Research and Development Tax Credits

Game Changer for America’s Businesses

We recognize the role research and development (R&D) plays in the success of our clients’ businesses, and we strive to ensure that our clients develop and implement a strategy that enables them to receive the financial benefit they deserve along with the sustainability they need. Correctly calculating your research credits is critical because they can be used to lower your company’s effective tax rate. For companies in net loss positions, the federal R&D credit may be carried back one year and carried forward for 20 years until it can be used.

The key to obtaining R&D tax credits is distinguishing between qualified and nonqualified research activities and expenses. The distinction often is subjective, and may be based on how a company’s accounting and project management systems allocate activities and expenses. As a result, many allowable expenses can be overlooked by taxpayers. Our R&D team is skilled in reviewing such systems and redesigning them to better capture qualified expenses.

There are currently two available methods for calculating the federal R&D tax credit. The traditional or “regular” method relies on a base period of expenses and gross receipts from the mid-1980s which can prove cumbersome to many companies. The more recently introduced Alternative Simplified Credit (ASC) method has become popular because it only requires examination of expenses in the credit year and for the prior three years. Qualified Research Expenses (QREs) include a percentage of employee wages, supplies used in development or testing, and a portion of product or process development consulting fees.

The regular credit is computed by measuring qualified expenses as a percentage of a business’s gross receipts and a higher percentage is applied to qualifying expenses than with the ASC method. Thus, if a business is increasing its QREs as a percentage of gross receipts measured against a historic period, it will likely be eligible for the regular credit, but the recordkeeping requirements can be onerous and may make the ASC method more attractive despite the difference in the applied percentage. The ASC is a less burdensome methodology to compute the research credit. Generally, the credit is equal to 9.1% of a business’ increase in QREs in the current year over 50% of average QREs in the prior three years.

Once we determine which method is most advantageous for your business, we assist in designing custom reports that identify the documentation needed to substantiate your company’s R&D claim.

Anchin’s objective for delivering substantiated studies involves exploring all potential areas of opportunity including new project design; design improvements; process or technique development or improvements; review of IT systems; design of software systems specifically designed for research; review of cross-functional process improvement; and data collection activities.

In addition to the Federal R&D tax credit, similar credits and other incentives are offered by most US states to attract new jobs and industries into their region. In most cases, the rules for calculating state R&D tax credits follow the federal rules closely. With minimal additional effort, Anchin’s professional R&D team can identify and calculate applicable state research credits. These additional state credits and incentives may lower your effective tax rate further while also providing increased cash flow.

Building Bridges from Biden’s American Jobs Plan to the R&D Tax Credit

Click here to read our latest article, featured in Practical Taxation, that discusses how tackling these lofty goals and infrastructure challenges may involve Architecture, Engineering & Construction companies designing, developing, and uncovering new solutions that could qualify for the R&D Tax Credit.

Success Stories


  • Anchin Alert
    Is Your Technology Company Missing Out On a Significant Tax Incentive?October 6, 2021

    The Research and Development (“R&D”) Tax Credit (or “R&D Credit”) is an often an overlooked tax incentive due to many misconceptions regarding its applicability to those creating or introducing a new product or technology to the marketplace.

  • Anchin Alert
    Does Your Current Financial Service Provider Deliver the Tax Services You Need?October 1, 2021

    Interested in learning more about the specific ways Anchin’s Financial Services team can better meet your financial service needs? This is the first article in a series that describes the wide assortment of services that Anchin’s Financial Services team covers - starting with tax.

  • Anchin in the News
    Interest in Opportunity Zones Peaks as Higher Rates LoomJuly 27, 2021

    The real possibility of higher capital gains rates has fueled interest by investors in opportunity zone funds.

    While Code Section 1400Z, providing for the funds, was slipped into the Tax Cuts and Jobs Act late in the legislative process and with little fanfare, it quickly became popular with investment advisors.

