Maximize The Benefits Of Federal And State Research And Experimentation Tax Credits

The federal research and experimentation tax credit (also known as the R&D tax credit) and similar state and international credits were designed to encourage innovation by providing tax credits for activities relating to research and development (R&D). Since its creation in 1981, the federal R&D credit has grown increasingly complex. While it originally applied to revolutionary new products and processes, now improved products and processes also qualify. Although the credit has been temporary (and extended 13 times), President Barack Obama is currently calling for Congress to permanently extend it. As a result, now is the time for life sciences firms to organize supporting documentation to take advantage of the R&D tax credit. To do so, firms will need to properly qualify and document their eligible R&D expenses. Kronos for Life Sciences provides critical information necessary to gain visibility into and document eligible R&D expenses to execute tax planning strategies and maximize R&D tax credit benefits.

Pharmaceutical, medical device, and biotechnology firms spend tremendous amounts on R&D. In 2009, the biopharmaceutical sector invested $65.2 billion in R&D — up from $2 billion in 1980. On average, life sciences firms spend $1.3 billion to $1.5 billion on R&D for each approved biologic and traditional small-molecule drug approved. Federal and state R&D tax credits enable life sciences companies to recoup some of these costs. More than $7.5 billion in federal R&D tax credits are given out annually, while state and international R&D tax credits add to this amount.