design or develop any new products, manufacturing processes, formulas, or software in 2017? Did you design or develop any improvements to existing products, manufacturing processes, formulas, or software in 2017? Did you pursue or consider the possibility of patenting a product idea or methodology in 2017?
If you answered "YES" to any of the questions above, it would certainly be in your best interest to speak to someone knowledgeable on the R&D Tax Credit and to find out whether or not and how you might potentially benefit from this program.
As we've discussed in the past, the R&D Tax Credit was created by Congress in an effort to keep design and manufacturing jobs and innovation right here in the United States. As such, companies can receive a potential tax benefit for the wages of employees tasked with design and development, supplies that were wholly consumed during the development process, as well as a portion of the qualified invoices from 3rd party contractors who assisted with the design and development.
Now that 2018 has arrived and W-2s have been generated and sent to you employees, it's that time of year again to explore the potential tax benefits of the Research & Development Tax Credit.
Did you design or develop any new products, manufacturing processes, formulas, or software in 2017? Did you design or develop any improvements to existing products, manufacturing processes, formulas, or software in 2017? Did you pursue or consider the possibility of patenting a product idea or methodology in 2017?
If you answered "YES" to any of the questions above, it would certainly be in your best interest to speak to someone knowledgeable on the R&D Tax Credit and to find out whether or not and how you might potentially benefit from this program.
As we've discussed in the past, the R&D Tax Credit was created by Congress in an effort to keep design and manufacturing jobs and innovation right here in the United States. As such, companies can receive a potential tax benefit for the wages of employees tasked with design and development, supplies that were wholly consumed during the development process, as well as a portion of the qualified invoices from 3rd party contractors who assisted with the design and development.
11/15/17
SEMA Show 2017
We've recently returned from another successful and exciting trip to the SEMA Show. 2017 marked our third time as a lecturer/presenter and participant in SEMA's "Ask an Expert" one-on-one sessions.
We were fortunate enough to meet up with many familiar faces as well as new contacts and to continue educating the SEMA community on their potential for business tax savings.
For this year's presentation, not only did we continue to introduce the R&D Tax Credit, we also devoted some time to discuss the IC-DISC (Interest Charge - Domestic International Sales Corporation) export incentive, a legal entity which if applicable to your business can yield significant tax savings on income earned from foreign sales.
We've recently returned from another successful and exciting trip to the SEMA Show. 2017 marked our third time as a lecturer/presenter and participant in SEMA's "Ask an Expert" one-on-one sessions.
We were fortunate enough to meet up with many familiar faces as well as new contacts and to continue educating the SEMA community on their potential for business tax savings.
For this year's presentation, not only did we continue to introduce the R&D Tax Credit, we also devoted some time to discuss the IC-DISC (Interest Charge - Domestic International Sales Corporation) export incentive, a legal entity which if applicable to your business can yield significant tax savings on income earned from foreign sales.
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For SEMA members who were unable to attend our Education Days session on November 2, 2017 at 3:30PM, or for those who were able to attend and would like a PDF copy of the presentation, please click on the SEMA 2017 Presentation link to the right.
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4/26/17
2016 Tax Year
Although the deadline to file your business and personal 2016 taxes have already passed, if your company filed for an extension (or if you are an owner and both you and your company filed for an extension for both your business and personal tax returns), then you should definitely still consider exploring how an R&D Tax Credit Study might benefit your company's bottom line in reducing its tax liability.
And in our experience, filing for the R&D Tax Credit in a current year's tax return is advantageous to amending a previously filed tax return. So don't let this important opportunity pass you by!
Although the deadline to file your business and personal 2016 taxes have already passed, if your company filed for an extension (or if you are an owner and both you and your company filed for an extension for both your business and personal tax returns), then you should definitely still consider exploring how an R&D Tax Credit Study might benefit your company's bottom line in reducing its tax liability.
And in our experience, filing for the R&D Tax Credit in a current year's tax return is advantageous to amending a previously filed tax return. So don't let this important opportunity pass you by!
