The R & D credit is designed to stimulate increased company spending on R&D activities over time by reducing taxes. In general, a qualifying company is eligible to deduct from corporate income taxes an amount equal to 20 percent of qualified research expenses above a base amount. The base amount is a calculation of a company's ratio of qualified research expenses to gross receipts during a given time period multiplied by current gross receipts, dependent on the year the business was founded. As a result of the significant increase in recent years in R&D credit claims, the credit was designated as an LMSB Tier 1 Audit Issue as of April 4. 2007. Tier 1 Audit Issues are those that, if present in an audited tax return, must be reviewed. Due to this, tax practitioners should expect to see an increased level of scrutiny relating to R&D credit claims.