The R&D tax credit is one of the most powerful tax incentives available to the construction industry. Unfortunately, many construction companies do not take advantage of the incentive because of the misconception that they do not qualify. There are many technical uncertainties involved when completing a construction project. The means and methods of construction used to overcome the uncertainty are the activities that qualify for the tax credit. Typically, these activities are performed by project managers, superintendents, foremen, engineers, estimators, and officers.

Construction projects that qualify for the tax credit often involve an assessment of the design against the site conditions to determine constructability. This analysis involves the consideration of alternative building materials, layouts, foundations, equipment, and routing of HVAC components in the attempt to improve the performance, quality, functionality, or reliability of the structure and reduce the cost of the endeavor. For example, the following activities could potentially qualify for the tax credit:

  • Analyzing site conditions to determine soil conditions, special constraints, conflicts with existing infrastructure, and configurations of building components;
  • Determining the most efficient method of complying with municipal, county, state, federal, and international building codes and regulations;
  • Performing the request for information (RFI) process to determine design intent; and
  • Conducting value engineering to reduce cost and increase performance.

These activities qualify for the credit because they are technological in nature and help resolve uncertainty inherent in each project. The focus of a tax credit study is what means and methods the construction firm is using to identify and overcome these technical uncertainties. Often, the process is centered around a systematic process of trial and error to identify and test alternative solutions.

Qualified activity can exist in many of the different phases of construction. If your firm employs any of the employees listed above or encounters any technical uncertainty during your projects, you may qualify for the R&D tax credit. Contact Parachor for additional information.