11/1/16
SEMA Show 2016
On November 1st, 2016, Meritum Consulting will proudly be returning to the 2016 SEMA Show in the Las Vegas Convention Center to continue educating its members on the R&D Tax Credit as well as recent changes to the credit since last year's show.
Last year, we also participated in SEMA's Biz Tips, where we recorded a short video briefly discussing the R&D Tax Credit and how it could apply to SEMA's members.
SEMA members can also access a previous Meritum Consulting Research and Development Tax Credit webinar presentation on the SEMA website under archived webinars.
For those interested in a one-on-one session Wednesday (November 2, 2016), please stop by the SEMA PAC room (N243) to sign up for their Ask an Expert program. If you are unable to make it but would still like to meet, please feel free to email me at [email protected].
On November 1st, 2016, Meritum Consulting will proudly be returning to the 2016 SEMA Show in the Las Vegas Convention Center to continue educating its members on the R&D Tax Credit as well as recent changes to the credit since last year's show.
Last year, we also participated in SEMA's Biz Tips, where we recorded a short video briefly discussing the R&D Tax Credit and how it could apply to SEMA's members.
SEMA members can also access a previous Meritum Consulting Research and Development Tax Credit webinar presentation on the SEMA website under archived webinars.
For those interested in a one-on-one session Wednesday (November 2, 2016), please stop by the SEMA PAC room (N243) to sign up for their Ask an Expert program. If you are unable to make it but would still like to meet, please feel free to email me at [email protected].
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For SEMA members who were unable to attend our Education Days session on November 1, 2016 at 3:30PM, or for those who were able to attend and would like a PDF copy of the presentation, please click on the SEMA 2016 Presentation link to the right.
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2/29/16
Should I consider exploring the R&D Tax Credit?
Now that 2016 has arrived and W-2s have been generated and sent to you employees, it's that time of year again to explore the potential tax benefits of the Research & Development Tax Credit.
Did you design or develop any new products, manufacturing processes, formulas, or software in 2015? Did you design or develop any improvements to existing products, manufacturing processes, formulas, or software in 2015? Did you pursue or consider the possibility of patenting a product idea or methodology in 2015?
If you answered "YES" to any of the questions above, it would certainly be in your best interest to speak to someone knowledgeable on the R&D Tax Credit and to find out whether or not and how you might potentially benefit from this program.
As we've discussed in the past, the R&D Tax Credit was created by Congress in an effort to keep design and manufacturing jobs and innovation right here in the United States. As such, companies can receive a potential tax benefit for the wages of employees tasked with design and development, supplies that were wholly consumed during the development process, as well as a portion of the qualified invoices from 3rd party contractors who assisted with the design and development.
New Changes to the R&D Tax Credit
But aside from checking if you and your employees qualify for this benefit, the major news is that there have been some huge recent changes to the R&D Tax Credit that are aimed specifically at helping small businesses and startups to be able to take advantage of the R&D Tax Credit.
First up, unlike in previous years where the R&D Tax Credit required yearly approval from Congress, the R&D Tax Credit has now been made into a permanent tax credit. Although even in past periods where the credit was allowed to lapse, it was always later re-approved and always done so to extend back retroactively in order to cover any period where the credit may have lapsed. But with this new permanence in place, Congress adds an extra sense of stability to industries counting on this tax program.
The second big change to the R&D Tax Credit is that like the one-year grace period back in 2010, the R&D Tax Credit now no longer considers whether or not a business is subject to the Alternative Minimum Tax (AMT). In year's past, many businesses may have qualified for the R&D Tax Credit by virtue of their development activities as defined by the tax code but were unable to utilize any calculated credit as they were subject to AMT. This new change allows small businesses (defined as having less than $50 million in Gross Receipts) to ignore any AMT implications that would otherwise exclude them from being able to take advantage of the R&D Tax Credit.
