The Basic Research Tax Credit

The Internal Revenue Code (“I.R.C.”) provides corporate taxpayers with tax credit for making certain payments to qualified organizations for basic research. The basic research tax credit rewards these taxpayers for paying for research that has no specific commercial objective.

Basic Research Tax Credit Calculation

The basic research tax credit is equal to the taxpayer’s basic research payments made during the current year over its qualified organization base period amount (“QOBPA”). The portion of the basic research payments which does not exceed the taxpayer’s QOBPA is treated as contract expenses for purposes of the regular research tax credit. The regular research tax credit can be taken in addition to the basic research tax credit.

Basic Research

Basic research means any original investigation for the advancement of scientific knowledge not having a specific commercial objective. The research must be conducted in the United States and must involve the hard sciences (i.e., not involve research in the social sciences, arts or humanities).

Basic Research Payments

Basic research payments are cash amounts paid by a corporation (not a Subchapter S corporation, holding company or service organization per I.R.C. § 41(e)(2)(A)) to a qualified organization for basic research. To qualify, the payments must be made pursuant to a written agreement between the parties. The research must also be performed by the qualified organization or certain tax-exempt organizations. The term “qualified organization” means an educational organization or tax-exempt organization as defined in I.R.C. § 41(e)(6).

Qualified Organization Base Period Amount

QOBPA is the sum of the taxpayer’s minimum basic research amount (“MBRA”) and maintenance-of-effort amount (“MOEA”). MBRA and MOEA are defined in I.R.C. § 41(e)(4) and (5). The base period is the three year period ending with the tax year immediately preceding the taxpayer’s first tax year beginning after December 31, 1983.


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