  • Anchin in the News
    Anchin: Personalized Accounting Services for Holistic GrowthJune 18, 2021

    The COVID-19 pandemic has presented challenges to accounting firms and their clients, many of whom are still working on a strategy to combat this unprecedented situation. While CFOs and other finance professionals spent much of 2020 addressing the pandemic's hardships, in 2021 they will likely be shifting their focus toward implementing long-term plans to position their organizations for growth and profitability. Despite its toll on people and businesses, the pandemic has created an opportunity for accounting firm leaders to influence positive outcomes by reevaluating and adjusting their goals and executing wellthought-out strategies. As a result, advisory services are among the fastest-growing segments for firms such as Anchin, one of the country's leading accounting and advisory firms. Since the onset of the pandemic, Anchin’s team of professionals have made it a priority to assist their clients through COVID-19 related hardships including guiding clients through the transition to remote working, evaluating cash flow and costs, and providing them with continuous information and updates on the Paycheck Protection Program (PPP) and other incentives and programs.

  • Anchin Alert
    What Technology Companies Need to Know About the Enhanced NJEDA Technology Business Tax Certificate Transfer ProgramMay 12, 2021

    The Technology Business Tax Certificate Transfer Program enables qualified, unprofitable, NJ-based technology or biotechnology companies with fewer than 225 U.S. employees (including parent company and all subsidiaries) to sell a percentage of their net operating losses (NOL) and research and development (R&D) tax credits to unrelated, profitable corporations.

  • Anchin Alert
    What A/E/C Firms Need to Know About the R&D Tax Credit and the Employee Retention CreditMay 7, 2021

    In order to stimulate the U.S. economy during the pandemic, the federal government enacted stimulus initiatives including the Paycheck Protection Program (PPP). The PPP enabled a business to receive a loan, with the ability to be forgiven if used according to loan guidelines that were put in place to help businesses keep their workforce employed during the COVID crisis. While many architecture, engineering, and construction (A/E/C) businesses successfully participated in the program, receiving the loan and later applying for and receiving forgiveness, the tax ramifications of receiving a PPP loan initially were somewhat unclear. One area of uncertainty was the tax deductibility of expenses covered by the PPP, which would also impact and reduce the expenses that could be claimed for the Research and Development (R&D) tax credit.

  • Anchin in the News
    Changes to R&D Expensing—Unpleasant Surprise to Taxpayers and Great Opportunity for BipartisanshipMarch 18, 2021
  • Anchin in the News
    INSIGHT: Financing Innovations in Emerging Technologies With R&D Tax CreditsAugust 27, 2020
  • Anchin in the News
    INSIGHT: Taking Another Look at the Foreign-Derived Intangible Income DeductionJuly 24, 2020

    The Foreign-Derived Intangible Income (FDII) income deduction is not the simplest of calculations. Gwayne Lai, Amanda Scott, and Yair Holtzman of Anchin show how some taxpayers can use existing R&D data to get a head start.

  • Anchin Alert
    U.S. Tax Court Reaffirms Architecture, Engineering and Construction Industry’s Right to Claim R&D Tax CreditsJuly 7, 2020

    Taxpayers within the Architecture, Engineering and Construction (AEC) industry received a big win from the U.S. Tax Court this past December. The Tax Court’s decision reaffirmed that AEC industry companies contracted by developers or other clients are indeed eligible to claim R&D tax credits for research activities they perform. This has long been a contentious issue between the IRS and AEC Industry taxpayers. Populous Holdings, an architectural design services company, had claimed R&D tax credits on its 2010 and 2011 tax returns totaling nearly $300,000. The IRS disallowed these claims, arguing that the research activities were funded by Populous clients who contracted with the company for its services.    

  • Anchin in the News
    Anchin: The Virtual Strategist CFOJune 12, 2020

    Chris Noble explains how Anchin's outsourced accounting services group, now rebranded as the Client Accounting Advisory Services Group (CAS), is a natural extension of Anchin's proactive client service model.

  • Anchin Alert
    For Companies Retooling to Fight COVID-19, R&D Tax Credits Are Important WeaponsMay 14, 2020

    For many companies, catalyzing successful innovation is already critical to long-term strategy and success. Companies recognize the importance of tax credits and incentives as critical weapons in remaining competitive and harnessing innovation. This R&D tax credit may be increasingly attractive for companies that are redesigning their business processes and/or product innovation in the face of the pandemic.

