Yes, the federal R&D credit can be carried back one year and forward 20 years. Each state is different when it comes to carryforward and carryback rules, but most follow the general federal guidelines.
For qualified small businesses (or QSB), the federal R&D credit can be used to offset payroll taxes owed to the IRS. Thus, startups no longer need to be in a profitable tax position to take advantage of the tax credits.
To be considered a QSB, a company must meet these requirements:
- Less than $5 Million in gross receipts;
- Five or fewer years of gross receipts; and,
- Qualified Research Expenses.