Don't Overlook R&D Tax Credit
Posted 1-20-2012 | By Gloria McDonnell | Download Article
The Research and Development (R&D) Tax Credit is often mistaken as only a manufacturing industry credit - that is not the case. Architects; mechanical and electrical contractors; and environmental, structural and civil engineers may benefit as well. Many activities and innovations related to the design and development of systems, structures and functions may qualify for the R&D tax credit.
The R&D tax credit is a direct reduction of a company's tax liability. The credit reduces corporate tax for C-Corporations, or shareholders/partners' tax for S-Corporations or partnerships. Minnesota recently expanded its R&D tax credit so it is now available to C-Corporations and flow-through entities. Minnesota's R&D credit is also refundable, so any credit in excess of a taxpayer's Minnesota tax liability can be refunded to the taxpayer. Companies can claim credits for up to three years in the past.
Companies often think only "new" products qualify for the tax credit, however a new process, technique or formula also qualifies. If a company develops a new product or process, or improves an existing product or process, the R&D credit may apply. The product or process does not need to be new to the industry but must simply be new to the taxpayer.
Below are a few examples of qualifying activities for businesses in the contracting, engineering or architecture industries:
- Design for LEED/Green Initiatives
- LEED certification
- Improving acoustical qualities of structure
- Developing alternative water flow / plumbing systems
- Developing alternative electricity conduction systems
- Developing or improving lighting within a structure
- Improving or developing alternative ventilation for a structure
- Improving or determining alternative heating and cooling systems
- Determining alternative structural design
- Designing building shape and form
- Building Information Modeling
- HVAC design
- Mechanical system design and testing
- Structure and facility design for constructability
- Value engineering
To learn more about the R&D tax credit opportunities that may be available to you, please contact Gloria McDonnell, CPA, at gmcdonnell@hlbtr.com or 651-407-5829.