Select Page

As the taxation calculations pile up, companies keep looking for ways to obtain tax credit. Two such great tax benefit tools are the research tax credit and the 179D tax deduction for energy efficiency. The first aspect applies to tax benefits to encourage companies to invest in business research and development on US soil. The 179D tax deductions, on the other hand, help companies see the profit in lowering energy consumption. In reality, companies, except the big ones seldom look into these aspects of tax benefits.

  • Incentive to research

The concept of tax credit based on investments in research and development initiated in the early 1980s, and since then the credit has been through fourteen extensions, with the present system expiring in December 2013. The last extension of the credit system was through the passing of the American Taxpayer Relief Act (ATRA) of 2012. Since this is a largely unknown tax credit, many businesses, big or small, fail to take its advantage.

  • Anyone can apply

Many businesses are of the view that they can apply for the research tax credit only when they are investing in research to develop something new through a recognized research setup. Although this fact is mostly true, yet it is not an absolute fact. Businesses who can show documented proof of investing in research to improve existing products and not always through a laboratory setup can successfully apply for this credit. Even small businesses can also apply when they can show evidence of collecting customer interaction data and investing in the analysis of this data.

From manual ‘fill the form’ research to online business research using various CRM systems analytics, all are eligible for this tax benefit. It also applies to state laws, as, as of now, 38 states include a tax credit on research and many more states are considering implementing this policy to encourage businesses to perform with greater scientific accuracy. Companies applying their research results through intelligent branding and Neuro marketing should also consult with tax experts to assess their eligibilities.

  • Tax benefits of adopting energy efficiency

Similarly, the 179D tax deduction on energy efficiency can also be a potential source of harvesting tax benefits. These deductions work in accordance with the legal stipulations of the Emergency Economic Stabilization Act of 2008. To be eligible for this, companies need to make significant reductions (50%) in the energy expenditure for HVAC, building envelope, and interior lighting, starting from January 2006. The present rate of deductions is at $1.8 per square foot for the eligible.