Posted by Jeffrey Feingold on 09.06.16

Increased research and development (R&D) activity in the U.S. oil and gas industry has resulted in many innovative advancements in the field. Despite global competition in the oil and gas marketplace, the U.S. continues to play a vital role, and there are incentives for companies engaging in qualified R&D activities.

The Opportunity

At a time when the oil and gas supply is plentiful and the weakened global economy has decreased demand, companies may feel strapped when it comes to the costs associated with developing new methods, materials and technological innovations. Federal and state R&D tax credits can support such innovation by enabling oil and gas companies – including small and midsized businesses – to receive dollars back to further invest in industry advances.

Less than 33% of companies that qualify for the federal R&D tax credit actually utilize it.

While Congress originally enacted the federal R&D tax credit to support basic research expenses, such as those occurring in a laboratory setting, subsequent modifications simplified the credit and made it available for qualified activities in  a wider variety of industries. The majority of states also offer generous incentives for R&D activities. Yet, businesses miss out on tens of thousands to millions of dollars in money-saving opportunities each year. Now that Congress has made the credits permanent and widened the playing field for small businesses, there is even greater opportunity for oil and gas companies to participate.

See related blog: PATH Expands R&D Credit Eligibility for Startups and Small Businesses

Which Activities Qualify?

De­spite its name, the research and development (R&D) tax credit program includes far more activities than research, patents and laboratory work in high-tech, medical and scientific industries. Think in terms of the development and improvement of products, processes and even the software used for the exploration, production, refinement and transportation of oil and gas.

A partial list of eligible activities that qualify for R&D tax credits include:

• Alternatives and improvements to drilling
• Development of transport alternatives
• Offshore structure design pertaining to helidecks, process modules and more
• Certain improvements to plant design (e.g., pressurization and safety)
• More efficient ways to refine oil or gas
• Providing wastewater treatment solutions
• Solutions to environmental problems
• Testing fuel combustion

The Benefits

R&D tax credits can equal 10 percent of your company’s spending costs as a dollar-for-dollar offset against tax liability. As companies further reinvest in R&D activities, they stand to claim additional tax credits that allow them to expand their companies, hire more employees and further invest in innovation.

Don’t throw away an opportunity to receive credit for the activities you are already conducting.

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

Your accountant or qualified R&D tax credit expert can easily help you determine whether your oil and gas business and activities meet the criteria of the test by conducting a tax credit study.

Find Out if Your Activities Qualify

The R&D 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. To learn more about whether your industry and company activities meet the R&D four-part test, request our free assessment today.

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, please contact 800-260-4138 or leave us a message below.