Manufacturing and technology companies in the U.S. will continue to benefit from the Federal Research and Development (R&D) Tax Credit. The Tax Extenders Package signed by President Obama on December 17th, 2010 calls for a two year extension, retroactive to 1/1/10 and through 12/31/11.
This extension of the R&D Tax Credit, along with passage of the Small Business Jobs Act of 2010, is going to create an incredible opportunity for more individuals to benefit from the R&D Tax Credit in 2010. In particular, the Act allows for general business credits such as the R&D Tax Credit to be applied against the Alternative Minimum Tax (AMT) in 2010. In the past, many S-corporation and Partnership shareholders have been prevented from immediately using the R&D Tax Credits that they could generate because of the AMT. That changes in 2010!
The definition of Research and Development (R&D) is much broader than people realize. Activities and costs associated with developing and/or improving a product or process can potentially generate R&D Tax Credits. Manufacturers of all kinds, including those that design and develop their own products, as well as those companies (i.e. metal stampers and fabricators, precision machiners, mold builders and plastic injection molders) that make parts for their larger OEM customers, often do not know or believe that they are doing R&D. In addition, there can be significant R&D going on in software development and technology companies.