R&D Credit Illustration: Alternative Simplified Credit
The ASC illustration compares current QREs with the preceding three years. It cannot establish qualified expenses or the amount you can use.
How this illustration works
With QREs in all three preceding years, the simplified illustration is 14% of current QREs exceeding 50% of their three-year average, floored at zero. If any preceding year has no QREs, the illustration uses 6% of current QREs.
It excludes the Section 280C adjustment/reduced-credit election, special components, controlled groups, short tax years, payroll and other elections, credit limitations and state rules. Unknown past-year expenses need research, not a zero input.
Before using the result
Have your professional confirm project eligibility, cost allocations, contract rights and risks, exclusions, current-year rules and your ability to use the credit.
Primary source
IRS Form 6765. Confirm how it applies to your tax year and circumstances before acting.