Cost-of-Capital-Calculator
Cost-of-Capital-Calculator copied to clipboard
PSLmodels
R&E credit
The Research and Experimentation credit is a significant business tax credit that affects the cost of capital and METRs. B-Tax should thus include the credit in it's calculations.
There are some complications:
- Even within a given type of intellectual property, the R&E credit does not apply to all expenditures
- The R&E credit rate is not a flat rate applied to all expenditures - the rules are a bit nuanced.
To solve (1), one might turn to BEA data on fees and costs associated with research and development (by industry and by type of intellectual property) to determine the share to which the R&E credit could be applied. For (2), one might try to get an average effective rate and apply this to all eligible expenditures.
@jdebacker,
Along with my quest to get R&D amortization into the CCC model, I have been looking into ways to add R&D credit functionality.
An analyst at CBO forwarded me this report that they released in 2018: https://www.cbo.gov/system/files/2018-11/54648-Intangible_Assets.pdf
Report provides a value for the R&D credit (5.5%). It also provides a somewhat detailed road map for how to apply the credit to different assets by industry and legal form of organization.
Fully integrating the credit may take a while. In the meantime, I am using a short cut for a project I am working on now.
I'll let you know what I come up with.
