R&D credit is again restored - with changes

The Section 41 credit for research and development credit was restored with the passage of the Small Business Job Protection Act of 1996. Taxpayers were hoping that the credit would be reinstated retroactively to its expiration date of June 30, 1995, but the 1996 Act allowed the credit's restoration for only the 11-month period between July 1, 1996 and May 1, 1997. A gap in coverage therefore exists since the retroactive restoration was not extended to cover the 12-month period between the credit's expiration and its reinstatement. Consequently, R&D expenses incurred during this period do not qualify for the credit. While the new law has made taxpayer compliance more complicated, it has added new provisions that are intended to expand the number of taxpayers who can avail of the R&D credit.