As retailers shift from direct purchasing of goods to creating proprietary brands, they are investing more in research and development (R&D). The wages paid to textile development specialists, designers, process engineers and others involved in new product and process development may qualify for the research credit.

Retailers are increasingly using information technology as a competitive tool and are designing service-oriented system architectures and custom IT solutions for merchandising, price optimization, points of sale, sales audit, labor scheduling, transportation management, space utilization, warehouse management and e-commerce.

Despite the pressures related to R&D, you can help manage the cost and risk involved by exploring tax incentives, given the extension of the R&D Tax Credit and the new Alternative Simplified Tax Credit (ASC) for 2007. 

Whichever credit you explore, you must be prepared to defend reported R&D tax credits. The Deloitte Tax LLP R&D team is a national practice of highly experienced tax professionals specializing in R&D tax incentives and includes former senior officials with the IRS and Treasury who participated in drafting the legislation and regulations. These specialists can help you identify qualified R&D activities and assemble documentation to defend your claim, based on their extensive knowledge of the law and your industry.

The Deloitte Tax R&D approach includes a customizable tool that helps to automate the computation and information gathering, and a Quality Assurance team that reviews deliverables and computations.

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