R&D & Architecture 02/06/20

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In today’s development climate as architects are striving to create new, interesting, and environmentally conscious buildings, many firms find themselves as hotbeds of R&D. Also given the typical firm’s practices surrounding documentation and tracking, claiming the R&D tax credit for this work could be relatively painless. Leyton has worked with countless architects over the past several years to save millions utilizing the R&D Tax credit benefit. Through this experience, Leyton has compiled a few of the most common questions from architectural and design firms across the globe.

I’m an architect, where’s my Research & Development?

Most architects do not think that their work is qualified as research and development, but each project presents new challenges and the opportunity to create a new design, and that is R&D. Qualified research is defined as an activity or project undertaken by a taxpayer. The IRS uses a 4 part test to qualify activities as R&D; permitted purpose, elimination of uncertainty, the process of experimentation and finally technological in nature. So how does an architectural firm meet these…?

Permitted Purpose: Enhance a design by using specific materials, achieving a novel building design or developing a new construction technique.

Elimination of Uncertainty: the client may have a very specific design they need built that can be hard to achieve, the structure being designed may be in a live environment (cities, inhabited building) close to water or on uneven terrain forcing new design techniques to be created. The design itself can bring technical challenges for the structure of the building that have to be tackled during the project.

Process of Experimentation: in order to eliminate uncertainty the architect must evaluate several different alternatives of the same design to achieve the desired outcome.

Technological in Nature: the process to achieve your outcome must be scientific in nature; architects meet this test with their use of engineering principles – e.g. structural engineering, mechanical engineering, etc. - in the design process.  

How much money can I expect to get back if I claim the R&D Credit?

Companies can expect to receive around 10-15% of their qualifying R&D spend back as a tax credit. This will arrive in the form of a tax refund, corporate tax reduction or a payroll tax reduction. 

I do hundreds of projects per year, do they all have to be evaluated?

Who’s got time for that? Not every project has to be evaluated and a sampling methodology can be applied. Leyton’s architecture team will look at a sample of projects and bring in a statistician to help extrapolate the R&D activities across all projects and capture the associated costs. 

Can I build this credit into my business plan?

Leyton encourages that you do. The R&D Tax Credit is permanent meaning this credit will offset your income tax liability year over year, and you can carry it forward for 20 years. When working with Leyton we promote real time data collection so no project goes overlooked and you are maximizing your credit.   

My firm is a partnership, will I still be able to benefit from this credit?

Absolutely! The credit will flow through according to the percentage split in your partnership. 

How do I get the R&D Tax Credit for my firm?

Reach out to Maggie at Leytonmcrowley@leyton.com or call 617-712-6759

Contributor Bio

Leyton

The construction, design and development industry is continually innovating, yet it is massively under-claiming a lucrative tax incentive – The research and development R&D Tax Credit.

Leyton, the leading R&D Tax Credit Consulting firm for this industry, maximizes the benefit available to this sector. Every year, we help thousands of clients globally to improve their business performance through R&D tax credits and government funding.

Our industry-specific team of highly experienced tax attorneys, engineers and architects provide innovative and sustainable strategies to save our clients’ time and generate a tax benefit. This is achieved by adapting to our clients’ environment and timeline, making Leyton’s service minimally disruptive and highly beneficial. We follow a clear, proven methodology built on tested know-how and in full compliance with current legislation.

Leyton has more than 9,000 clients globally, served from 25 offices worldwide, with a range of companies from start-ups to multi-national organizations.

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