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December 24,
Volume 79, Number 52
CENEAR 79 52 p. 7
ISSN 0009-2347
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Newly proposed regulations aim for simplification, less paperwork


The Department of the Treasury is proposing new IRS regulations on the research and development tax credit. The previous regulations, which would have made it somewhat harder for companies to justify the R&D tax credit, were among the "midnight regulations" issued in the final days of the Clinton Administration.

The Bush Administration revoked the regulations, which critics said would have significantly increased the paperwork burden on companies using the tax credit, at the end of January.

According to Treasury, the new proposal, among other things, gets rid of the "discovery test," a requirement that would have forced taxpayers to document that their research was "undertaken to obtain knowledge that exceeds, expands, or refines the common knowledge of skilled professionals in a particular field of science or engineering."

"The elimination of the discovery test will make it easier for businesses to qualify for the credit in the course of developing new products," said Treasury Secretary Paul H. O'Neill about the new regulations.

Stephen Elkins, head of tax policy for the American Chemistry Council, says the proposed regulations are welcome. "The chemical industry is one of the most research-intensive industries, and it uses the R&D tax credit extensively to lower its effective tax rate. The Clinton regulations would have been very difficult for the industry to comply with."

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