Is your architectural firm leveraging the research and development tax credit to minimize tax burden and drive cash flow profitability? If not, you may be missing out on potentially significant tax credits. First introduced in 1981 as a two-year incentive, the innovation tax credit's original legislation was more restrictive, generating the belief that it was a capital-infusing resource meant only for large pharmaceutical or technology companies.
Fortunately, the R&D tax credit has undergone numerous iterations in its almost 40-year history. In 2015, Congress passed the Protecting Americans from Tax Hikes (PATH) Act, essentially leveling the corporate playing field by provisioning R&D tax credits for qualifying small businesses looking to offset payroll and/or alternative minimum tax credits. Additionally, in its current version, the credit is no longer designated only for traditional lab-based research. Instead, the innovation tax credit extends to applied research techniques as well, encompassing vital operations performed to either create new products and processes or improve existing products and processes. As a result, the R&D tax credit offers extensive tax benefits to businesses of every size and in a wide range of industries, including architectural and engineering firms.
Qualifying R&D Activities: Is Your Architecture and Engineering Firm Eligible?
While every state has various rules, regulations, and requirements, current provisions in the federal tax code allow for over 10 billion dollars of R&D tax credits to be awarded to businesses every year. Unfortunately, many smaller enterprises still miss out on these deductions simply because they aren't aware that their operations qualify for the credit or are misinformed about the documentation needed to file their claims.
Does your architectural and engineering firm have operations that meet the innovation tax credit requirements? It's important to note that the credit is not applicable to research conducted to duplicate an already-existing product or performed after commercial production on an item or design. Your company may qualify if you:
- Develop new designs
- Improve existing designs
- Analyze alternative strategies and designs to achieve (or overcome) intricate building codes, site conditions, or customer requirements
- Evaluate new materials and designs that maximize a building's energy efficiency and/or meet LEED certification requirements
- Create master plans, schematic drawings, planning and elevation diagrams
- Innovate designs for new or improved roadways and bridges
- Design strategies for new or improved sewer or drainage systems
- Develop eco-friendly buildings
Let Acena Consulting Help You Determine Qualifying Activities
Of course, these are just a few of the many potentially qualifying operations performed by architectural and engineering firms. At Acena Consulting, we work with architectural and engineering firms across every specialty to ensure our partners optimize every relevant deduction and incentive. Contact us today to tell us about your business and hear more about our systematic approach to identifying eligible deductions and developing necessary R&D tax credit documentation.