RSM Resources

The U.S. Government Accountability Office (GAO) recently sought input from RSM McGladrey’s and the Big Four’s research and development practice leaders.

The GAO was particularly interested in how R&D tax credit issues affect midsized companies. As the fifth largest accounting firm, RSM McGladrey was uniquely suited to provide that insight.

The GAO’s report is being prepared at the request of the U.S. Senate Finance Committee, which will consider ways to improve the administration and effectiveness of the research tax credit.

“Because of our positioning with middle-market clients, I think we represent a wider range of taxpayers. And that’s why the GAO was interested in our input,” says Tom Windram, RSM McGladrey’s national R&D practice leader. “The research credit has been the subject of a lot of tax controversy because the IRS has made it very difficult for companies — particularly small and midsized companies — to satisfy its onerous documentation requirements. These additional requirements go far beyond what is required by the Internal Revenue Code and Regulations.  They’ve grown out of very liberal IRS interpretations of a handful of old court cases which have become institutionalized in IRS examination guidelines.”

Windram met with GAO representatives Aug. 31 for an interview regarding its report on the R&D tax credit. The interview provided a forum to advocate for middle-market clients. Prior to the meeting, Windram and Jerry Parshall, director-national tax, crafted detailed responses to a GAO questionnaire to capture RSM McGladrey’s middle-market positions.

“The smallest taxpayers are expected to comply with the documentation requirements that the IRS imposes on the largest taxpayers,” says Parshall. “This drastically reduces the effectiveness of the tax credit for smaller taxpayers like many of our clients, which is unfortunate since this market segment contributes the greatest amount to our country’s job growth and innovation. Our participation in this report is a good example of how RSM McGladrey continues to look out for the interest of midsized businesses.”

Specifically, the GAO met separately with Windram and each Big Four R&D practice leader to delve deeper into:

• What aspects of making research credit claims (and supporting them in the course of audits) taxpayers and practitioners find most burdensome
• Additional perspectives on complaints the IRS has raised regarding some practices of taxpayers making research credit claims
• Suggestions for changes to the law or to the IRS/Treasury positions or practices that might reduce compliance and administrative costs to taxpayers and the IRS or that would make the credit a more effective incentive for increasing private sector research spending