Example

Example- Company uses ASC method for 2008 claim

A company has incurred $800,000 of eligible R&D in 2008. The company also has an average of $600,000 in qualified research expense from 2005-2008. The base is taken at 50% and the 12% ASC rate is applied to the increment resulting in a $60,000 tax credit, or 7.5% of the current year’s qualified research expenses.

Step 1) Calculation of base expenditures

	2005	2006	2007	2008
Total R&D expenditures:	$500,000	$600,000	$700,000	$800,000

Previous 3 year average:	$600,000
Current year base (50% of 3 year average):	$300,000

Step 2) Calculation of R&D tax credit

Increment:	$800,000 - $300,000 = $500,000
Rate:	12% ASC
Current year research tax credit:	$60,000 (7.5%)

Note: If the 2008 R&D expenditures were $600,000, then the company would qualify for $36,000 ASC or 6% of qualified research expenses. Thus the ASC method generates a rate of 6% where R&D spending is flat.