The research and development (R&D) tax credit, once a boon only for companies developing the latest and greatest technologies in their respective industries, has greatly expanded to include a wide range of activities for many different types of engineering firms. Civil, mechanical, and structural engineering firms within the construction industry are beginning to evaluate the R&D tax credit to reduce tax liability and free up additional capital to remain competitive in an increasingly competitive marketplace.

Engineering firms that are in a good position to take the R&D tax credit typically work on a diverse set of projects where project designs are not recycled or reused. It’s very common for engineering firms’ clients to engage them on projects that require unique designs or solutions, otherwise there would be no requirement for them to work on the project.

Additionally, while performing work for a project, the firm must encounter technical uncertainty as to the capability, method, or final design of the project. These technical uncertainties often reveal themselves in the form of project challenges that require answers to the following questions:

  • Can efficient drainage be achieved given the unique site conditions?
  • What structural design would be most effective with the project soil profile?
  • What HVAC design can increase energy efficiency with a building?
  • Which materials would increase the quality or durability of a designed product?

How engineering firms overcome technical uncertainties typically leads to activities qualified for the R&D tax credit. To resolve the technical uncertainties, the firm must conduct a process that is designed to evaluate one or more alternatives which could include project modeling, simulation, or a systematic process of trial and error. The time engineers, their support staff, and management focus on resolving these challenges is key to calculating tax credit figures.

Contact Parachor for a consultation regarding the R&D tax credit. Through a brief phone conversation, our consultants analyze your business activities and calculate a credit estimate to determine if the R&D tax credit makes sense for your company.