Judge Jackson's opinion on research activity credit: No increase after taking into account all relevant factors.
Judge Jackson's opinion in Section 41 Credit for increasing research activities is based on complex computations that are difficult to summarize. You don't need to understand the specific math involved to understand the judge's opinion. The bottom[...]
In a recent development, Louisiana Republican kingmaker Leonard Lane Grigsby has been ordered to repay a $576,756 refund that was issued to him based on erroneous research conducted by alliantgroup. Judge Brian Jackson of the US District Court for the Middle District of Louisiana issued the opinion requiring the repayment of the refund last month, and Grigsby has been given 30 days to comply. This is a significant development, as Grigsby is a well-known figure in Louisiana politics, and the refund represents a significant amount of money. It remains to be seen how this will affect Grigsby's political standing in the state.
It is always interesting to read about people who have overcome great odds to become successful. Lamar White Jr.'s profile of Grigby for the Bayoubrief is an inspiring story of someone who has gone from rags to riches. Grigby's support for Republican candidates in Louisiana is also admirable. Adrienne Gonzalez's coverage of the ongoing alliantgroup investigation on Going Concern is also very interesting. As best I can tell, there is no direct connection between the two stories. However, the stories behind the story are always more interesting.
The Research Credit: An Engaging Summary
It is clear that the computations involved in the Section 41 Credit for increasing research activities are quite complex. However, it is important to note that Judge Jackson's opinion does not require a detailed understanding of these computations. Rather, the judge concluded that there was no research eligible for the credit at all. This is a significant ruling that will likely have far-reaching implications for businesses and individuals seeking to take advantage of this tax credit.
The trend of businesses hiring consultants to help them take advantage of the research tax credit under Section 41 is a positive development. This practice can help businesses save money and improve their bottom line. Additionally, it can help create jobs and spur economic growth.
It was one of those things the managing partner just loved. In my view, the biggest hazard in public accounting is envy. Unless you have an odd specialty in order to prosper, you must work for and associate with people who are much wealthier than you have any hope of ever becoming.
The tyranny of the billable hour is a major problem for many workers. They have to work long hours to make a living, and often have to pay someone else a reasonable wage to do the work. Value billing is one way to escape from this tyranny. Research credit consulting is one of the things that can be value billed. Rather than charging based on how much work you do, you charge a percentage of the tax savings.
I believe that value billing can work even better not being under the umbrella of a regulated profession. I have not been able to figure out how alliantgroup bills or what it is they have against capital letters, but I believe that this model has great potential.
How to Get Your Refund Claim
It is great to see that Cajun Industries is thriving and doing well. As one of the largest construction contractors in the South, the company is clearly doing something right. I'm especially pleased to see that the company is taking advantage of research credits to help improve its bottom line. This shows that Cajun is committed to continuous improvement and is always looking for ways to save money and be more efficient. I'm confident that the company will continue to be successful in the future.
Grigsby's revised K-1 showed a credit of $979,237, which the IRS paid out along with $73,663.38 in statutory interest on September 15, 2017. While the research credit can be a helpful tax break, it is important to note that it can also reduce other deductions and is not refundable if it exceeds your tax liability. In this case, Grigsby's refund claim was for "only" $576,756.
The Litigation: A New Courtroom Drama
The Department of Justice has filed a lawsuit against Lane Grigsby and his wife to recover an erroneous tax refund of $750,000. Stephanie Riegel of the 1012 Industry Report covered the story, which included Grigsby's resignation. I have not been able to reconcile the numbers in the complaint with those in the opinion, so I will not go into those details here. However, it is clear that the Grigsbys received a refund that they were not entitled to, and the DOJ is seeking to recover that money. This is yet another example of the government cracking down on tax fraud and abuse. Those who attempt to cheat the system will eventually be caught and will face consequences.
The people who prepared the documents say the records Cajun has are as clean as any they have ever seen. This is good news for Cajun, as it means that their business is running smoothly and efficiently.
In his view, the IRS is overreaching in its treatment of him and may be doing so because of his outspoken, conservative political views. He notes that other partners in his business who received R&D credits for 2013 haven't gotten any pushback from the IRS.
It is typical of our government to abuse its citizens, according to one man who was recently targeted by the IRS. He says that he knows of other conservatives who have been targeted by the IRS in similar ways, and that he believes he was singled out because he speaks out against the government. This man's story is a prime example of how our government mistreats its people, and how those in power abuse their positions to target those who they disagree with.
Grigsby is unperturbed by the lawsuit, noting that he shells out more in taxes than he receives in government benefits. "I send the government way more money than they send me," he said.
The Opinion: A Place for Engaging, Thoughtful Discussions
It is great to see that the parties have come to an agreement on a sample of four projects. This will help to determine the amount of research that is necessary for each project. I am particularly interested in the Methanex project, as it involves the relocation of a methanol plant from Chile to Louisiana. I am also interested in the Chevron CVX project, as it involves the expansion of an oil refinery in Mississippi. I am looking forward to seeing the results of the research that is conducted on these projects.
Qualified research is essential for businesses to innovate and stay competitive. The requirements for qualified research ensure that businesses are investing in activities that will improve their products or services. The four requirements for qualified research are: (1) the expenses must be of the type deductible under [26 U.S.C.] $ 174; (2) the research must be undertaken "for the purpose of discovering information . . . which is technological in nature;" (3) the application of that information must be "intended to be useful in the development of a new or improved business component of the taxpayer;" and (4) substantially all of the research activities must "constitute elements of a process of experimentation. These requirements ensure that businesses are investing in activities that will have a positive impact on their bottom line. qualified research is an important part of business innovation and helps to keep businesses competitive.
There was some discussion among the lawyers about burden of proof and some criticism of Grigsby's lawyers for changing their argument at the last minute. However, Judge Jackson ruled that they did not specify a single new or improved process that Cajun developed in any of the four test projects. This ruling makes it more difficult for Cajun to prove that its technology is superior to that of its competitors.
It's clear that Cajun failed to do research that would create a better mousetrap or an improved process for building mousetraps on three of the four projects. However, on the fourth project, the judge determined that there was no risk involved in the research, and therefore Cajun should get credit for the research.
alliantgroup's Customers Could Be in for a Sweaty Season
It seems likely that the IRS is targeting alliantgroup, especially after Adrienne Gonzalez reported on Going Concern that CPA firms that referred clients to alliantgroup are receiving subpoenas to turn over client records in conjunction with a grand jury investigation. However, I rate Grigsby's speculation that hw was targeted because he is a conservative on the improbable side.
The firm's advice to its clients is that there is nothing to worry about on their returns. This is based on the story that is being told.