So often, we find that clients tend to think of the Research and Development (R&D) Tax Credit as a tax strategy only for the “lab coats” and that couldn’t be further from the truth. The credit was established to reward companies for innovative ideas and processes. Many architecture and engineering firms meet the requirements laid forth by the IRS and are great candidates. McGuire Sponsel has had tremendous success documenting Research & Development Tax Credits for architecture and engineering firms. They often qualify for tax credits by dedicating resources towards specialized research and design work for each unique project. Our team has worked with all sizes of firms building a defensible credit while maximizing tax benefits.
An engineering firm that specializes in municipal wastewater and potable water treatment systems engaged McGuire Sponsel to conduct a four-year R&D tax credit study. The client was converting from a C corporation to an S corporation and had a large built-in gains tax due. McGuire Sponsel conducted fieldwork and interviewed key principals, project engineers, and designers to gain an understanding of the company’s development process and qualified projects. McGuire Sponsel professionals then analyzed the client’s extensive project list and time-tracking data to calculate the company’s qualified research expenditures, which totaled above $7.8M over the four-year span. This generated over $680k in federal credits and $122k in state credits, which greatly assisted in offsetting the built-in gains tax.
McGuire Sponsel conducted a four-year R&D study for an architecture firm specializing in green building design. McGuire Sponsel conducted on-site interviews with the architects and designers to determine the firm’s qualified projects and then analyzed the company’s time-tracking data to determine the percentage of time each employee worked on qualified projects for each study year. This process generated $125k in federal credits to the company.