The Research Tax Credit: Accounting for Nexus

6 Pages Posted: 25 Sep 2011

Date Written: April 1, 2011


The research tax credit is popular with politicians and taxpayers. It has not been as well received by the Internal Revenue Service (IRS). The research tax credit continues to generate quite a bit of controversy between the government and taxpayers. Much of this controversy stems from the IRS’s attempt to impose a stringent substantiation requirement for research tax credits. This requirement has been rejected by Congress and, recently, by several courts.

The IRS has not been deterred and has redoubled its efforts. Its latest angle is to replace the word “substantiation” with the word “nexus.” In addition to putting a new name on the old concept, the IRS is using its nexus idea to impose a heightened recordkeeping requirement. This heightened requirement makes the availability of the research tax credit contingent on whether the taxpayer creates and keeps project-based records. This article examines nexus and the IRS’s heightened recordkeeping requirement for the research tax credit.

Keywords: research tax credit, nexus, R&D tax credit, R&E tax credit

JEL Classification: H2, H25

Suggested Citation

Mitchell, Kreig D., The Research Tax Credit: Accounting for Nexus (April 1, 2011). Journal of Tax Practice and Procedure, Vol. 12, No. 2, p. 47, April-May 2011, Available at SSRN:

Kreig D. Mitchell (Contact Author)

Mitchell Tax Law ( email )

6671 Southwest Fwy, Ste 820D
Houston, TX 77074
United States
713-909-4906 (Phone)


Kreig LLC ( email )

6671 SW FWY STE 490A
United States


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