Questions about the R&D Credit?
Questions about IRS requirements?
Industry Directive #1 on R&D Credit Claims was published on April 4, 2007, as a first attempt to address the IRS Tier I issue concerning the R&D Credit. Cheryl P. Claybough, Director of Field Operations East, was named as Issue Owner Executive for this Tier I Issue. This is was the Directive stated:
The volume of R&E Credit claims that have been filed, along with the compliance audit resources required to examine these claims, has continued to rise to a level of high strategic importance to LMSB, as a Tier I issue. A growing number of these claims, both formal and informal, are based on marketed tax products supported by studies prepared by the major accounting and boutique firms. Typically these studies are marketed on a contingent fee basis and exhibit one or more of the following characteristics:
- high-level estimates,
- biased judgment samples,
- lack of nexus between the business component and qualified research expenses (QREs), and
- inadequate contemporaneous documentation.
In addition, the Directive established issue tracking procedures that are now required on all open examinations. This means that if a taxpayer is being audited for ANY reason, and if the taxpayer claimed an R&D Credit on the return, the examiner MUST follow the issue tracking procedures. Hence, the probability of audit increased significantly with the issuance of this Directive.
Finally, the Directive referenced three sources of additional information:
- Notice 2002-44
- The Research Credit Audit Technique Guide (ATG), and
- The Research Credit website.