  • Anchin in the News
    A Tax Credit for COVID-19 InnovationMay 5, 2020

    Manufacturers repurposing production and research to support the relief effort may qualify.

  • Anchin Alert
    What to Know About the Research & Development (R&D) Tax Credit and the IRS’ New Compliance CampaignMay 1, 2020

    The R&D tax credit can be a powerful incentive, often providing a hidden source of cash from prior years’ expenses while also serving to significantly reduce current and future years’ federal and state tax liabilities. The R&D tax credit is also a tool for refueling a company’s R&D efforts. Planning ahead by creating an infrastructure that identifies qualifying research activities and collects contemporaneous documentation is essential to reducing future tax liabilities and synthesizing an R&D tax credit that will be sustainable on audit examination. There has been a new development related to this credit. 

  • Anchin Alert
    The CARES Act: Commonly Asked Questions for Technology CompaniesMay 1, 2020

    With Congress swiftly passing the largest economic stimulus package in history, it’s no surprise that the provisions of the CARES Act raised a significant amount of questions. In the past week alone we’ve seen more guidance and continued confusion amongst taxpayers. We hope the confusion subsides as more guidance is released over the coming days.  Although we have received many questions, here are some of the most commonly asked questions we have recently discussed with technology companies.

  • Anchin in the News
    A different calculationJanuary 28, 2020

    Yair Holtzman and Sharlene Sylvia share insights about how companies can take advantage of the alternative simplified credit with NJBiz.

  • A US tax break Israeli startups can utilizeFebruary 19, 2019

    Many Israeli companies with connections to the United States have benefited extensively from the research and development tax credit, which has recently become significantly more accessible.

  • Thumbnail Headshot Yair Holtzman
    Meet the Anchin R&D Tax Credits Team: Yair HoltzmanJanuary 29, 2019

    As the Research & Development (“R&D”) Tax Credits Group Practice Leader, I am responsible for the leadership, strategic focus and business performance of the group. In this role, I oversee the R&D group’s growth, vision, diversification and development.

  • What is the R&D Tax Credit?January 29, 2019

    The federal research and development (R&D) tax credit under Internal Revenue Code (IRC) section 41 was first introduced by Congress in 1981. The purpose of the credit is to incentivize U.S. companies to continue and increase spending on research and development within the U.S.  The R&D tax credit is available to businesses that uncover new, improved, or technologically advanced products, processes, principles, methodologies or materials.  In addition to “revolutionary” activities, in some cases the credit may be available if a company has performed “evolutionary” activities such as investing time, money, and resources toward improving its products and processes.

  • Anchin State of the Construction Industry 2017
    Industry Spotlight – Architecture, Engineering & ConstructionJanuary 29, 2019

    Architecture, engineering, and construction (“AEC”) firms frequently invest substantial resources to advance and improve building designs and processes. When contractors, architecture and engineering professionals develop and design new and innovative techniques, their activities may qualify for the R&D tax credit. As a result of unique project aspects and ever-changing structure and energy codes, many projects that appear similar on the surface are, in fact, at least partially new or improved with respect to function or performance.

  • Frank Schettino and Marc Federbush in Fashion Mannuscript Magazine
    More than HistoriansOctober 1, 2018

    Almost by definition, most accounting firms are historians, simply reporting the results of a client’s recent past. But that’s not even half the job, according to Marc Federbush, leader of the Fashion Group at New York City-based accounting and advisory firm Anchin.

  • Anchin Alert
    Tax Cuts and Jobs Act Offers Favorable Tax Breaks for Real Estate OwnersJanuary 3, 2018

    The Tax Cuts and Jobs Act (TCJA), which was signed into law on December 22, offers the real estate industry a treasure trove of tax breaks. Overall, most Real Estate companies and owners will come out ahead under the new tax law, but there are a number of tax breaks that were eliminated. Here are the most important changes in the new law that will impact the real estate industry.

