The Opportunity: Does Your R&D Tax Practice or Business Need Engineer Technical Services?
The Research and Development (R&D) Credit (IRC Section 41) has existed as a corporate tax benefit since 1981. It allows taxpayers an annual credit of up to 20% of their current qualified research expenditures.
How we differ.
InovativSolutions is a one of its kind firm employing engineers to help you realize benefit from this resource intensive and highly specialized process. Our full time specialists can take a global view of your organization’s structure to identify the areas of opportunity and level of R&D activity through an understanding of the Internal Revenue Code, IRS policy and procedure and extensive technical operational knowledge of specific industries. This kind of insight and capability is the hallmark of our valuable, efficient services.
Our approach can help your R&D practice or business effectively, quantify and communicate to the IRS your clients’ or business’ R&D activities. We can provide the experienced resources that know the law, understand the law, can interpret the law and demonstrate how it applies to technical and tax fact patterns then provide a technical edge to the documented deliverable that accountants, attorneys and engineers can readily comprehend. The final product delivers a permanent tax benefit that pays out in the form of present and future tax savings.
If your company:
- Has never conducted an R&D study;
- Is uncertain of what constitutes “qualifying research expenditures” (QRE’s);
- Is not claiming all eligible R&D credits;
- Does not have a sufficient infrastructure or resources to pursue an R&D credit claim;
- Has significantly increased expenditures for R&D over the last few years;
- Is currently under IRS audit for R&D credits claimed;
- Is a capital or technology-intensive industry;
- Are unsure or unaware of which “nontraditional” R&D activities are QRE’s;
then your organization could benefit from our engineering technical services for a thorough R&D analysis to minimize your tax exposure and ultimately enhance its competitive advantage in the marketplace.
Skilled engineers who consistently deliver high-quality products timely and maintain strong client relationships.
In order for an R&D analysis or tax credit study to be successful, it requires the cooperation of many people within the company, most of whom are not tax or financial personnel. In today’s business environments, product development efforts by cross-discipline teams are commonplace. These cross-functional product development efforts can involve input from several departments within the company such as:
· R&D Department
Customized approaches to deliver added value to the client.
In cooperation with individuals in such departments, we can provide these services in the following areas:
- Coordinate meetings and conduct interviews with engineers, scientists and other technical staff, tax department members and other appropriate personnel;
- Compute base period and credit year calculations;
- Preparation of written engineering technical reports summarizing positions taken and credit claimed and Information Document Requests (IDR’s);
- Organize and collate final deliverable;
- Determine quality and adequacy of documentation to support claimed credits;
- Identify traditional and nontraditional QRE’s;
- Identify and evaluate projects and departments within the clients’ organization that most likely qualify for the R&D tax credit;
- Identification of industry-specific R&D opportunity areas;
- Engineer technical marketing support and identification of cross-selling opportunities;
- Interpret IRC and regulatory law ambiguities;
- Expert witness testimony;
- Negotiate with IRS examining agents, IRS engineers, and Appeals officers.
Our full-time specialist(s)’ backgrounds include mechanical and petroleum engineer expertise and previous private industry and IRS experience as an Engineer Specialist(s). The research credit analysis is a facts-and-circumstances test and can vary from year to year accordingly. Thus this process cannot be automated. It requires the specialist to apply their experience and insight to decipher from fact patterns what is pertinent to your case. The specialists use this expertise to conduct the R&D tax credit analysis process as characterized by the following 4-stage service matrix.
Stage 1 – Preliminary Assessment (Preliminary Need Assessment)
The purpose of this stage is to provide an overview presentation of Internal Revenue Code (IRC) Section 41. Our specialists perform due diligence with the client to ascertain the scope of the R&D analysis activity and address potential issues such as AMT prior credit claims and NOL are investigated. Ultimately, we perform a high-level need assessment. Provided a full-scale study is warranted the sequence progresses to Stage 2 involvement.
Stage 2- Overview of Company’s Activities (Assessment of R&D Potential)
This stage entails a proposal meeting which focuses on a credit criteria presentation, any prior credit issues, an estimate of potential credit and other discretionary specifics. The investigation pursues data extraction, a base period calculations and a federal and state (if applicable) credit estimates
Stage 3 – Full Scale Study (Stage 2 assessment refinement and fieldwork)
This stage coordinates the logistics of the engagement including site visits, meeting scheduling, procurement of resources and the development of a cost identification and documentation concept. The fieldwork consists of a refinement of the cost identification and documentation methodology, interviews, documentation to corroborate the interviews, calculation of the credit and a final product deliverable. Post fieldwork activity meetings are conducted with the client to discuss the credit analysis findings and deliverables.
Stage 4 – Post Credit Claim Representation (IRS Audit Defense Support as requested by the client)
Stage 4 is an ongoing process designed to help the client to address any audit issues including Information Document Requests (IDR) responses, IRS policy and procedure, revenue ruling, case and tax law research and other items.
INDUSTRY SPECIFIC SERVICES PROVIDED
Well versed in various industries to help you realize success
Many taxpayers, misinterpret “R&D” as an activity exclusively associated with biotech and pharmaceutical type companies (the “white lab coat” myth).
However, the R&D tax credit incentive recognizes and encompasses practically all industries and includes “industrial R&D” in addition to the “traditional R&D” activity. However, in order to realize benefits from your specific trade or business we provide a keen understanding of the tax law, along with technical knowledge of your industry specific product(s) and manufacturing process(es) involved to identify where opportunity rich options exist and to present the most effective case.
Specific industry experience includes but is not limited to the following:
- Food Processing
- High Technology/Computer Products
- Petroleum (Exploration &Production)
- Petrochemical (Refineries)