R&D Tax Credits for Assisted Reproductive Technology

JANUARY 5, 2021

12:00 AM

By David De Vore

Assisted Reproductive Technology (ART) has gained tremendous growth since the successful birth of Louise Brown using IVF in 1978. With the ever-increasing number of infertility cases as a result of obesity, pollution, and underlying disease this exponential growth is only expected to continue. Embryologists, endocrinologists, and clinicians are continually evaluating new techniques to improve reproductive success and keep pace with growing demand.

This growth, in conjunction with favorable regulatory frameworks, allows ART practitioners the unique opportunity to enhance their clinical and business-related goals through the use of specific tax incentives like the Research and Development (R&D) Tax Credit. Eligible researchers, manufacturers, and other businesses may be able to recapture some of their R&D expenditures by qualifying them for the federal R&D Tax Credit, and eligible state R&D Tax Credits, to offset federal and state income tax liability.

What is the R&D Tax Credit?

The R&D Tax Credit is a Federal tax incentive that is available to a wide range of companies, including those in the field of reproductive endocrinology and infertility. The R&D Tax Credit enables qualifying companies to reduce their income tax liability in the current tax year dollar-for-dollar, and potentially receive a refund for overpaid taxes on previously filed tax returns. There’s no limit on the amount of R&D expenses that can be qualified in a given tax year.

The R&D Tax Credit can also be carried forward up to 20 years to offset future tax liability, if it cannot be used immediately or completely. Eligible businesses may also be able to claim state R&D Tax Credits for their qualified research conducted to offset a portion of their state tax liability.

Start-ups and early-stage businesses can also take advantage of the Payroll Tax Credit to reduce their payroll tax liability, even if the company has no federal income tax liability.

Qualifying R&D Activities:

Companies can claim the R&D Tax Credit by qualifying their activities according to the four-part test. Qualifying activities can be found in all areas of ART, but each individual activity must pass all elements of the four-part test to qualify. The four-part test asks:

  1. Does the activity intend to make or improve a product or process that results in improved function, performance, reliability, quality or cost efficiency?
  2. Does the activity intend to eliminate an uncertainty when developing or improving a product or process related to methodology, design, techniques, formulas or inventions?
  3. Does the activity include a process of experimentation to eliminate or resolve an uncertainty by evaluating alternatives or approaches using trial and error, modeling, or other methods?
  4. Is the activity technical in nature by relying on a hard science, such as biology, chemistry, or medical science?
Potentially Qualifying Activities:

  • New stimulation protocols
  • Alternative PGT-A protocols
  • New sperm separation techniques
  • Improved transfer protocols
  • AZH procedures
  • Oocyte and embryo culture improvements
  • Vitrification process improvements
Qualifying Costs

Qualifying costs are the expenses incurred in performing the qualifying activities. Potentially qualifying R&D expenses include:

  • Compensation paid to employees involved in the R&D activities, including employees with direct involvement, as well as employees that directly supervised or supported the R&D projects, such as managers, supervisors, and laboratory assistances.
  • Raw materials & supplies consumed during the R&D process, such as Culture media and reagents, Pipette tips and syringes, Pre-cycle and in-cycle medications, Tubes, culture dishes, and other plastic lab equipment.
  • Contractor expenses for R&D related services.
Why work with Leyton?

Given the technical nature of the R&D Tax Credit it is essential to work with a firm that has ample experience in the sciences. Our qualified experts in Leyton’s Biotechnology Team, as well as our tax professionals, will fully substantiate and safeguard your claim by working with you and your technical team to properly qualify the activities and expenses related to your research and development.

Having the proper documentation to validate a claim is crucial, and Leyton safeguards your claim with a detailed Technical Report that outlines how your company’s R&D qualifies for the R&D Tax Credit.

Author:

David De Vore

Associate Biotechnology Consultant – Leyton USA


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About Leyton:

Founded in 1997, Leyton is a global innovation funding consultancy dedicated to helping our clients improve their business performance. In the US, our specific expertise is in optimization of Federal and State Research & Development (R&D) Tax Credits. As a business, we want to help unleash our clients potential and be a strategic partner in their evolution and growth.


Author

David De Vore

R&D Technical Consultant

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