Early Assessment of the Increased Tax Deduction for R and D (Research and Development) Equipment Donations to Universities

摘要

The legislative changes that created an increased corporate tax deduction for charitable contributions of research and development (R&D) equipment to universities are examined. Ways in which the Tax Code was changed are enumerated, and the anticipated magnitude of these changes is explored. The law prior to the enactment of the Economic Recovery Tax Act of 1981 (ERTA), and the intent of Congress when it enacted this law, are reviewed. The various factors that comprise the R&D deduction are analyzed, including the basis or cost of the property donated, fair market value, and rate of appreciation. Examples of how the deduction is computed are supplied, and additional considerations that have some bearing on the tax benefits associated with donations of R&D property are addressed, such as raising the charitable contribution percentage, carryover of unused charitable contributions, and various nontax factors. It is concluded that the revision to the tax law will create an incentive for corporations to donate R&D equipment to universities.