The Tax Cuts and Jobs Act (TCJA) has changed how CPAs for charities go about their tax planning for bookkeeping and accounting. One major change in the TCJA was keeping R&D tax credits as a permanent part of tax law. Your charity may qualify for research and development tax credits if it meets certain criteria.

Changes to R&D Tax Credits Over the Years

Tax credits for R&D were introduced in 1981. Over time, legislation has changed, affecting how these tax credits may apply to charity accounting. The number of businesses and the types of businesses that can benefit from this tax credit has gradually expanded, as have the savings that a charity may accrue. One of the biggest changes seen to research and development tax credits was in 2003 when the “Discovery Rule” was removed as a stipulation. Before this change, the only research that could qualify was research deemed “new to the world.” Now, it must be “new to the taxpayer.” This could make tax planning for charities more favorable for the taxpayer.

In 2015, another change to R&D credits for charities happened with the Protecting Americans from Tax Hikes Act. Now, tax planning for charities might include work performed by small and midsize businesses and startups. It was also in 2015 that R&D credits for charities and other organizations became a permanent part of tax law. The more recent TCJA upheld this.

Understanding how R&D tax credits may apply to your charity may be complicated. At Fusion CPA our team of CPAs is well-versed in tax planning and bookkeeping for charities. We offer to help you see if you qualify for R&D tax credits or other deductions that can minimize your tax liability.

Claiming R&D Tax Credits for Charities

Partnering with financial advisers may help charities determine the factors that go into claiming R&D credits. Taking the time to explore whether a charity qualifies for R&D credits is worth it because the potential savings,

Charities may claim a credit for the current tax year and prior tax years. This underscores the importance of charities documenting their R&D activity carefully so they can claim credits in both the above-mentioned situations.

Before claiming credits, a charity may need to evaluate their research and meticulously document it. This may allow them to prove the amount of qualified research they did and the amount of money they paid to carry out this research activity. Charities may estimate some of their research expenses. However, these estimates must be backed up with a factual basis. Some forms of documentation that may be included are:

· payroll records

· general ledger

· project list

· project notes

· other documents produced during business

Practical Guidance: Financial Advisory for Charities

Charities may have unique tax planning challenges that require tailored tax planning strategies. Fusion CPA has a team of CPAs who understand the tax laws pertaining to charities. We are dedicated to helping your charity minimize its tax liability and increase the amount of money available to further your cause. Whether you need help with general accounting, bookkeeping, financial planning, cash flow management, or creating strategies for growth, we are ready to assist. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!


This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.