White Nelson Diehl Evans is dedicated to providing high quality, client focused tax, financial accounting and advisory services to assist our many customers in the technology industry:

  • Cloud Application Services
  • Telecommunications
  • Computer Hardware, Components and Accessories
  • Mobile Devices and Accessories
  • Electronics
  • Software Providers
  • Life Sciences
  • Medical Device
  • Resellers
  • Memory / Storage
  • Systems Integrators / VARs
Benefits of Research & Development Tax Credits

Technology companies in the US take advantage of $2 billion in technology related research and development (“R&D”) tax credits every year and the good news is you don’t have to be Google to qualify. Whether you are an emerging startup or a mature tech company, the technology you develop may very well qualify for a tax credit. Unused tax credits can be carried forward for 20 years, so even if your company is in a net loss position, don’t overlook this important credit. There are four criteria to qualify for R&D tax credits. First, your research must be technological in nature. Second, your research must create or improve the functionality, reliability, quality or performance of a product, technique, invention, formula or piece of software. Third, there has to be some degree of uncertainty that you hope to eliminate through your research and finally, the process to eliminate such certainty must include some experimentation.

A few examples of qualified research are development or coding for a new software or algorithm, testing of new solutions in the cloud and developing an innovative product that is new to the market. Many companies are conducting R&D and overlook these credits because they seem too complex, or they lack the resources needed to identify and quantify the tax credits. There are two calculation methods a taxpayer can use to determine the value of the tax credit. Selecting the correct method between the Regular Research Credit (“RRC”), or the Alternative Simplified Credit (“ASC”), will insure the company yields the best results. The ASC is an easier method and one most used by smaller businesses without the resources necessary to compute the RRC method. Understanding the best method to select for your business is one of the many ways White Nelson Diehl Evans helps its clients.

Transfer Pricing and Technology

Transfer pricing is the price paid for transactions between related companies. According to recent trend reports, 91% of dealmakers expect to increase the volume of acquisitions/mergers and 70% believe that technology will be the most active. As an increasing number of companies seek growth through acquisition, transfer pricing becomes more and more relevant for the finance team to address.

One of the most significant areas for this transfer pricing during a merger is what happens to intellectual property (“IP”). The key is establishing both legal and beneficial ownership during due diligence prior to developing the merger or acquisition transaction details. This is true regardless of which side of the deal you are on. There needs to be a decision about which entity will own the IP after the merger is complete. If IP is migrated from one entity to the other, the valuation of such IP as considered an intangible asset can be a tricky tax issue. The tax implications of such a transfer can be material because a “sale or exchange” has occurred. Taxes apply to one respective taxing authorities. Federal and state taxing authorities are looking to expand revenues through ever increasing compliance scrutiny. Efforts to identifying IP transfers and other operational restructuring has risen on their radar.

The rising trend of software-as-a-service (SaaS) or “cloud” based applications is further increasing the complexity of intercompany service transactions. The distinction between IP transactions and service transactions is becoming more and more complex. For companies that sell internationally, the issue is even more difficult. As the rise in technology continues, and SaaS or cloud based applications are developed by smaller companies, there is often a lack of an expansive in-house finance team to manage these issues. White Nelson Diehl Evans has an experienced team that works with its technology clients to address any tax or accounting issues proactively, and well before they become potential problems.

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Tax Planning Guide

At White Nelson Diehl Evans, we know how difficult it is to stay ahead of the complex and dynamic tax laws. From new standards changing revenue recognition rules to the impact of the Affordable Care Act, our goal is to help our clients stay in front of tax issues that impact your bottom line. To help in this effort, we have put together a comprehensive tax-planning guide and it’s available to download for free.

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Partner Testimonial

“As the technology sector grows across Southern California, we have had the privilege to serve many clients who conduct businesses related to a spectrum of devices, applications and services. We enjoy working with the entrepreneurs who build these companies and we strive to deliver tax, financial and advisory services to help them navigate the various stages of growth.”

Paul Treinen Tax Partner