Tax Incentives Blog

The Unusual Suspects of R&D: A CTI Success Story

Written by John Bohannon. Updated May 31, 2019.

RD_Suspects“The Greatest Trick the Devil Ever Pulled…

…was convincing the world he didn’t exist” explains Roger “Verbal” Kint in the 1995 cult classic The Usual Suspects, a gripping crime drama depicting the deceptive power of hiding in plain sight.

As one of its primary themes, the film emphasizes how often we fail to perceive what’s right in front of us when it flies in the face of our preconceived notions. This mental barrier causes the film’s lead detective to ultimately let a golden opportunity—catching a shady criminal mastermind—slip through his fingers.

Recover Software Development Expenses with R&D Tax Credits

The pitfalls of this mental block aren’t relegated to just high-stakes crime dramas but happen every day in the business world as well. Companies and industries often become accustomed to the economic landscape they’ve come to know through experience and can sometimes miss new opportunities that arise from unusual avenues.

For example, the digital revolution sweeping across nearly every industry nationwide presents precisely this kind of opportunity. Industries previously precluded from claiming the federal research and development tax credit for their primary business activities are increasingly able to capture this lucrative tax benefit for the development of qualifying software applications, digital platforms, and other technological innovations that augment and improve a company’s otherwise ineligible business activities.

Unusual Suspects Lineup—Mortgage Companies

For instance, recently CTI helped secure significant R&D tax credits for businesses in the mortgage origination and underwriting industry.

Hiding in plain sight, these companies’ primary business activities of providing mortgage services do not qualify for the research credit, as it is intended to incentivize highly-technical occupations of the hard sciences—biology, physical sciences, engineering, and computer science.

However, the credit is not just potentially available to companies who directly perform qualifying activities, but also for companies who pay contractors to perform those activities.

Consequently, for multiple mortgage industry clients, CTI secured substantial R&D tax credits. These largely stemmed from R&D expenses for contractor payments made to software development companies to create new digital platforms that provided fresh features and functionalities to their customers and improve the quality of their mortgage services through technological innovation.

On one occasion, for a single tax year, CTI identified an R&D credit over $40,000 for a mortgage company’s proprietary software development efforts. This firm pioneered an innovative software application designed to simplify and expedite the lending process, allowing clients to complete a loan application online and receive an automatic, instantaneous quote for rapid comparison of different loan terms.

Call a Private Eye

In the world of tax incentives, nothing guards against the danger of preconceptions better than a second pair of eyes. An R&D consultant expertly trained to investigate all aspects of this continually-evolving legal landscape leaves nowhere for tax savings opportunities to stay hidden.

Call a tax specialist today and see if a mountain of tax savings is hiding right under your nose.

 

 

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Topics: R&D Tax Credit

John Bohannon

Written by John Bohannon

Graduating from South Texas College of Law Houston, John acts as CTI’s chief R&D legal researcher. His focus on tax law research combined with his years of experience performing R&D tax credit studies and providing audit support affords unique insight into the research credit’s application and other evolving areas of tax law.

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