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The Tax Cuts and Jobs Act (TCJA) may create opportunities for research and development (R&D) credits to be used for tax savings not previously considered. The topics listed below should be evaluated for prospects to use R&D credits:

  • Alternative Minimum Tax (AMT)
  • Tax Rates – Corporate & Pass-Through
  • Net Operating Loss (NOL) Limitations
  • Amortization of R&D Expenditures
  • Retention of Qualified Small Business Payroll Credits
  • Retention of Eligible Small Business Credits

What’s Changed Under The New Laws?

  • Corporate tax rate is now at a flat 21 percent, down from previous top rate of 35 percent
  • Pass-through tax rate deduction of 20 percent of domestic qualified business income; subject to limitation; expires after December 31, 2025
  • NOL deduction is limited to 80 percent of taxable income for losses arising in tax periods beginning after December 31, 2017; no carryback and indefinite carryforward for losses arising in tax periods ending after December 31, 2017
  • AMT higher exemption for individual taxpayers; expires after December 31, 2025
  • AMT is repealed for corporations; AMT credits are refundable from 2018 through 2021.
  • Amortization of certain R&D expenditures (including software development costs) would be required for tax periods beginning after December 31, 2021. These R&D costs would be required to be capitalized and amortized over a five-year period.
    Note:  Current efforts are underway to postpone or eliminate enactment of the Internal Revenue Code (IRC) Section 174 provision.

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