Company Profile

• Industry: Mechanical Engineering
• Location: California
• Annual Revenue: $150 million
• Qualifying R&D Expenses: $11.7 million
• Federal and State R&D Tax Credits: $1.2 million

Challenges

The mechanical engineering company faced the following challenges:

• Complex R&D Activities: Their R&D processes involved intricate design, simulation, prototyping, and testing phases, making it challenging to precisely identify and record qualifying expenses.
• Competition: The need for continuous innovation to stay ahead of fierce market competition put pressure on their R&D activities.
• Lack of In-House R&D Expertise: The company needed expert guidance to navigate the complexities of R&D tax credit regulations and to maximize their claim.

Qualifying R&D Activities

The company engaged in a wide range of qualifying R&D activities, including:

• New Product Development: Designing and engineering innovative mechanical systems and components with enhanced functionality and improved efficiencies.
• Simulation and Modeling: Employing advanced computer simulations to predict and analyze the behavior of mechanical systems under various operating conditions.

R&D Tax Credit Solution

The mechanical engineering company enlisted the help of Acena Consulting. We performed the following:

• In-Depth Analysis: A thorough evaluation of the company's R&D projects to pinpoint activities and expenses eligible for the tax credit within the framework of the IRS four-part test.
• Documentation: Meticulous gathering and organization of supporting documentation, including payroll records, design documents, technical reports, and project notes.
• Calculation and Claim: Preparation of detailed technical narratives and calculations to substantiate the R&D tax credit claim on both federal and state tax returns.

Results

• The meticulous efforts resulted in documenting $11.7 million in qualifying expenses.
• The company successfully secured a total of $1.2 million in federal and state R&D tax credits.
• These significant tax savings are being reinvested into furthering R&D initiatives, fueling innovation, and enhancing competitiveness.

Key Takeaways

• R&D Incentives are Significant: Mechanical engineering companies stand to benefit 
  greatly from the R&D tax credit. Its substantial cash savings can be a game-changer within a highly competitive landscape.
• Professional Assistance is Invaluable: Seeking specialized consulting services helps companies maximize their R&D credit claims while ensuring meticulous compliance with intricate regulations.