Last year, Forbes reported that the video game industry is growing so quickly that some analysts
predict that it will generate over $300 billion annually by 2025. It is at the top of the list of industries
that is in a war of constant one-upmanship. This landscape has sent production costs for AAA titles through the roof, some
titles, costing more than $250 million. With this constantly changing landscape, the risk inherent to development increases
constantly and for some development studios, especially in the small-to-midsize space, every dollar that can add to the
runway is another dollar keeping the studio’s doors open.
I love video games. My kids love video games. Even my mom loves video games. What would quarantine be without electronic entertainment? I remember how exciting it was when Pac Man, Space Invaders and Galaga came out.
With the extended tax return filing deadlines upon us, soon it will be planning season and time to flex your tax consulting skills. Certainly you wouldn’t mind another weapon in your arsenal. That’s where R&D credits for software applications come in. By software applications, I don’t mean creating your own internal A/P system or accounting package, although under the right circumstances, that can definitely qualify. I mean the development of an application for the company’s use to reach their clients, connect with their suppliers, improve the customer experience, bring in external data used in their business, streamline their operations, go to market in a new way, or deliver a product or service differently.
For decades, companies have been trying to design software that could accurately and completely capture a company’s R&D tax credits. The main reason that companies have been unsuccessful over the years is because the R&D tax credit rules are interpretive
The R&D tax credit can help companies generate much needed cash flow by offsetting taxes owedor paid.In many cases, the cash generated is used by companies to grow and remain competitive byfunding additional research activities perhapsleading to expanded manufacturing lines or
Internal Use Software (IUS) includes software applications, operating systems and related resources used torun a business and serve customers. Many small, midsized and even larger U.S. companies currently do nottake advantage of Federal & State tax credits available for IUS research and development (R&D)
We are currently in unprecedented times, with regular routines and business and social norms being disrupted in attempts to minimize the impact of COVID-19. The disruption is not only limited to individuals or even businesses but also is affecting governmental agencies, as seen most clearly by the impact on the IRS.
In a recent opinion, the US Tax Court rebuffed another attempt by the IRS to deny the R&D credit to taxpayers. By granting summary judgment to the taxpayer, the Court upheld the string of cases that define what funded research means.
Many people think that R&D tax credits only apply to companies that require lab coats to be worn at the office. But the definition has evolved greatly over the years to include not only companies that manufacture and develop software,but companies in various