And finally for startup companies Congress has introduced a brand new rule to allow them to also take advantage of the R&D Tax Credit. Traditionally, startups have been barred from taking advantage of the R&D Tax Credit because as the term "credit" implies, a business must be profitable (earning income) before a credit could be applied. And although much of a startup's critical development work takes place during its infancy, they may not yet have any sales or income to speak of so there was nothing to which a credit could be applied. This situation often led startups to carry the credit forward until they were profitable, but this delay access to much needed resources could be a serious detriment to many new businesses trying to get off the ground. The new rule for the R&D Tax Credit pertaining to startups (generally a company with less than $5 million in gross receipts) allows a business to take the R&D Tax Credit against their payroll taxes for the first 5 years.
With a new permanence and the removal of two critical traditional roadblocks for new and small businesses, the R&D Tax Credit is now even more exciting and accessible than ever before. Truly an early Christmas for small business owners and new entrepreneurs!
Now that 2016 has arrived and W-2s have been generated and sent to you employees, it's that time of year again to explore the potential tax benefits of the Research & Development Tax Credit.
Did you design or develop any new products, manufacturing processes, formulas, or software in 2015? Did you design or develop any improvements to existing products, manufacturing processes, formulas, or software in 2015? Did you pursue or consider the possibility of patenting a product idea or methodology in 2015?
If you answered "YES" to any of the questions above, it would certainly be in your best interest to speak to someone knowledgeable on the R&D Tax Credit and to find out whether or not and how you might potentially benefit from this program.
As we've discussed in the past, the R&D Tax Credit was created by Congress in an effort to keep design and manufacturing jobs and innovation right here in the United States. As such, companies can receive a potential tax benefit for the wages of employees tasked with design and development, supplies that were wholly consumed during the development process, as well as a portion of the qualified invoices from 3rd party contractors who assisted with the design and development.
New Changes to the R&D Tax Credit
But aside from checking if you and your employees qualify for this benefit, the major news is that there have been some huge recent changes to the R&D Tax Credit that are aimed specifically at helping small businesses and startups to be able to take advantage of the R&D Tax Credit.
First up, unlike in previous years where the R&D Tax Credit required yearly approval from Congress, the R&D Tax Credit has now been made into a permanent tax credit. Although even in past periods where the credit was allowed to lapse, it was always later re-approved and always done so to extend back retroactively in order to cover any period where the credit may have lapsed. But with this new permanence in place, Congress adds an extra sense of stability to industries counting on this tax program.
The second big change to the R&D Tax Credit is that like the one-year grace period back in 2010, the R&D Tax Credit now no longer considers whether or not a business is subject to the Alternative Minimum Tax (AMT). In year's past, many businesses may have qualified for the R&D Tax Credit by virtue of their development activities as defined by the tax code but were unable to utilize any calculated credit as they were subject to AMT. This new change allows small businesses (defined as having less than $50 million in Gross Receipts) to ignore any AMT implications that would otherwise exclude them from being able to take advantage of the R&D Tax Credit.
And finally for startup companies Congress has introduced a brand new rule to allow them to also take advantage of the R&D Tax Credit. Traditionally, startups have been barred from taking advantage of the R&D Tax Credit because as the term "credit" implies, a business must be profitable (earning income) before a credit could be applied. And although much of a startup's critical development work takes place during its infancy, they may not yet have any sales or income to speak of so there was nothing to which a credit could be applied. This situation often led startups to carry the credit forward until they were profitable, but this delay access to much needed resources could be a serious detriment to many new businesses trying to get off the ground. The new rule for the R&D Tax Credit pertaining to startups (generally a company with less than $5 million in gross receipts) allows a business to take the R&D Tax Credit against their payroll taxes for the first 5 years.
With a new permanence and the removal of two critical traditional roadblocks for new and small businesses, the R&D Tax Credit is now even more exciting and accessible than ever before. Truly an early Christmas for small business owners and new entrepreneurs!
11/2/15
On November 2nd, 2015, Meritum Consulting will proudly be giving a presentation on the Research and Development Tax Credit at the 2015 SEMA Show in the Las Vegas Convention Center.
If SEMA members were unable to attend, a copy of the presentation will be made available on the SEMA website.
SEMA members can also access a previous Meritum Consulting Research and Development Tax Credit webinar presentation on the SEMA website under archived webinars.
