This is a reminder to our clients and contacts who are preparing their fourth quarter Commercial Activities Tax (CAT tax) return due Friday, February 10, 2012. The Ohio CAT tax allows a non-refundable credit for research and development (R&D) expenses. Similar to the reporting of gross receipts for the CAT tax, the credit is calculated on a calendar year basis, regardless of the taxpayer’s fiscal year.
The credit available is equal to 7% of the excess of the average of the prior three years’ R&D expenses. Ohio’s definition of R&D expense is the same as the federal and generally includes amounts paid for wages, supplies and 65% of amounts paid to outside research firms.
Taxpayer has $1.25 million in qualified R&D expenses in calendar-year 2011. The client had R&D expenses of $1 million in 2010; $795,000 in 2009; and $500,000 in 2008. For its 2011 CAT tax returns, the client can claim a non-refundable credit of $33,950. This is calculated as $ 1.25 million minus the three-year average of $765,000, multiplied by 7%.
Don’t worry if you don’t have your 2011 R&D expenses quantified by the February 10th deadline. You will have the option to amend the fourth quarter return at a later date in order to capture the credit.
For more information, contact a member of your service team.
This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.
Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.