Tax Incentives Blog

Architectural and Engineering (A&E) companies can realize the benefits of the R&D tax credit if they know which research activities are eligible for the credit.  Several activities that are conducted by A&E firms might, at first review, seem like qualified activities, but are actually ineligible types of company activities.

Below are some of the key activities that are not eligible architecture and engineering activities that A&E firms need to be aware of when identifying and calculating their research activities and credits.

The research and development tax credit was founded in 1981 as part of the Economic Recovery Tax Act to help companies remain competitive. Recognized as a permanent tax credit as of January 1, 2016, companies can apply for one of the most valuable tax solutions, research and development tax credits – providing a dollar-for-dollar reduction in tax liability. Businesses are able to hire more engineers, scientists and software developers with the tax savings they gain from this credit. Additionally, the credit allows companies to buy more supplies and materials.

Architectural and Engineering (“A&E”) firms may be able to take advantage of the credit for increasing research activities (“R&D 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.

Tax incentives such as the R&D tax credit have the potential to significantly increase your company’s savings when you capture all qualified research expenses. Every year, the research and development tax credit accounts for billions of dollars in federal and state benefits for companies that have qualified research expenditures. Therefore, work with a tax expert who can advise you on specific tax savings strategies when you are unsure of the documentation required, statutory deadlines and which research expenses qualify.