  • Anchin Alert
    Tax Cuts and Jobs Act Offers Favorable Tax Breaks for BusinessesDecember 28, 2017

    The Tax Cuts and Jobs Act (TCJA), which was signed into law on December 22, contains a treasure trove of tax breaks for businesses. Overall, most companies and business owners will come out ahead under the new tax law, but there are a number of tax breaks that were eliminated or reduced to make room for other beneficial revisions. Here are the most important changes in the new law that will affect businesses and their owners.

  • Anchin Alert
    The Tax Cuts and Jobs Act Doesn’t Cut the R&D Tax CreditDecember 27, 2017

    On December 22nd, President Trump signed the Tax Cuts and Jobs Act of 2017 (“TCJA”) into law, setting the stage for the most sweeping update to the U.S. tax code since 1986 tax reform enacted under President Reagan.  The centerpiece of the TCJA, is a permanent reduction in the corporate tax rate from approximately 35% to 21%. Thankfully, as expected, the final law has preserved the research and development (“R&D”) tax credit, which was made permanent in the Protecting Americans against Tax Hikes (“PATH”) Act of 2015. 

  • Anchin Alert
    Tax Bill Impacts A/E/C IndustriesDecember 22, 2017

    Today, President Trump has signed into law the “Tax Cuts and Jobs Act of 2017” (TCJA). The bill contains many provisions that will significantly impact the construction, architecture, and engineering industries.

  • Anchin Alert
    Congress passes biggest tax bill since 1986December 21, 2017

    On December 20, the House passed the reconciled tax reform bill, commonly called the “Tax Cuts and Jobs Act of 2017” (TCJA), which the Senate had passed the previous day. It’s the most sweeping tax legislation since the Tax Reform Act of 1986. The bill makes small reductions to income tax rates for most individual tax brackets, significantly reduces the income tax rate for corporations and eliminates the corporate alternative minimum tax (AMT).

  • Anchin Alert
    Tax Bill ReleasedDecember 18, 2017

    Late Friday night, a written version of the Republican tax proposal was finally released. The bill represents a substantial revision of our country’s tax code.

  • Anchin Alert
    Tax Plan Moves ForwardDecember 14, 2017

    The Senate and House conference committee made further progress on its tax reform plan.

  • Anchin Alert
    Senate Passes Tax BillDecember 5, 2017

    The Senate voted and narrowly passed its version of tax reform legislation clearing another significant hurdle in the progress of changing our nation's tax system. There still remains significant differences between the House and Senate versions which will require reconciliation of the two bills.

  • Anchin in the News
    U.S. Research and Development Tax CreditOctober 30, 2017

    Yair Holtzman, Leader of Anchin's Research and Development Tax Credits Group, explains how the credit works and shares his findings on the impact of the PATH Act.

  • Anchin Alert
    New Research Credit Directive Provides Safe Harbor for Taxpayers That Expense R&D Costs on Audited Financial StatementsOctober 10, 2017

    The Large Business and International (LB&I) division of the IRS recently released guidance that will allow taxpayers to take advantage of a new safe harbor under which an adjusted amount of their ASC 730 R&D costs can be deemed qualified research expenses (QRE) for the purpose of claiming the Section 41 research tax credit. 

  • Anchin Alert
    Federal Tax Proposal ReleasedSeptember 28, 2017

    On Wednesday, September 27th, the “Unified Framework for Fixing Our Broken Tax Code” was released.  In the nine page outline, numerous concepts for federal tax reform were presented. We have been told that this outline was intentionally broad in order to allow the Ways and Means Committee to take the first step in drafting legislation.

  • Anchin Alert
    New York State Alcoholic Beverage Production CreditAugust 15, 2017

    The New York State Department of Taxation and Finance has expanded the applicability of the Alcoholic Beverage Production tax credit (formerly known as the Beer Production Credit).  For tax years beginning after December 31, 2015, the credit is now available to registered distributors that produce beer, cider, wine and liquor.

  • Anchin Alert
    It’s Not Too Late to Amend Your 2016 Tax Return for the R&D Tax CreditJuly 5, 2017

    Recently, the IRS issued interim guidance on how eligible small businesses can benefit from a new provision that enables them to apply their Section 41, Research and Development tax credit against their payroll tax liability instead of their income tax liability, allowing qualified companies to start using the credits before becoming profitable. 

