Case Study: Civil Engineering Firm

Company Profile

• Industry: Civil Engineering
• Location: California
• Revenue: $50 million
• Employees: 200 (engineers, project managers, field personnel, designers)
• Projects: Bridges, roadways, water treatment facilities, environmental remediation

Background

The company, known for its innovative approaches, regularly invests in research and development (R&D) to improve design, construction methods, and environmental impact. While aware of the R&D tax credit, they did not understand how their activities could qualify.

R&D Tax Credit Engagement

The company engaged Acena Consulting to perform a comprehensive assessment including a qualitative assessment of their ongoing projects, quantitative analysis and calculation of their qualifying expenses, and the required documentation to support their federal and California research tax credit.

Results

The study identified numerous qualifying R&D activities across project types:

• Bridge Design: Development of new structural designs for earthquake resistance, material optimization, and long-span capabilities.
• Roadway Construction: Exploration of innovative paving materials for increased durability and reduced environmental impact. Additional design iterations evaluated several alignments to maximize safety, flood control, construction requirements, and underlying geological complications. 
• Water Treatment: Research into novel filtration processes, energy-efficient pumping systems, and advanced water quality monitoring.
• Environmental Remediation: Development of remediation techniques for contaminated soil and groundwater, utilizing specialized microorganisms or chemical processes.

Financial Impact

• Qualified Research Expenditures (QREs): $6.5 million (approx.)
• Estimated Federal R&D Tax Credit: $500,000
• Estimated California R&D Tax Credit: $450,000

Outcome

The company secured substantial federal and state R&D tax credits. These credits delivered:

• Reduced Tax Liability: A significant offset of income tax obligations.
• Reinvested Funds: The credits fund further research into sustainable materials, advanced design tools, and environmental monitoring technology.

Key Takeaways

• Civil Engineering R&D: This field is ripe with eligible activities, often overlooked due to lack of awareness.
• Comprehensive Assessment: In-depth analysis is required to identify and document qualifying R&D projects.
• Strategic Investment: R&D tax credits can fuel innovation, giving engineering firms a competitive edge.

Disclaimer: This case study is illustrative. The R&D tax credit is complex and depends on the specific activities, expenses, and tax situation of each company. Always consult a tax professional.