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"We are extremely pleased with the R&D Studies that Paradigm Partners has conducted for our existing clients and I would recommend their services to any qualifying client or CPA firm seeking to provide this substantial cash-back incentive to their clientele."
Todd Estes
CPA
Turner Stone & Co
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 About Us
Paradigm Partners is an international consulting firm specializing in complex federal and state tax and funding incentives, for both public and private entities, across a host of industries. Paradigm Partners has distinguished itself among its peers by adopting a low cost, high return service model that employs a tailored two-phase approach. The Company's business development and professional teams work hand in hand to provide accurate analyses, establish effective client dialogues, and guarantee rapid turnaround times.
Paradigm's staff is comprised of a highly selective pool of intellectual property and tax attorneys, engineers, PhDs, and CPAs. Company personnel utilize not only years of industry expertise, but their numerous academic achievements from distinguished institutions across the globe.
The Company's core consulting portfolio includes Global R&D Tax Credits Analyses, Hiring and Location- Based Incentives, Unemployment Claims Management, IC-DISC, Domestic Production Deduction, Grant and Non-dilutive Funding Advisory, Cost Segregation Studies, Tax Controversy, Patent and Audit Defense Services.
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Proper Substantiation for the R&D Credit
Long Thai, Attorney at Law and Saqib Dhanani, Attorney at Law
The Credit for Increasing Research Activities (I.R.C. § 41, "the R&D Tax Credit") offers companies engaging in research and development activities the opportunity to lower their tax liability. Following proper procedures, the R&D Tax Credit can be accurately calculated and defended even without formal project accounting. As courts have held that tax credits are a matter of legislative grace, taxpayers bear the burden of proving they qualify for the R&D Tax Credit. The taxpayer claiming the R&D Tax Credit must retain substantiation records in sufficiently usable form and detail to meet the burden of proving credit eligibility. A recent case, Basim Shami and Rania Ardah, et al. v. Commissioner of Internal Revenue, demonstrates the critical importance of proper procedure and methodology when claiming the R&D Tax Credit. In this case, the U.S. Tax Court held that wages paid to a company's shareholders, CEO, and the marketing chief were not qualified expenses under the R&D Tax Credit. This article highlights the importance of substantiating any claims to the R&D Tax Credit, as well as the procedures necessary to ensure that this is done properly. Contact Karim Solanji at 281-558-7100 or KSolanji@ParadigmLP.com to learn more about an R&D Tax Credit study. |
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Supply Costs Are Still A Viable Source of Qualified Research Expenditures
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Jae Kim, Attorney at Law and Karim Solanji, Attorney at Law
Supply costs have been a factor in the research and development tax credit since its inception in 1981. The Internal Revenue Code (IRC or Tax Code) states that qualified research expenses (QREs) include "any amount paid or incurred for supplies used in the conduct of qualified research" and further defines supply costs as "any tangible property other than land or improvements to land, and property of a character subject to the allowance for depreciation." This definition seems deceptively broad and has caused difficulty for many companies attempting to capture supply costs as a portion of its QREs. Companies further shy away from capturing potentially qualified supply costs as the IRS has stated in its audit technique guide for the R&D credit that supply cost QREs should generally make up a small part of total QREs.
Given the fact that the IRS has said that supply costs are more narrowly defined than what is expressed in the IRC, it begs the question: what exactly do supply costs encompass? Taking a look at the definition above, we see that qualified supplies can be tangible property not subject to depreciation. For practical purposes, this means inventory and items that will be held for sale, as well as any item with a useful life longer than one year, including equipment and machinery, do not qualify. Beyond this restriction, the supplies must be used in the conduct of qualified research. Thus, supply costs are not nearly as broad as they initially seem.
The recent court decision in the Union Carbide Case shows the dangers of overreaching for credits.
Click Here to Read the Article
Contact Karim Solanji at 281-558-7100 or KSolanji@ParadigmLP.com to learn more about an R&D Tax Credit study.
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