R&D Credit Extension Modifies Rules For Controlled Group Allocations And Acquisitions

The research and development (R&D) tax credit has been extended through 2013 as part of the American Taxpayer Relief Act of 2012, and the legislation makes several modifications in how the credit is computed for controlled groups and how acquisitions are treated.

Controlled group allocations

The legislation modifies and simplifies the methodology for allocating the credit to members of a controlled group of corporations and businesses under common control. Under the prior statute and associated regulations, all companies under common control that were required to calculate the credit at the group level were then required to allocate the credit to the members of the group based on each member's standalone credit. This allocation methodology was particularly burdensome in some situations where group members were required to use different methods for computing their standalone credits.