R&D Tax Problem

Extracted Attributes

• Risk

  IRS scrutiny discourages firms from claiming the credit and dampens R&D investment

• Current Status

  Stalled in Congress

• Financial Impact

  Forced deferral of over $59 billion in tax benefits, reducing present value of R&D benefits by half

• Affected Entities

  Startups, U.S. businesses, firms

• Reason for Stalling

  Link with the Child Tax Credit

• Impact on Innovation

  Raises cost of innovation, discourages private-sector investment, weakens incentive structure

• Compliance Challenges

  Complexity and compliance costs, difficulty substantiating qualifying expenses, IRS audit hurdles

• Originating Legislation

  Tax Cuts and Jobs Act of 2017

• Nature of R&D Tax Credit

  Incremental tax credit, complex, intended to incentivize domestic R&D growth

Timeline

• The Tax Cuts and Jobs Act is enacted, creating the R&D Tax Problem for startups and affecting R&D tax credits. (Source: Document 0b0b85f3-ba5b-4c47-97b8-fddea126d4a0)

  2017

• The R&D capitalization and amortization requirement is introduced, forcing companies to defer tax benefits and raising the cost of innovation. (Source: web_search_results)

  2022

• The R&D Tax Problem, specifically related to R&D tax credits, is stalled in Congress due to its association with the Child Tax Credit. (Source: Document 0b0b85f3-ba5b-4c47-97b8-fddea126d4a0)

  Current

• Legislative changes have reshaped how R&D credits are calculated and documented, increasing compliance urgency for businesses. (Source: web_search_results)

  Recent

• Upcoming R&D tax credit filing deadline, amplifying pressure on tax teams to improve efficiency, accuracy, and compliance. (Source: web_search_results)

  2025-10-15

R

R, or r, is the eighteenth letter of the Latin alphabet, used in the modern English alphabet, the alphabets of other western European languages and others worldwide. Its name in English is ar (pronounced ), plural ars. The letter ⟨r⟩ is the eighth most common letter in English and the fourth-most common consonant, after ⟨t⟩, ⟨n⟩, and ⟨s⟩.

Web Search Results

• Bad breaks: Why US tax policies put innovation at risk

  Complexity and compliance costs. The R&D tax credit is very complex, creating challenges for both taxpayers and the IRS. Many firms struggle to substantiate qualifying expenses, while the IRS faces significant hurdles in auditing R&D credit claims. This complexity has real economic implications — recent research by co-author Cowx documents that the risk of IRS scrutiny discourages firms from claiming the credit and also dampens their R&D investment (Cowx 2025). [...] ## Strengthen U.S. innovation incentives to compete globally The U.S. faces two pressing challenges to the competitiveness of its innovation tax incentives. First, domestic tax policy must be modernized, with a particular focus on the R&D capitalization and amortization requirement introduced in 2022. Delaying R&D deductions raises the cost of innovation, discourages private-sector investment, and weakens the incentive structure that has supported U.S. technological leadership for decades. [...] 1. Companies were forced to defer more than $59 billion in tax benefits under this new policy, reducing the present value of R&D benefits by half. The figure below illustrates the magnitude of the tax benefits that have been deferred within our sample of large publicly traded corporations. This estimate represents cash held by the government rather than with U.S. businesses, restricting firms’ ability to invest this cash in R&D.

• Research & Development (R&D) Tax Credit FAQs Answered

  The Internal Revenue Code (IRC) Section 41 Credit for Increasing Research Activities (R&D Tax Credit) is an incremental tax credit, which is an often overlooked and misunderstood tax benefit for performing research and development activities. The R&D Tax Credit intends to incentivize companies to perform development activities within the U.S. and spur additional domestic R&D growth. [...] To claim the R&D Tax Credit, taxpayers must identify the amount of qualified research expenses (QREs) in prior years to calculate a base amount of qualified spending that must be overcome before current year spending becomes eligible. Most tax preparers associated R&D only with technology, biotechnology and pharmaceutical-type activities. Recent U.S. Department of Treasury regulations have substantially broadened the range of taxpayers eligible for the R&D Tax Credit. [...] Yes, if eligible R&D activities have been conducted in the past and the R&D Tax Credit has not been claimed in those years, taxpayers can still claim them for those open tax years. However, if the tax year has already been closed or the tax return has already been filed, the taxpayer cannot claim R&D Tax Credits for that particular year. This will vary from company to company, but generally, open statutes are in the current year and the prior three years. Depending on facts and circumstances

• How to eliminate the burden of R&D tax credit compliance

  This urgency is amplified by recent legislative changes that have reshaped how R&D credits are calculated and documented. Automation and audit-ready processes are no longer optional. They are essential. ### Key legislative changes driving urgency ### What’s new in 2025 ### Tailored R&D tax credit automation for every business Whether you’re an SMB, an enterprise, or an existing ONESOURCE user, Neo.Tax delivers scalable, compliant solutions that fit your workflow: [...] Whether you’re a mid-sized business or a global enterprise, the ONESOURCE and Neo.Tax integration delivers tangible value: ## Why this matters now: The October 15th deadline With the October 15, 2025, R&D tax credit filing deadline fast approaching, tax teams are under pressure to improve efficiency, accuracy, and compliance. ONESOURCE and Neo.Tax not only meet IRS requirements, but they also help businesses avoid last-minute scrambles and costly delays. [...] For Enterprises (> $500M revenue): Scale your R&D credit process across entities with enterprise-grade AI and seamless integration into your existing ONESOURCE infrastructure. No new systems, no workflow disruption—just streamlined compliance aligned with IRS standards. For Existing ONESOURCE customers: If you’re already using ONESOURCE Income Tax, you’re halfway there. Neo.Tax completes the solution by automating R&D credit calculations and filing directly within your current workflow.

• Common Misconceptions About R&D Tax Credits - KBKG

  Services + Service Overview + Research & Development (R&D) Tax Credit - R&D Tax Credit Overview - R&D Tax Credit – Audit Defense - R&D Benefit Calculator - R&D Payroll Tax Credit Calculator - R&D Qualifying Activities - R&D Tax Credit Benefits by State + Cost Segregation [...] + Webinar Course Catalog + Employee Retention Tax Credits + Bonus Depreciation + Cost Segregation Software Tools & Tax Strategies + Intro to Cost Segregation & the Impacts of Tax Reform + 179D and Green Building Tax Incentives + R&D Tax Credit + R&D Tax Credits & the IRS: How to Prepare for Audit + R&D Tax Credit for Software Development + Tangible Property Repair Regulations + Transfer Pricing & New Tax Audit Rules Insights [...] + Recent Insights + Tax Insights + R&D Tax Credit + Cost Segregation + Tangible Property Repair Regulations + Energy Tax Incentives Tax Insights + Transfer Pricing + Employee Retention Credits Tax Insights + Subscribe to KBKG About + About Us + Our Team + Diversity, Equity, Inclusion + Careers + Employee Benefits + Client Testimonials + Send Us Your Feedback + Partnering Opportunities

• Tax enforcement and R&D credits - ScienceDirect.com

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