Behind the Big Profits: A Research Tax Break

by | Jun 14, 2013 | News

Strong first-quarter corporate profits may not be quite as good as they look.

An analysis by The Wall Street Journal shows that the extension of a big tax credit quietly boosted the profits of dozens of companies. Under accounting rules, the companies reported a year’s worth of benefits from the research-and-development tax credit in their first-quarter results, lifting profits for many of them by more than 10%.

With first-quarter results nearly complete, 465 participants in the Standard & Poor’s 500-stock index cumulatively reported that revenue increased 2.1% from the same period a year earlier. Expenses grew slightly faster, so pretax profit rose only 0.9%, according to the Journal’s analysis.

But the S&P-500 companies also set aside 5.6% less money…Click here for the full article from the Wall Street Journal