Tax considerations in R&D planning

R&D planners have traditionally paid little or no attention to the tax consequences of performing R&D, since tax law historically has not offered any particular advantages to R&D undertakings. In recent times, however, tax law has begun offering special advantages to R&D performers. This is in large part a consequence of the provisions of the 1981 Economic Recovery Tax Act (ERTA), which offers a substantial tax credit for increases in corporate R&D budgets, as well as a consequence of the growing popularity of R&D limited partnerships. Today, the implications of tax law on R&D planning can be substantial, and planners find it increasingly necessary to study the R&D provisions of the tax code.