Research, innovation and development of new products and services have a valuable impact on US society. However small or big, every company has a role in boosting the nation’s economy. In the United States, small- and mid-sized businesses are responsible for 12% of the country’s total research and development.
Recent stats have also shown small businesses in the United States create two-thirds of new jobs. With 22 million Americans filing for unemployment in the last 30 days alone, small businesses will continue to play a vital role in the growth and resurgence of the economy.
What are R&D Tax Credits and Incentives?
The federal and state government offer numerous tax incentives to small and large businesses alike, called R&D tax credits. They’re aimed at providing cash credits and incentives to businesses so they continue developing innovative products and services that help boost the US economy. R&D tax credits act as a 10-15% return on capital invested in research and development.
These particular tax incentives to uplift businesses were introduced by congress in 1981 during the Reagan administration. Then in 2015, the R&D tax credit and incentive policy was made permanent by the federal government. It also decreased the eligibility bar to benefit small- and mid-sized businesses.
Now, businesses with less than $50 million in gross tax receipts can claim the credit and reduce their tax liability. Despite the longevity and benefits of the credits, many diverse business owners aren’t aware that they exist. Only 5% of small businesses claim the credit while 95% of large businesses take advantage of the benefit.
Covid-19 Business Relief Aid
With the present situation of COVID-19 in the US, the federal government has passed a bill of $2.2 trillion incentives for the aid, relief and economic security of the country. Out of this, $500 billion is set for large businesses while $377 billion is for the small business sector. This aid will help businesses pay their employees and continue running their organizations after the stay-at-home restrictions are lifted. This time seems like a great opportunity to claim your business R&D tax credits and use the money to research, innovate and develop business processes and functions.
The COVID-19 aid is in addition to R&D tax credits and incentives depending on your day-to-day business operations. Did you know:
- Impact from small- and mid-sized businesses: Only 5% of small businesses claim these credits even though the government favors small businesses given they create two-thirds of new jobs every year and are a major factor in boosting the US economy. Tax credits reduce a businesses’ tax liability and this money can be put back into the business for further research, innovation and development.
- State governments pay as well: Apart from the federal government, 36 state governments in the US, including California, also reward businesses with R&D tax credits.
- Claim for the last 3 years: Companies can claim the unclaimed tax credit incentives for the past 3 years if they haven’t already.
Your business qualifies for R&D tax credits if it:
- Conducts research activity, innovates and develops processes, products, patents, formulas, software and prototypes,
- Enhances or redesigns existing products and services,
- Hires scientists, designers, engineers and/or other staff
Industries that qualify are
- Financial Services
- Consumer Products
- Entertainment & Media
- Food Processing
- Medical Devices
- Fashion Designer
- Oil & Gas
- Chemical & Plastics
- Website Development
- Paper & Forest Products
Tax Asset Recovery Program with the Council for Supplier Diversity
The state and federal government have both created numerous business tax incentives and credits over the years. However, many small and large diversity businesses have not taken advantage of these programs. In partnership with one of our diverse businesses, we now offer the Tax Asset Recovery program that can be of tremendous value to your company.
Most business owners are not aware and are entitled to these incentives. Recently a general contractor received back a profit recovery of $128K hundred thousand and a home health/hospice $1.1M million dollars. This could be the difference between staying in business and losing your business.
Many companies leave tens of thousands of dollars on the table every year because they are simply unaware of this program. We can help you learn more about the R&D Tax Credit, and why you may be qualified. Don’t let the word “R&D” stop you from thinking you don’t qualify, you just have to have a creative element to what you do.
Submit your information to learn more about Tax Asset Recovery through the Council for Supplier Diversity.
About the Council for Supplier Diversity
The Council for Supplier Diversity, established in 1999, is a nonprofit organization. The Council for Supplier Diversity represents the corporate outreach to the Diverse Supplier community. It is our purpose to facilitate business opportunities and market share growth for minority, woman, and service-disabled businesses through interaction with our corporate members.