Research and Development Tax Credit Q&A with Patrick Rogers

The Research and Development (R&D) Tax Credit is one of the most valuable incentives available to innovative businesses, yet it remains underutilized by many who qualify. As a follow-up to our R&D Tax Credit Webinar in May, we decided to have a Q&A with our R&D Director, Patrick Rogers, EA, MST. In this conversation, he discusses industries that commonly qualify, clears up common misconceptions and offers guidance on how to properly document R&D activities. Whether you’re new to the R&D tax credit or looking to refine your approach, this discussion provides practical insight from a leader directly involved in helping clients benefit from their research and development activities.

Q: Is there any proposed tax legislation regarding R&D that companies should be aware of?

A: The One Big Beautiful Bill Act (OBBBA), was signed into law on July 4, 2025 and includes several important tax provisions, most notably the reversal of the Section 174 amortization requirement.

Beginning in 2025, businesses will no longer be required to capitalize and amortize R&D expenses, restoring the ability to immediately expense U.S. based R&D costs. Additionally, the bill provides a pathway for small businesses (those with under $31M in revenue) to retroactively expense R&D costs incurred in 2022–2024 by filing a change in accounting method. The legislation also allows for flexibility in deducting any unamortized Section 174 costs, either in full in 2025 or spread over 2025–2026.

Q: Can companies in any industry qualify for the R&D Tax Credit? Are there industries that are more likely to benefit?

A: Companies across nearly any industry can qualify for the R&D Tax Credit if their activities meet the IRS’s Four-Part Test: a permitted purpose, being technological in nature, eliminating uncertainty and a process of experimentation.

Industries that are most likely to benefit from the R&D tax credit include:

Technology and Software
Manufacturing and Distribution
Pharmaceuticals and Biotech
Architecture and Engineering
Agriculture and Food Production

Beyond these industries, I’ve seen others like financial services, insurance, and construction qualify.

Q: How is the R&D Tax Credit expected to change in the next few years?

A: The industry has been anticipating some changes for the R&D credit, including:

Reinstated full expense of R&D costs under Section 174 and the flexibility in deducting any unamortized Section 174 costs—either in full in 2025 or spread over 2025–2026.
Increasing formal reporting standards as the IRS looks more closely at tax return for R&D claims.
Expanding credit access for more industries or smaller businesses.

Q: What are common misconceptions about the R&D Tax Credit?

A: When I speak about R&D, the most common misconceptions that people believe disqualifies their organizations are:

We don’t have a lab or scientists – R&D is not limited to white lab coats; software developers, engineers, and even machine operators can qualify.
We didn’t invent anything new – The credit also applies to improvements, not just groundbreaking innovations.
Only large corporations benefit – Small and medium-sized businesses can benefit from the R&D tax credit, especially with the payroll tax offset for startups.
The paperwork isn’t worth it – With the right documentation and support, the return on investment often far outweighs the effort.

Q: What is the biggest mistake companies make when claiming the R&D Tax Credit?

A: Usually, the biggest mistake that I see is failing to properly document qualifying activities and expenses. Other common pitfalls that I see are:

Mixing qualifying and non-qualifying activities without clear segregation.
Waiting too long to capture data, making retroactive substantiation difficult.
Underclaiming the credit due to uncertainty or over-conservatism.

Q: How can companies optimize their processes to ensure R&D activities are captured for the credit?

A: I always advise companies to maintain detailed project documentation (objectives, trials, iterations), educate employees on what qualifies and how to document efforts. Other things to consider would be the use of project management tools to flag R&D tasks, assign responsibility to someone in finance or operations or, if possible, create an R&D Coordinator role.

Q: Are there specific events that might prompt a company to bring in an R&D specialist or external consultant?

A: Yes, you would want to contact a consultant if any of the following events occur:

You are a first-time claimant who is unfamiliar with the rules.
Your company has a significant new product or software development.
You’re expanding into new markets with custom solutions.
You are going through a merger, acquisition, or restructuring (which may affect claim eligibility).
You are at risk of an IRS audit due to large claims or past compliance issues.
There have been changes in legislation or tax treatment.

As innovation continues to drive competitive advantage, leveraging the R&D tax credit can be a smart way to reinvest in growth. If your business is developing new products, improving processes or solving technical challenges, it may be time to take a closer look at how this incentive can benefit you. Brown Plus provides R&D Tax Credit Consulting to businesses across a wide array of industries. If you have any questions regarding the R&D tax credit, please contact Patrick Rogers, EA, MST, Tax Principal and R&D Director.