Computing the research credit for consolidated groups

Sec. 41 offers a credit for increasing research activities. It is an incremental credit in that a taxpayer must have current-year qualified research expenses (QREs) that exceed a base amount in order to claim the credit. The base amount for taxpayers claiming the regular Sec. 41 credit (and neither the alternative incremental research credit nor the alternative simplified credit) is the product of the fixed base percentage and the average annual gross receipts for the four years preceding the current tax year. Thus, the credit itself is determined by a calculation that is dependent not only on current-year QREs but also prior years' activity. (Note that Sec. 41 has been extended through Dec 31, 2011, by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, RL. 111-312.)