The Benefits of Conducting R&D Through Universities

Companies are able to claim the R&D tax credit for qualifying activities performed at universities  or other qualifying organizations and typically receive a higher credit than they would if the project was done outside of a university. In return, the credit encourages companies to take on R&D projects that benefit their industry sector but are also suitable to academic research.

How Universities Benefit from the R&D Tax Credit

According to the Association of American Universities, “when companies contract with universities to conduct R&D, faculty and graduate students benefit from receiving complex academic and practical research problems and the financial support to study them. The R&D tax credit, in turn, promotes greater collaboration between industry and universities. This in turn leads to R&D based employment opportunities for students and graduates.”

The R&D tax credit also promotes start-up companies, many of which are a product of new technologies developed at universities as a result of industry-funded research.

How Companies Benefit from Working with Universities to Conduct R&D

Both on the federal and state level, companies receive a higher credit rate when they conduct their R&D work through a university.

Federal returns allow an additional 20% credit for R&D conducted through universities. The credit rates for Texas returns double when working through universities.

All in all, it is a mutually beneficial partnership.

R & D Tax Credits