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Tuesday, June 30, 2009

The Research Credit - The Saga Continues

In recent times, I've written about an almost 50-year old temporary provision of the law (PL 86-272 on nexus for income taxes), this post is about a 28 year old temporary provision - our federal research tax credit. It's odd that it has remained temporary for so long because all presidents since 1981 and most of Congress has said they support a permanent credit. President Obama's 2010 revenue proposals include making the credit permanent (p. 15) - we'll see what happens.

While the research credit was created and has been renewed over ten times to benefit the economy, some taxpayers have likely found it to be a difficult or mysterious provision. A recent taxpayer victory on the documentation needed to claim the credit on amended returns and what guidance applies in interpreting terminology, illustrates the challenges and frustration that both taxpayers and the IRS face in dealing with a temporary provision (its temporary nature causes it to not go too high on the list for issuing guidance).

I've got a brief article on the recent case (McFerrin) and current proposals for modification and permanence you may find of interest: The Research Credit — The Saga Continues, recently published in The AICPA Corporation Taxation Insider.

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