Smith v. Commissioner, a pending research credit case in the United States Tax Court, presents an issue of first impression: Is a partner’s self-employment income in a partnership allowable as a qualified research expense...more
The Michigan Department of Treasury released a draft of a notice regarding the new research and development credit. ...more
Taxpayers had mixed success in two recent research credit cases in the United States Tax Court.
In Smith v. Commissioner, the taxpayer was an architectural firm....more
HB 5100 and HB 5101, as passed by the Michigan House of Representatives and Senate, and to be signed by Governor Gretchen Whitmer, provide a new income tax credit. For tax years beginning on and after January 1, 2025,...more
In Grigsby v. United States, the Justice Department used discovery procedures in federal district court essentially to audit a taxpayer’s federal income tax credits for research activities. The court found that the taxpayer...more
Issue: In Meyer, Borgman, and Johnson, Inc. v. Commissioner, the issue was whether the taxpayer’s (“MBJ” or “MBJ’s”) customers funded MBJ’s research activities. The court found that its customers did so, with the consequence...more
Over an objection by the IRS, the Tax Court recently ruled in Kapur v. Commissioner that it could limit discovery and permit statistical sampling of voluminous data related to a claimed research credit. The court refused,...more
As previously reported by Miller Canfield, in October 2023 the IRS launched a withdrawal program for Employee Retention Credit (ERC) claims for employers who now doubt the validity of their claim. Unfortunately, employers who...more
As described in our October 24 article “IRS Offers Forgiveness for Erroneous Employee Retention Credit Claims” the IRS has increased scrutiny on claims for the Employee Retention Credit (“ERC”). The IRS halted processing...more
The IRS recently issued guidance explaining that OSHA communications regarding COVID-19 precautions alone do not allow employers to qualify for the Employee Retention Credit (“ERC”).
Other than some start-up businesses,...more
The stream of cases challenging disallowance of research tax credits continues in the Tax Court with Phoenix Design Group, Inc. v. Commissioner. The taxpayer in Phoenix Design designs mechanical, electrical, and plumbing...more
The Employee Retention Credit (“ERC”) is a popular COVID-19 tax break that was targeted by some unscrupulous and aggressive tax promoters. These promoters flooded the IRS with ERC claims for many taxpayers who did not qualify...more
If a taxpayer calculates research tax credits using an appropriate statistical sampling method on its tax return, does the taxpayer then make a prima facie case in the Tax Court by introducing evidence of that statistical...more
Key Takeaways -
..The Seventh Circuit torpedoed a taxpayer’s research tax credits for two watercrafts.
..The decision creates confusion about how a taxpayer should document research activities and arguably undermines...more
A Treasury regulation provides that a researcher performing technological research for its customer is not entitled to federal income tax credits for the cost of the research if the researcher does not retain substantial...more
The Inflation Reduction Act of 2022 (the “Act”), which passed both chambers of Congress on Aug. 12, 2022, includes the following tax provisions meant to raise government revenues and subsidize green energy initiatives....more
8/16/2022
/ Alternative Minimum Tax ,
Business Losses ,
Clean Energy ,
Corporate Taxes ,
Energy Tax Incentives ,
Enforcement ,
Excise Tax ,
Foreign-Owned Corporations ,
Investment Tax Credits ,
Pending Legislation ,
Production Tax Credit ,
Renewable Energy ,
Stock Repurchases ,
Tax Credits ,
Tax Rates
The IRS issued Interim Guidance that likely will increase the expense and burden of filing research credit refund claims. Research credits in original returns are not affected by the Interim Guidance....more
On October 15, 2021, the IRS published Information Release 2021-203, based on Memorandum 20214101F (the "Memorandum") prepared by Field Attorneys in the Office of Chief Counsel, setting out a detailed procedure requiring...more
In two recent cases, the IRS has tried to defeat research credit refund claims on procedural grounds, rather than simply litigating whether the substantive nature of the asserted research meets the requirements of section 41...more
8/6/2021
/ Audits ,
Failure To State A Claim ,
Internal Revenue Code (IRC) ,
IRS ,
Pending Legislation ,
Research and Development ,
SBA ,
Scientific Research ,
Small Business ,
Tax Credits ,
Tax Deductions ,
Tax Refunds
To claim federal income tax credits for a research project, a taxpayer must prove that the project satisfies each prong of a four-part test. In IRS Field Attorney Advisory 20212501F (June 25, 2021), the Large Business and...more
For practitioners advancing research credit claims, a recent Tax Court case is of concern because it said more than was necessary to reject the taxpayer's claim. The Commissioner may seize upon dicta in the opinion to...more
A recent Tax Court decision - which arguably is wrongheaded - could cause many suppliers of production parts to original equipment manufacturers to lose federal income tax credits. Suppliers are well advised to consider...more
In Audio Technica U.S., Inc. v. United States, 2020 WL 3481702 (6th Cir. 2020), the Sixth Circuit has made clear that calculation of the federal income tax credit for increasing research activities may require a taxpayer...more
The IRS Large Business and International Division ("LB&I") announced a campaign on February 27, 2020, to examine taxpayers' returns claiming income tax credits and deductions for research expenditures under IRC Sections 41...more
A taxpayer may claim a credit against its federal income tax liability for research expenses paid or incurred during the tax year.
The definitions of research expenses for financial reporting purposes and federal income...more