The R&D Tax Credit Aspects of Autism

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        Autism is the fastest growing disorder of neural development in the United States. On March 20th 2013, the Centers for Disease Control and Prevention (CDC) reported a remarkable increase in the prevalence of autism: as of 2012, one in every 50 children between the ages of 6 and 17 exhibit some type of autism. In 2007, the number was one in every 88 kids.

        Uncertainty remains about whether this growth is due to heightened awareness or to an actual increase in incidence of the disorder. However, fact is that autism affects a considerable group of children nationwide.

        Knowledge of what causes Autism Spectrum Disorders (ASDs) remains deficient. More importantly, there is no known medical detection or cure for ASDs. Important R&D tax credits are available to support eligible autism innovation activities.

The Research & Development Tax Credit

        Enacted in 1981, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On January 2, 2013, President Obama signed the bill extending the R&D Tax Credit for 2012 and 2013 tax years.

Autism Spectrum Disorders (ASDs)

        ASDs are a group of disabilities that affect social, communication, and behavioral skills with varying intensity (ranging from mild to severe). There are three types of ASDs :

  1. Autistic Disorder
    Also known as "classic" autism, this disorder is usually characterized by social and both verbal and non-verbal communication challenges. Many people with autistic disorder present intellectual disabilities as well as uncommon behaviors and interests.

  2. Asperger Syndrome
    The Asperger Syndrome patients often present milder symptoms of autistic disorder. There is a relative preservation of language and intellectual skills. However, difficulties in social interaction and unusual behaviors are recurrent.

  3. Pervasive Developmental Disorder - Not Otherwise Specified (PDD-NOS)
    People with PDD-NOS meet some, but not all, of the criteria of autistic disorder. When present, symptoms are fewer and milder, causing only social and communication difficulties.

        Not all causes of ASDs have been identified. Environmental, genetic, and biologic aspects can favor the incidence of disorders. Studies have shown that boys are about five times more likely to develop autism than girls.

        ASDs are developed before the age of three and endure through a person's life. Although there are cases of symptoms improving with time, only 3% of adults with autism live independently. There are no medical tests to diagnose ASDs, which are only identified through the monitoring of a child's behavior. In many cases, disorders are not diagnosed until later in the child's life, reason why many children do not receive the help they need.

        There is no cure for ASDs. Treatments usually consist of behavioral and educational interventions, medications and therapies, aimed at improving specific symptoms. Early interventions, made between a child's birth and the age of three, have been successful in fostering the development of skills, such as social interaction and communication.

        According to the organization Autism Speaks, on average, autism costs a family about $60,000 per year.

Autism Innovation

        Novel research efforts, new technology, and innovative methods have the potential to change the face of autism. The following domains stand out as promising areas for advances. Companies investing in any of these fields constitute strong candidates for federal R&D tax credits.

  1. Unveiling the causes: Uncertainties remain as to what causes autism. A growing number of researchers, however, believe that nutritional and environmental aspects during pregnancy can influence the risk for ASDs. In a recent international conference in San Sebastian, Spain, three studies suggested some sort of environmental association: pregnant women exposed to high levels of air pollution and to certain household insecticides were found to increase the child's risk for autism; on the contrary, pregnant women taking iron supplements presented lower risk. These studies, however, were limited to associations. Further research is necessary to unveil causal relations.

  2. Developing new and effective diagnostic tools: Autism diagnosis remains a time consuming and subjective task. Groundbreaking efforts include an ongoing study led by Dr. Harvey J. Kliman, a research scientist at the Yale School of Medicine, which has raised the possibility of assessing the risk of developing autism through the analysis of a child's placenta. The hypothesis is that the placentas of children with autism have "more placental folds, called trophoblast inclusions, visible after birth". This characteristic could revolutionize early diagnosis of ASDs, becoming a biomarker for newborns at risk.

  3. Understanding cases of recovery: It is has been known that between 1 and 20 percent of children diagnosed with ASDs no longer qualify for such diagnosis later in life. While some experts believe in mistaken diagnoses, others advocate that early detection and treatment can lead to recovery. This is the case in a recent study led by Deborah Fein of the University of Connecticut at Storrs, which analyzed 34 people who were diagnosed with ASDs before the age of 5 and no longer presented any symptoms. Results supported the possibility of (rare cases of) recovery. However, further research is necessary to determine the most effective ingredients or therapies as well as behavioral patterns or biological markers that predict such recovery.

  4. Gender differences in ASD: Reasons why boys outnumber girls in autism diagnoses are not fully uncovered. Research led by Elise Robinson of Harvard Medical School recently discovered that girls with autism come from families with significantly higher risks than boys. The conclusion is that females are somewhat "protected" from the disorders. However, the source of this "protection" remains unknown. Further research is necessary to confirm whether this condition is due to social bonding hormones, such as oxytocin and vasopressin, or to other metabolic systems. Clarifications about the feminine advantage can greatly contribute to understanding the disorders and possible prevention strategies.

