Innovation is a topic that executives love to talk about. Who wouldn't love to discuss new technology that could possibly take your organization to the next level? While discussing tax credits for innovation may not appear quite as exciting, it can be just as important. Proper tax planning is often a key to making new ideas and projects possible.
To better help the rest of your executive team understand and appreciate the value of ideas that can help generate tax credits, there are a few ways you can try to present your information more effectively.
Go Beyond the Technical Details
If you only focus on the technical details of tax credits, the rest of the team may struggle with the discussion. Take your time to explain what's going on with your ideas and the projects they are connected to.
For example, instead of just saying that your organization qualified for a $2 million R&D tax credit last year, you could explain how it was your organization's development of your latest product line that made the tax credit qualification possible, and the money saved went toward upgrading your organization's remaining legacy systems. This way you tie in the financial information with parts of the organization that the executive team better understands.
You should also stress how important tax credits are to your bottom line and how they might be the key to turning a profit. According to Bloomberg Technology, Google has invested over $1.4 billion in clean energy projects such as solar panel installations. While the projects themselves are struggling to make money, Google uses "tax incentives that can produce investment gains of more than 10 percent a year" to offset the costs.
Remember Your Audience
Your approach to presenting tax credit ideas should really depend on which C-suite executive you are talking to. Your CEO might be most interested in increasing future revenues, so the ability to sell excess state tax credits from research might grab their attention — you can fund innovation while developing another possible source of revenue at the same time.
Meanwhile, you might instead point out to your CTO that any research that qualifies for an R&D tax credit and generates tax savings could go straight into the technology budget for new innovations. You should consider framing the explanation within the context of each department leader's sphere of influence to help garner the attention and acceptance you need.
Suggest the Next Move
If you discover a tax credit opportunity for which your organization may be eligible, you can more than likely find even wider acceptance by also presenting ideas on how those tax credit proceeds can be most effectively utilized. For example: you realize that if you move research to a different state, you can receive an extra $1 million in state tax credits. From there, you could propose putting that money right into the new cloud server that your CTO was talking about while also suggesting the best tax strategies for financing that new investment. Suddenly, your focus isn't just on making current projects work financially, but also coming up with innovative ideas that benefit a number of different departments within the organization. By turning your tax credit data into an actionable plan for your organization's future, you can both show and tell why these credits are so valuable.
Stay Connected to Your Tax Group
Some of the most helpful innovation tax credits are at the state and local levels. You likely don't have time to keep track of every single area's tax code, so you need your tax group or experienced third-party service provider to help you find these ideas. If you do not know the key details about state and local tax credits for innovation, there's no way you can present this information to the executive team. Make sure to bridge this knowledge gap by staying in close contact with your tax group or experienced third-party service provider.
In the end, the rest of the executive team might never get excited about the technical information behind taxes. However, if you explain both the innovation potential and return on investment behind these strategies, your team may perk up and listen closely as you present your latest tax credit ideas.
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