If SEMA members were unable to attend, a copy of the presentation will be made available on the SEMA website.
SEMA members can also access a previous Meritum Consulting Research and Development Tax Credit webinar presentation on the SEMA website under archived webinars.
1/18/15
On January 16, 2015, the Treasury Department and tRS gave notice of proposed regulations (REG-153656 -03) regarding the application of the R&D Tax Credit for computer software that is developed for internal use. This is a welcomed communication as many in the tax credit industry and our clients have been clamoring for clarification on the issue since the release of T.D. 9104 in 2003, which did not fully address internal-use software.
Background
As per section 41(d)(4)(E), internal-use software is not eligible for the R&D Tax Credit except as carved out under certain exceptions by regulations, a.k.a. "high threshold of innovation test." Nevertheless, the topic remained a point of contingency for many in this field over the years. And for every year since 2004, addressing the matter has been on the "Business Plan" of the Treasury & IRS. Therefore the long-sought-after and recently released proposal is an exciting development.
Internal-Use Software Definition
Under the proposed regulations, software that is developed by (or for the benefit of) the taxpayer is considered internal-use if the software is developed for use in general and administrative functions that facilitate or support the conduct of the taxpayer's trade or business. The same definition would apply to taxpayers developing software for the same purpose for a member of its controlled group as well.
This definition is intended to remove the classification of software developed to deliver computer and non-computer services, and targets software used in the back-office functions of taxpayers (e.g. financial management, human resources, support services, customer relations management, warehouse/inventory/purchasing functions, etc.).
Software that is created to be commercially sold, licensed, leased, or otherwise marketed will be treated as non-internal-use software. This explanation removes the previously interpreted requirement of a third-party commercial focus in order to avoid being characterized as internal-use software. Therefore, certain software that is developed to benefit third parties to facilitate interaction or transactions with the taxpayer may avoid the internal-use software designation. If software is developed for the benefit of both the taxpayer and third parties, the software will be considered internal-use by default unless the taxpayer can point to specific aspects of the development process that were specifically for the benefit of third-parties.
High Threshold of Innovation Test
Internal-use software will continue to be eligible for the R&D Tax Credit so long as it meets all three parts of the of the "high threshold of innovation test.". But there appear to be some slight changes in this latest proposed edition.
In this proposal, that the software in question not be available commercially remains unchanged.
Also in this proposal, the innovative test remains the same (requiring either a significant economic savings, increase in speed, or other quantifiable benefit), but would not require successful development; merely so long as the desired result is a quantifiable and objective improvement.
Finally, the significant economic risk test has been altered most notably. The newly proposed test focuses on the level of uncertainty at the outset of development instead of the degree of innovation represented by the end result. In other words, the proposed regulations provide that substantial uncertainty exists if, at the beginning of the taxpayer’s development activities, the information available to the taxpayer does not establish the capability or method for developing or improving the software.
The proposed regulations attempt to address the controversy regarding whether the significant economic risk test concerns technical risk or economic risk. Treasury & IRS interpret the significant economic risk test to require both technical and economic risk. It requires technical risk because there must be uncertainty that is technological in nature, as defined in §1.41-4(a)(4) of the current regulations. However, it also requires economic risk because the taxpayer must devote substantial resources to the development and, by virtue of the technical risk, there must be uncertainty regarding whether the final result can be achieved within a timeframe that will allow those resources to be recovered within a reasonable period.
Conclusion
Clearly, the language in the newly proposed regulations will present a significant new challenge for those attempting to qualify software that could be potentially characterized as internal-use. However, it will be interesting to see how these new changes will affect the industry and business decisions (e.g. risk assessment) of taxpayers considering the R&D Tax Credit.
Background
As per section 41(d)(4)(E), internal-use software is not eligible for the R&D Tax Credit except as carved out under certain exceptions by regulations, a.k.a. "high threshold of innovation test." Nevertheless, the topic remained a point of contingency for many in this field over the years. And for every year since 2004, addressing the matter has been on the "Business Plan" of the Treasury & IRS. Therefore the long-sought-after and recently released proposal is an exciting development.
