A lot of AEC firms might think they won’t qualify for the incentive, but with the increasing complexity of design, they should rethink the issue.
Are you looking to be more competitive in an ever-changing global economy? Are you being asked to develop and improve designs and processes to be more forward thinking? Are you finding that the cost of this constant development and improvement is becoming more costly?
Many AEC firms don’t realize it, but the complexity of modern structures often requires a great deal of innovation, design, and development – efforts that may qualify a firm for significant research and development tax incentives. If an AEC firm expends time and effort in the design phase of projects and processes, then they are in a great position to claim the R&D credit. A firm does not have to be operating a laboratory to qualify for the credits as defined by the Internal Revenue Code. The following are examples of activities that AEC firms provide that can qualify for the credit:
- Architectural activities. Design activities in connection with energy efficiency, site orientation, structural and functional features. These include commercial office buildings, educational facilities, hospitals, correctional facilities, industrial facilities, airports, stadiums, and other similar facilities. Activities that don’t usually qualify are feasibility studies, project budgeting, and construction and project management.
- Civil engineering. Engineering and design activities in connection with road and bridge design, water and wastewater treatment facilities, foundations and earthwork, retaining walls and structures, site development, and infrastructure will qualify. Services relating to surveying, soil and materials testing, traffic engineering, subsurface and landscape architecture typically do not qualify.
- Environmental engineering. Design activities in connection with Brownfields redevelopment, remediation design, solid waste system design, and drainage system design will qualify. Site assessments and investigation, permitting, and regulatory compliance usually do not qualify.
- Structural and MEP engineering. Building superstructure design, foundation, HVAC, electrical systems, and pipe system designs will usually qualify. Forensic engineering, permitting, construction management, and feasibility studies usually do not qualify.
The federal R&D tax credit can be an impactful monetary incentive for many AEC firms. The professionals at Somerset CPAs have been able to obtain millions of dollars in credits for their clients.
Jason Bainter, CPA, CGMA, MBA, CDA, is a manager at Somerset CPAs and Advisors. He can be reached at firstname.lastname@example.org.Subscribe to the electronic version of The Zweig Letter for free.