University Autism Efforts

        Major U.S. research universities are engaged in a wide range of autism R&D activities, as briefly summarized below:

        Stanford University Autism and Developmental Disorders Research Program: The program has the objectives of clarifying the neurobiological underpinnings of ASDs and understanding how genetic and environmental aspects contribute to the onset and evolution of symptoms. Clinical trials and studies are conducted with the goal of identifying effective treatment strategies. Ongoing studies include themes such as emotional reactivity and regulation, intranasal oxytocin treatment for social deficits, pregnenolone treatment, among others.

        Yale Autism Program: Recently recognized as a National Institutes of Health Autism Center of Excellence, Yale's Autism Research Center is among the best in the world. The program presents an interdisciplinary and synergistic approach. Current efforts focus on neuroscience and genetics of social engagement. R&D activities include: studies of learning styles and remedial treatments capitalizing on identified strengths; early detection of autism in infants; functional neuroimaging studies involving several neuroimaging technologies to measure in vivo brain responses to human faces, gaze, voice, emotional expressions and human action; etc.

        Harvard University: Researchers at Harvard Medical School have created algorithms and associated deployment mechanisms that can significantly reduce the time needed to accurately detect autism. The project includes a web-based assessment tool consisting of a small set of questions and a short home video. The time for autism diagnosis could be reduced by nearly 95%, from hours to minutes.

        University of California, San Diego: The UC San Diego Autism Center of Excellence has been at the forefront of autism research. The Eye Gaze Research, for instance, uses eye-tracking technology as a tool to detect early features of ASDs. Recent research has focused on discovering the causes of autism. Advances include the identification of a concentration of neurons in the prefrontal cortex of children with autism and the finding of a possible early hallmark of the disorder, namely, challenges in the brain's ability to establish communication between its right and left hemispheres.

        University of Illinois at Chicago: Funded by the National Institutes of Health, the Autism Center of Excellence at the UIC develops interdisciplinary and translational research. The Center's main projects focus on the genetics of serotonin and the insistence of sameness (IS) in ASDs.

        University of Pittsburgh: The Center for Excellence in Autism Research at the University of Pittsburgh was established with the objective of conducting "exceptional research on the cognitive, brain, and genetic basis of autism." Researchers believe that innovative treatments can contribute community services and government policies and improve the lives of people with ASDs. Current studies include 1) Development of Categorization and Facial Knowledge in Low and High Functioning Autism, 2) Disturbances of Affective Contact: Development of Brain Mechanisms for Emotions, and 3) Systems Connectivity and Brain Activation: Imaging Studies of Language and Perception.

        Cornell & Columbia Universities: A partnership between New York-Presbyterian Hospital, Weill Cornell Medical College, and Columbia University Medical Center has led to the establishment of the Center for Autism and the Developing Brain. The 214-acre mental-health campus in Westchester County will offer state-of-the-art diagnoses and treatments, gathering a wide-range of professionals from psychiatrists to speech, behavioral, and occupational therapists. During its first year, the Center is expected to treat about 200 patients, which will also have access to innovative research from the participating universities. The initiative will facilitate access to comprehensive care, both by concentrating a variety of services in one place and by making it easier for families to receive insurance coverage.

Corporate Autism R&D

        The considerable amount of ongoing university autism research will drive an ensuing wave of commercial autism R&D aimed at turning theoretical discoveries into commercially scalable technologies. Businesses engaged in autism-related R&D efforts, particularly the application of novel information into marketable alternatives to autism management, are likely to qualify for significant Federal R&D tax credits.

        A telling example is the search for an autism drug. Currently, there are no approved drugs to treat the core symptoms of ASDs, such as impaired communication and social skills. Despite difficulties in developing medications for neurological disorders, companies have been engaged in this quest. This is the case of Seaside Therapeutics, a private company in Cambridge, Mass., which is working in partnership with Roche to develop a treatment focused on the underlying molecular abnormalities of autism.

        A growing number of companies are also engaged in the development of innovative methods to hire people on the autistic spectrum. It has been found that these people frequently present highly analytical and focused behavior, which can be of great use in IT-related work, such as software testing and programming. Texas-based CRM firm Alliance Data pioneered this practice and has recently been followed by the multinational business software firm, SAP. Developing methods that efficiently incorporate people with ASDs is very challenging, especially due to impaired social skills. Companies investing in novel and improved systems to do so, may be eligible to Federal R&D tax credits.


        There are still many challenges surrounding ASDs, ranging from its causes to an eventual cure. R&D activities can greatly contribute to improve the lives of a growing number of children and families that must cope with neurodevelopment disorders. University autism efforts have set the basis for innovation and opened the way to an emerging commercial autism R&D wave. Federal tax credits are available to support eligible autism R&D activities.

Article Citation List



Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Andressa Bonafé is a Tax Analyst with R&D Tax Savers.

Charles G Goulding is a practicing attorney with experience in R&D tax credit projects for a host of industries.

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