When is the 6% R&D Credit Applicable
We review when to apply the 6% R&D Tax Credit
In yesterday’s post we provided an example of utilizing the 14% Alternative Simplified Credit (ASC) that in our opinion is typically used. Once the election is made to use the ASC, the taxpayer must continue to use it unless the IRS grants permission to change to another method.
This calculation requires reviewing the last three years of qualified research expenses (QRE) (some commentaries use the word expenditures) and using an average of these QREs to determine the amount of the current year credit.
However, what happens if you do not have any QREs in one or more of those back years. In that case, you then can use what is called the 6% credit. The calculation under this method is rather simple and straightforward. You simply add up your QREs for the current year, multiply it by 6% and that is the credit.
Let’s use the same example from yesterday’s post:
