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The Tax Court has addressed the allocation of R&D costs for use of the foreign tax credit, in the Perkin-Elmer Corp decision. While a taxpayer's method may be superior, it does not invalidate regulations such as under IRC section 861. The IRS used a sales method of allocation under IRC 861 to challenge the company. Another way to include R&D costs under domestic sources may be by cost-sharing agreements.

Executive Summary: The White House may, be busy, this fall with its reforms in health, government and others. But we see yet another 'reform' ahead -- telecommunications in 1994. Now [...]

The IRS is proposing regulations under Section 174 which offer two alternative methods of accounting for research and development costs or for experimental expenditures. Expenditures can either be deducted during the year they are paid, or they can be deferred over a period 60 months or longer. The new regulations will clarify the definition of research and development and the definition of experimental expenditures.

According to accounts up to 2003, advisers LF Consulting claimed credits amounting to [pounds sterling]77,392 'recoverable in respect of research and development expenditure', a description that experts have said could [...]

Businesses in the United States will no longer be eligible to receive tax credits for expenses related to research and develop as of midnight Wednesday, when the federal R&D tax […]

The Canadian government's federal budget makes it easier to tap into tax credits for corporate research and development. However, these steps do not really go far enough to boost industrial research levels in Canada. Making these incentives at least partially refundable could help during tough economic times.

Iowa Legislators are considering the Research Activities Credit (RAC) for 2007 which is set to release a total of $46 million in credits. The tax credit program does not require approval by the state board, but is automatically release for qualified expenditures. A pie graph showing research activities tax credit claims for 1986 to 2005 is presented.

A new way of calculating the tax credit that would increase technology companiesE value to many Silicon Valley companies in 2005 is introduced. The redesigned tax credit contained in the tax bill passed by the US Senate and approved by the House Weighs and Means Committee does away with the ratio altogether and provides a 12 percent tax credit of the average for the previous three years.

Amendments proposed to the IRS regulations concerning research and experimental (R&E) costs and procedures will help the manufacturing and software industries. The 1989 proposals pay special attention to software development costs, allowing computer software development to qualify as R&E expenditures under the same rules applying to other products. The core of the proposals is that after a product meets its basic design specifications for function and performance, further expenditures after that point are not deductible unless expenditures are to cure significant design defects, to obtain significant cost reductions, or to significantly enhance performance.

Under the Tax Reform Act of 1986, the process of determining a taxable year will be changed to a 'majority interest' rule for partnerships, to the calendar year for personal service corporations, and to 'permitted years' for Subchapter S corporations. These rules for defining tax years are explained and examples are given to clarify their application. The Act also makes several changes in the tax treatment of golden parachute payments to departing executives; these rules are explained. Small businesses and corporations with no readily traded securities are exempted form some of the new provisions governing the taxation of golden parachute payments, and the Act clarifies the definition of 'reasonable compensation.' The types of research expenditures that qualify for research tax credits and the method of computing such credits has been modified by the Tax Reform Act as well. Other tax reform provisions involving changes in general business credits, business energy credits, targeted jobs credits, and amortization provisions are also discussed.

An analysis of the effects of the Tax Reform Act of 1986 on capital investments and expenditures related to purchases of new plants and equipment focuses on (1) accelerated cost recovery systems prior to the law and after the law for items of property with 3- and 5-year useful lives, and (2) tax credits available for qualifying research and development expenditures. Depreciation rate tables under the new law have not been published by the Internal Revenue Service, but are said to be forthcoming. Under the tax reform, the amount of expenditures that can be expensed in a single tax year has been increased from $5,000 to $10,000, subject to certain exceptions based upon the total dollar amount of equipment placed in service, and the corporation's total income, during the taxable year. The points at which capital expenditure costs may begin to be recovered are also changed under the tax reform, such that equipment placed in service during the taxable year must be accounted for as if placed in service at mid-year; similarly, mid-month and mid-quarter timing conventions have also been instituted under the new law. Class lives and recovery periods are listed for 13 types of capital equipment. The tax credit available to corporations for the performance of qualifying research and development activities has been reduced from 25 percent of expenses to 20 percent. Formulas for calculating depreciation and a table of possible depreciation rates by year under the new law are provided.