Posted by Jeffrey Feingold on 10.29.20
Does your contracting company resolve technological challenges through the innovative use of products and processes? Despite its name, the Research & Development (R&D) tax credit program includes far more activities than research, patents and laboratory work in high-tech, medical and scientific industries. Federal and state tax credits are available to a host of industries for activities that are deemed pertinent to R&D. But which businesses qualify, and how does the process work?
Many contractors do not realize their activities related to system design and development may constitute qualified R&D activities. As architects and engineers have raised the bar on innovation, the construction industry too has developed new processes and engineering solutions that could qualify for the R&D tax credit.
Less than 33% of companies that qualify for the federal R&D tax credit actually utilize it, due to misconceptions about qualification and the complexity of necessary documentation. Think in terms of new techniques, formulas, processes, software, tests of new building materials, and the design of new projects, such as those involving mechanical and electrical systems. Do you use innovative construction materials to create more reliable, energy-efficient structures? Many activities required to design and construct a new building, or improve an existing structure, meet R&D tax credit requirements, especially those performed by the project architect, engineers and other design services consultants, including electrical contractors doing design work.
Contractors who provide design-build services that utilize new and innovative construction techniques and enlist engineers and architects to provide construction services are most likely to qualify for the R&D tax credit.
Listed are examples of the types of construction activities and innovation projects most likely to contain qualified research.
The R&D tax credit can be a lucrative incentive for innovative businesses. Given the new permanent nature of the tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving tax credit opportunities.
Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, read our e-book: The Contractor's Guide to R&D Tax Credits, contact us at (800) 260-4138, or leave us a message below.