The R&D tax credit is a dollar-for-dollar reduction of federal income or payroll tax liabilities. R&D tax credits can be claimed on amended tax returns which can generate cash refunds from overpayments in those years. Additionally, federal R&D tax credits roll forward for 20 years.
For qualified small businesses (i.e. startups), these credits can be used to offset payroll tax owed to the IRS. Therefore, startups no longer need to be profitable to take advantage of the tax credits.
Most states also have an R&D tax credit available to offset various income tax, franchise tax, or sales and use tax liabilities.