DEFINITION of 'Research Activities Credit'

A nonrefundable federal tax credit implemented in 1981 as an incentive for businesses and other entities to increase their research and development activities. Individuals, estates, trusts, organizations, partnerships and corporations are all eligible to claim the credit using IRS Form 6765, Credit for Increasing Research Activities.

BREAKING DOWN 'Research Activities Credit'

Only certain types of research expenditures are eligible for the credit; these are called "qualified research expenses." Qualified research expenses discover technological information that improves an item's performance or functionality, as opposed to its superficial characteristics. To be eligible for the credit, companies must increase their research spending from one tax year to the next (with a few exceptions, such as energy research). Research in the social sciences, arts and humanities is not eligible for the credit.

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