Tax Incentives Blog

The architecture and engineering (“A&E”) industry is the lifeblood of innovative design and construction projects in today’s competitive global environment. A&E firms develop a nation-wide infrastructure and these new projects may qualify for valuable federal and state R&D tax credits.  According to the latest U.S. Census Bureau, there are more than 80,000 A&E companies in the U.S. and a clear majority of these firms are not even aware that they are doing research and experimentation activities eligible for the credit.

Construction companies may be able to take advantage of the credit for increasing research activities (“R&D tax credits”) under Internal Revenue Code §41, if they know what activities and expenses are eligible for the credit.  The two key questions taxpayers should be asking themselves are 1) what activities at my company are eligible for the R&D credit and 2) are the R&D expenditures related to those activities properly identified and captured. 

Cannabis businesses involved in research and development activities and related expenses may be eligible for valuable R&D tax credits. Over the past several years, some states including California, have introduced and passed legislation making it legal to grow, manufacture, and use both medicinal and recreational cannabis (also known as marijuana).   Frequently, the cultivation of the cannabis plant and the subsequent development of new and different marijuana products involve much research and experimentation.    These businesses and their tax professionals need to know how the new legislation coupled with the current state R&D tax credit rules can provide significant savings on the taxpayer’s income tax returns.

Does your manufacturing company develop a new or improved product or process?  If so, you are likely eligible for a valuable corporate tax credit! 

Since 1981, companies of all sizes have been able to enjoy the benefits of the R&D credit, with companies in the manufacturing industry accounting for over 60% of the annual credits claimed by taxpayers.  Sounds like great news, but the fact is only 1 in 20 manufacturers claim the R&D credit.  Many small and medium-sized manufacturing companies are eligible for the R&D credit, but they frequently and erroneously believe that only companies developing or manufacturing products new to the world are eligible for the credit and therefore miss out an opportunity to substantially save their company money each year. 

Architectural and Engineering (“A&E) companies often fail to realize that they can take advantage of the credit for increasing research activities (“R&D Tax Credits”) under Internal Revenue Code §41 without even being aware of the program.  Some of the common misperceptions and areas often overlooked involve the following:

The R&D tax credit provides benefits to companies of all sizes by improving overall cash flow, reducing your effective tax rate and decreasing your federal and state income tax liability, to name a few. The R&D tax credit has come into its own over the last decade, as new regulations, court rulings and IRS guidance have resulted in broader positions taken by companies to maximize, and benefit from, the credit.

Architectural and Engineering (“A&E) firms continue to be an industry that is growing significantly in the U.S. and their design and experimentation activities are of the nature that is eligible for the Research & Development (“R&D”) tax credit. 

Federal and state research and development (R&D) tax credits are some of the least understood tax credits on the books. Most businesses aren’t claiming their full potential – but yours shouldn’t leave this valuable tax credit on the table.

In order to maximize your Architectural and Engineering (“A&E) firm’s Return on Investment (“ROI”); it is important to carefully review and analyze the company’s activities as it relates to the R&D tax credit.   Below are some of the key activities that are eligible architecture and engineering activities that A&E firms need to be aware of when identifying and calculating their research activities and credits.

When your business partners with an outsourced tax expert, you will not only receive expert advice but also the tax software necessary to support the process of capturing tax incentives.  Internal-use tax software is an instrumental tool for increasing transparency as you work on tax projects and on improving your firm’s productivity.