Businesses located throughout the Northeast may still have time to claim a research tax credit for tax year 2010 using either the regular or “alternative simplified credit” (ASC) method. As a result of Hurricane Irene, businesses that had obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17 now have until Oct. 31, 2011 to file their returns.

As a result of wide-scale flooding and property damage, the President declared the states of Connecticut, New Jersey, Vermont and certain counties in Massachusetts, New Hampshire, New York, North Carolina and Pennsylvania a federal disaster area. The declaration permits taxpayers who reside or have a business in the disaster area to postpone filing their federal and state returns until the end of October. In addition to all of Connecticut, New Jersey and Vermont, the affected counties in Massachusetts, New Hampshire, New York, North Carolina and Pennsylvania include:

• In Massachusetts: Berkshire and Franklin;
• In New Hampshire: Carroll and Grafton;
• In New York: Albany, Bronx, Clinton, Columbia, Delaware, Dutchess, Essex, Greene, Herkimer, Kings, Montgomery, Nassau, Orange, Otsego, Putnam, Queens, Rensselaer, Richmond, Rockland, Saratoga, Schenectady, Schoharie, Suffolk, Sullivan, Ulster, Warren, Washington and Westchester;
• In North Carolina: Beaufort, Bertie, Brunswick, Camden, Carteret, Chowan, Craven, Currituck, Dare, Duplin, Edgecombe, Gates, Greene, Halifax, Hertford, Hyde, Johnston, Jones, Lenoir, Martin, Nash, New Hanover, Northampton, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Pitt, Tyrrell, Vance, Warren, Washington, Wayne and Wilson;
• In Pennsylvania: Bucks, Chester, Delaware, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Philadelphia, Sullivan and Wyoming;

Steve Powers, President of Intrepid Advisors, pointed out that manufacturing and technology-based companies averaging $50 million or less in revenue should make every effort to include the research credit with their 2010 federal returns so as to take advantage of the special rules prescribed in The Small Business Jobs Act of 2010.

The Small Business Jobs Act, which was signed into law last September, contains a provision that permits corporations and the shareholders of companies earning less than $50 million to reduce their tax bills below the alternative minimum tax (AMT) threshold. Mr. Powers explains that this change in the federal tax regulations makes the Research Credit more valuable than ever before. In previous years, the Research Credit could be used to reduce the shareholders’ tax liability down to AMT, but not below. While lucrative for larger companies, many small businesses could not realize the full benefit of the credit. However, beginning with the 2010 tax year, smaller U.S. companies will be allowed the AMT exemption, permitting them to realize the maximal benefit of the Research Credit and the ability to reinvest tax dollars into new jobs and equipment.

For more information, contact Steve Powers at spowers@intrepid-advisors.com.