President Bush signed HR 1424 into law to extend the research tax credit. Since first enacted in 1981, the research tax credit has never been made a permanent part of our tax law. This most recent extension is valid for expenses paid or incurred on or before December 31, 2009. The law also increased the Alternative Simplified Credit (ASC) percentage to 14 percent (from 12 percent) for tax year 2009 and eliminates the Alternative Incremental Reseasrch Tax Credit (AISC) for tax years beginning after December 31, 2008.

The Social Science Research Network (SSRN) website has posted an article by a tax attorney that explains how business mergers and dispositions impact research tax credits. The paper provides an excellent overview of this complex and important area of law. The article can be downloaded directly from the SSRN website.

The IRS released a new audit techniques guide for the research tax credit. This new audit guide explains how IRS revenue agents are to conduct audits of research tax credits. This audit guide supplements the prior audit techniques guide released by the IRS approximately three years ago. This new audit guide can be found on the IRS website.