R&D - Basic Research Credit
Credit for basic research payments to qualified institutions.
Commonly referred to as the Credit for Increasing Research Activities
Do I Qualify for the R&D - Basic Research Credit?
To qualify for the credit, the business must be a C corporation with payments, in cash and under a written contract, for basic research to a qualified university, scientific research organization, scientific tax-exempt organization, or grant organization.
2022 R&D - Basic Research Credit Details
C corporations with basic research payments to qualified institutions may receive a credit of 20% of the basic research payments above a base period amount. The credit for basic research payments is only available to C corporations.
Basic research payments are cash payments made to organizations such as educational entities and tax-exempt scientific organizations for the purpose of conducting original investigation to advance scientific knowledge independent of any specific commercial objective.
Basic research payments that do not exceed the base amount will be treated as allowable contract research expenses (subject to the 65% limit) for the purpose of the research and development credit.
The base amount is generally determined by adding a minimum basic research amount and a “maintenance of effort” amount (adjusted for inflation) for the period from 1981-1983 that aims to limit the credit to increases in such expenditures and prevent corporations from redirecting donations not earmarked for scientific activities to such activities. The minimum basic research amount may not be less than 50% of the basic research payments for the year for which the credit is being calculated (except no minimum applies to corporations that existed at any time during the 1981-1983 period).
There Are Thousands of Other Tax Planning Strategies You May Be Missing Out On
Learn how Prosperity Tax Advisors can help you save money in taxes.
• Simple method for capturing R&D credit value
• Easy to track and qualify expenses based on accounting records and third party organizations qualifications
• Only available to C Corps
Assumptions When Taking the R&D - Basic Research Credit
• Amounts entered are for payments to qualified organizations with cash under a written contract
• None noted.
Requirements to Claim the R&D - Basic Research Credit
• The basic research is defined as any original investigation to advance scientific knowledge not having a specific commercial objective. Basic research done outside the United States and basic research done in the social sciences, arts, or humanities do not qualify.
Business Entities That Can Claim the R&D - Basic Research Credit
• C Corporation
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.