Did you know that several structural engineering firms around the country are taking advantage of R&D (Research & Development) tax credits? Yet, many more companies across the nation are unaware that they may be eligible to claim this credit, and are missing out on millions of dollars in Federal and State tax incentives.
The reason for this is that many companies hear the word “research”and automatically envision scientists in a lab wearing white lab coats inventing something revolutionary. Hence, many businesses fail to take advantage of R&D tax credits, since they erroneously believe it doesn’t apply to them.Fortunately, the IRS definition of “Qualified Research Expenditures” is quite broad, and a variety of U.S based manufacturing, engineering, software development, utility, and pharmaceutical firms qualify for the tax incentive.
Structural engineering has evolved into a sophisticated function that often involves many areas besides “traditional” building design. The complexity of modern structures require significant innovation from engineers in order to ensure the structure withstands all the ongoing stresses throughout its lifespan. Examples of structural engineering activities, in no particular order, that may potentially qualify for R&D tax credits include:
– Developing alternate water flow or plumbing systems
– Improving or developing alternative ventilation/heating/cooling system for structures
– Development of unique processes or methods for installing energy-efficient systems
– Improving acoustical qualities
– Determining alternate construction materials, or means of assembling/fastening components
– Environmental design, sustainable design, new technology
– And more
The costs involved in these activities – primarily wages, but also supplies used in the R&D process, and sub-contractors, may fall under Qualified Research Expenditures. Generally, the maximum federal credit is 6.5% of these qualified expenditures.
To be clear, not every structural engineering firm is going to be eligible for R&D tax credits. It is critical to utilize an experienced consulting firm that specializes in R&D tax credits that can conduct a thorough evaluation process, and scrutinize the company’s activities to determine eligibility.In addition, the firm must effectively document and substantiate your qualifications for the tax credit, to minimize the risk should you be audited. Finally, as part of their service, they must be willing to defend their work in case of an IRS audit.
The benefits for qualifying firms are quite substantial, and can often yield a six-figure tax credit. This is especially true for states like California, that offer a State level R&D credit in addition to the Federal benefit. More importantly, if your firm has not been claiming these credits, you may be eligible to capture the benefit for the past three open tax years! Is your firm eligible to take advantage of these lucrative tax credits? Click here to learn more!