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Digging Into the R&D Tax Credit

There is a huge amount of innovation in the construction, design and development industry! So why isn’t the industry claiming the research and development (R&D) Tax Credit?  While R&D is an activity typically associated with people in lab coats working in the biotech or defense industries, construction, design, and development is an industry that regularly undertakes activities that meet the R&D tax credit criteria. If you operate in this industry, employ engineers or perform technologically challenging activities, you need to investigate further, and keep reading!

The R&D Tax Credit was introduced into Federal US tax legislation in 1981, through the Economic Recovery Tax Act (ERTA), as an incentive to stimulate economic growth, create jobs, and improve technology and processes within the US.  In 2015 the credit was made permanent through the Protecting Americans from Tax Hikes (PATH) Act making the credit more business-friendly. It also allowed early-stage companies that have no tax liability to monetize the R&D credit earlier, by reducing their payroll tax liability. 

Within the construction industry, R&D is typically associated with the early stages of a project: Project concept, feasibility and design, and engineering. Essentially all technical uncertainty relating to a project is resolved prior to implementation. During these stages, solutions are proposed, modeled, trialed, tested, refined and continue through this process until a technically feasible solution is achieved. This trial and error process is very strong evidence that R&D activities are being performed.

Further to this, when there is a technical problem that occurs during a project, it often requires engineers and technical experts to resolve.  If you are trying to improve a process or product, trying to resolve a technical uncertainty to arrive at your solution or conducting a process that explores more than one potential solution, these can also qualify as R&D.

Whatever the driver, as long as a business component is trying to be improved and an experimentation process is undertaken, it is very likely you are undertaking R&D for tax purposes.  

It gets better– the first time you claim can result in multiple benefits!! The R&D Credit allows companies to claim for R&D related expenses in the current tax year, as well as retroactively for the past three (3) years, making the first time you claim four times more lucrative than a single year claim.  This credit allows businesses to reduce, or potentially eliminate income tax liability and provide cash refunds for overpaid tax liability when you claim retroactively.  

We have included a few examples of R&D activities below. Please note this is NOT an all-inclusive list for more information on ensuring you are claiming your MAX R&D tax credit contact the experts at Leyton. Leyton's team of engineers can help evaluate your projects to find any and all possible savings. Contact Maggie Crowley @ 617- 712-6759 or via email at mcrowley@leyton.com to get started. 

  • Construction in heavily restricted environments or in close proximity to key infrastructure. 

  • Innovative Temporary Work Solutions

  • Development of construction solutions that reduce construction time on-site.

  • Enhancement of BIM Environment to improve compatibilities and work-flow

  • Integration of a number of construction techniques to improve the quality or efficiency of the product or process.

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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