The research and development (R&D) tax credit can be a valuable tool for companies that conduct R&D, including the invention of patented products and processes. One of the rationales for patents is that they stimulate economic and technological development and promote competition by creating a financial motivation for invention in return for the disclosure of the invention to the public. The potential of the patent system has been widely recognized in the context of dynamic innovation activities.

One of the major functions of the patent system is the dissemination of technical information. Patent information is a valuable and comprehensive source of technical, commercial and legal information that can be used directly for scientific and experimental purposes and as a basis for stimulating the adaptation and improvement of the technology described in patent documents immediately after their publication. Recognizing the importance of the dissemination of technical information, a growing number of IP offices and organizations are using the internet to offer access to their patent documents' databases.

Considerations to Know About the R&D Tax Credit

• It provides a 14-percent credit on qualifying expenditures.
• The costs and legal fees for IP/patents are considered an R&D expenditure. Note that the R&D costs required to develop the idea being patented cannot be included in the capitalized cost of a patent. These R&D costs are instead charged to expense as incurred.
• R&D is inherently risky, without assurance of future benefits, so it should not be considered an asset.

The FI-Group is an international tax consultancy that specializes in the implementation of state and federal tax incentives and research and development (R&D) tax credits for corporations. The FI team consists of CPAs, engineers, IT, legal and business operation specialists. With more than 13,500 clients in 19 countries, their clients’ benefits exceed more than $2 billion in tax savings annually.