The R&D Tax Credit — A Catalyst For Life Sciences Innovation
Does your company develop new medical products, pharmaceuticals, or innovative production techniques in the United States? Does your company create software for the medical industry or for internal discovery or diagnostic tools? Does your company invest resources toward optimizing manufacturing processes?
If so, your company may qualify for the Research & Experimentation Tax Credit (or the R&D Tax Credit), an often overlooked and misunderstood opportunity for taxpayers. The CEO at one of our longstanding clients, a New Jersey medical device company, champions the research credit as “the best way to refuel my innovation engine.”
In 2011, a total of more than $9 billion in R&D tax credits was claimed by taxpayers around the United States. The tax credit can be used to offset income tax liabilities dollar for dollar, thereby lowering a company’s effective tax rate and increasing cash flow. A pharmaceutical company client of ours with sales of $300 million claimed a federal credit of $500,000, as well as New Jersey and Iowa state credits totaling $500,000, which will enable them to substantially increase their R&D efforts going forward. Another client, a medical devices company with revenue of $10 million, was able to obtain a $100,000 federal tax credit.