R&D Tax Credit
A History of the R&D Credit
The R&D tax credit began as a temporary incentive in 1981 and is now a permanent part of U.S. tax policy. Its history explains why documentation, eligibility tests, and legal precedent matter as much as the calculation itself.
Mitch Feldman · Co-Founder · R&D Tax Credit Practice · Houston, Texas·October 29, 2026
1981: creation of the credit
The Economic Recovery Tax Act introduced a temporary 20% credit on research spending above a historical base.
1986: first reform
The Tax Reform Act tightened qualification requirements and reinforced the need to document technical uncertainty and experimentation.
1990s: early legal precedents
Court decisions clarified what counts as qualified research. Software, engineering, and manufacturing began using the credit more widely.
2006: Alternative Simplified Credit
The ASC offered a streamlined calculation that does not rely on the original historical base period.
2015: PATH Act
The credit became permanent, and startups gained the ability to apply it against payroll taxes.
Today: heightened IRS scrutiny
Greater emphasis on documentation, eligibility tests, and legal precedent makes an attorney-led approach more important than ever.
This article is general information, not legal or tax advice. For how FCA applies this to a claim, see R&D Tax Credits.