Posted by Jeffrey Feingold on 06.05.24

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?

Read our blog: PATH Widens for R&D Tax Credit Opportunities

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.

Read our FREE guide: The Contractor's Guide to R&D Tax Credits

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.

• Value engineering
• Improving the overall construction process to increase efficiencies
• Design-build projects
• Pre-construction planning
• Development of means and methods for hard-bid jobs
• Development of innovative assembly of construction methods that accelerate or improve the construction process
• Dew point analysis to determine location and type of vapor barrier for walls, roofs and floors
• Designing HVAC systems for airflow and energy efficiency
• Designing electrical systems for efficient power usage
• Green building design/LEED certification
• Energy-efficient design or improvement
• Experimenting with new material combinations and evaluation of their performance properties
• Plumbing system design for efficient water usage
• Lighting system design for energy efficiency
• Drainage/storm management water management design
• Using building information modeling (BIM)
• High-tech equipment installation
• Plant production system design

Find Out if Your Activities Qualify

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.

Request a free assessment to determine qualifying R&D tax credit eligibility.

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.