  • Anchin Alert
    New Jersey Angel Investor Tax CreditMay 24, 2017

    New Jersey has amended and expanded the rules for claiming the Angel Investor Tax Credit. The Angel Investor Tax Credit provides for a tax credit equal to ten percent (10%) of the qualified investment made by a taxpayer in a New Jersey emerging technology business.

  • Anchin Alert
    New York Announces Passage of State BudgetApril 25, 2017

    Governor Andrew M. Cuomo announced the passage of the 2018 State Budget (“Budget”) which includes some interesting tax provisions.

  • Anchin Alert
    Tax Credits Clarity Provides Great Opportunity for Businesses Regarding Internal Use SoftwareOctober 7, 2016

    On October 3rd, 2016, the Treasury and IRS released final regulations regarding Internal Use Software (“IUS”) expenditures as related to the Section 41 Research & Development (“R&D”) tax credit.

  • Anchin in the News
    Is a U.S. ‘Patent Box’ a Good Idea?May 19, 2016

    Yair Holtzman, Practice Leader of Anchin's Research and Development Tax Credits Group, Life Sciences Industry Group and Chemicals and Energy Industry Group, shares his thoughts on the proposed "patent box" regime.

  • Anchin Alert
    Assessing Section 199 and IRS Released Proposed Regulations to Determine Deduction EligibilityApril 14, 2016

    Designed to protect jobs in the United States manufacturing and related sectors, Section 199, also known as the Domestic Production Activities Deduction ("DPAD"), allows a deduction equal to 9% of the lesser of a taxpayer’s Qualified Production Activities Income ("QPAI") or its taxable income.

  • Anchin Alert
    IRS Emphasizes the Need for Compliance When Claiming Tax CreditsApril 12, 2016

    This past February, the IRS released its annual "Dirty Dozen" list of warning alerts for 2016 filing season. The Dirty Dozen includes a variety of common scams taxpayers may encounter at any time during the year.

  • Anchin Alert
    Permanent R&D Tax Credit A Game Changer for America’s BusinessesDecember 21, 2015

    On December 18, 2015, President Obama signed into law The Protecting Americans from Tax Hikes Act (PATH) of 2015.

  • Anchin Alert
    New York City-Corporate Income, Miscellaneous Taxes: Authorization for Biotechnology Credit Extended for Three YearsOctober 7, 2015

    The Biotechnology Tax Credit allows qualified emerging technology companies (QETCs) specializing in biotechnology to claim a tax credit against the General Corporation Tax and Unincorporated Business Tax for amounts paid or incurred for certain expenses in New York City.

  • Anchin Alert
    The Agricultural Chemicals Security Credit has expired, but is opportunity still knocking?February 18, 2015

    The Agricultural Chemicals Security Credit was applicable to eligible expenditures incurred after May 22, 2008 and before January 1, 2013.

  • Anchin Alert
    Court Case Impacts Eligibility of Capped Contracts for R&D Tax CreditsFebruary 16, 2015

    On January 29, 2015, the United States Court of Appeals for the Eleventh Circuit affirmed a federal district court’s decision in Geosyntec Consultants, Inc. v. United States, No. 14-11107, disallowing the R&D tax credit for research expenditures linked to capped contracts.

  • Anchin Alert
    Proposed Regulations Provide Clarity and Guidance Related to Computer Software as it Applies to the R&D Tax CreditJanuary 26, 2015

    On January 16, the Treasury and IRS released proposed regulations (REG-153656-03) regarding internal use software ("IUS") expenditures as related to the Section 41 Research & Development ("R&D") tax credit. The proposed regulations contain several important changes related to claiming the R&D tax credit for IUS expenditures.

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    6 Recent Tax Law Changes That Technology Companies Need to Know07/25/2019 Automatic Extension Available for Making Portability Election1/31/2019 What Should Businesses Know About Qualified Opportunity Zones?1/15/2019 How Can…



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