Internal-Use Software Definition
Under the proposed regulations, software that is developed by (or for the benefit of) the taxpayer is considered internal-use if the software is developed for use in general and administrative functions that facilitate or support the conduct of the taxpayer's trade or business. The same definition would apply to taxpayers developing software for the same purpose for a member of its controlled group as well.
This definition is intended to remove the classification of software developed to deliver computer and non-computer services, and targets software used in the back-office functions of taxpayers (e.g. financial management, human resources, support services, customer relations management, warehouse/inventory/purchasing functions, etc.).
Software that is created to be commercially sold, licensed, leased, or otherwise marketed will be treated as non-internal-use software. This explanation removes the previously interpreted requirement of a third-party commercial focus in order to avoid being characterized as internal-use software. Therefore, certain software that is developed to benefit third parties to facilitate interaction or transactions with the taxpayer may avoid the internal-use software designation. If software is developed for the benefit of both the taxpayer and third parties, the software will be considered internal-use by default unless the taxpayer can point to specific aspects of the development process that were specifically for the benefit of third-parties.
High Threshold of Innovation Test
Internal-use software will continue to be eligible for the R&D Tax Credit so long as it meets all three parts of the of the "high threshold of innovation test.". But there appear to be some slight changes in this latest proposed edition.
In this proposal, that the software in question not be available commercially remains unchanged.
Also in this proposal, the innovative test remains the same (requiring either a significant economic savings, increase in speed, or other quantifiable benefit), but would not require successful development; merely so long as the desired result is a quantifiable and objective improvement.
Finally, the significant economic risk test has been altered most notably. The newly proposed test focuses on the level of uncertainty at the outset of development instead of the degree of innovation represented by the end result. In other words, the proposed regulations provide that substantial uncertainty exists if, at the beginning of the taxpayer’s development activities, the information available to the taxpayer does not establish the capability or method for developing or improving the software.
The proposed regulations attempt to address the controversy regarding whether the significant economic risk test concerns technical risk or economic risk. Treasury & IRS interpret the significant economic risk test to require both technical and economic risk. It requires technical risk because there must be uncertainty that is technological in nature, as defined in §1.41-4(a)(4) of the current regulations. However, it also requires economic risk because the taxpayer must devote substantial resources to the development and, by virtue of the technical risk, there must be uncertainty regarding whether the final result can be achieved within a timeframe that will allow those resources to be recovered within a reasonable period.
Conclusion
Clearly, the language in the newly proposed regulations will present a significant new challenge for those attempting to qualify software that could be potentially characterized as internal-use. However, it will be interesting to see how these new changes will affect the industry and business decisions (e.g. risk assessment) of taxpayers considering the R&D Tax Credit.
6/3/14
According to new regulations announced on June 2, 2014, the Alternative Simplified Credit (ASC) method for calculating the R&D Tax Credit, found in Sec. 41(c)(5), can now be used to amend a previous year's tax return. (Federal Register, PDF) The new regulations went into effect on June 3, 2014.
Specifically, the IRS amended its regulation to withdraw Regs. Sec. 1.41-9(b)(2), which formerly did not allow for the use of the ASC method for amending a previous year's tax return, and replaced it with Temp. Regs. Sec 1.41-9T(b)(2), which permits a taxpayer to make an ASC election for an amended return so long as the taxpayer did not previously claim the credit on its original return or an amended return for that year, and the taxpayer (or a member of its controlled group) did not make an election to use any other calculation method on an original or previously amended return for that year.
Specifically, the IRS amended its regulation to withdraw Regs. Sec. 1.41-9(b)(2), which formerly did not allow for the use of the ASC method for amending a previous year's tax return, and replaced it with Temp. Regs. Sec 1.41-9T(b)(2), which permits a taxpayer to make an ASC election for an amended return so long as the taxpayer did not previously claim the credit on its original return or an amended return for that year, and the taxpayer (or a member of its controlled group) did not make an election to use any other calculation method on an original or previously amended return for that year.
