When it comes to engineering firms, the term “R&D credit” can be a misleading name.
Many engineering firms don’t realize that the design and development activities of creating structural, mechanical, and electrical systems can be considered qualifying activity to earn the R&D tax credit. It’s generally not a problem for these companies to show they meet the four-part test for a project to qualify because they don’t need to be developing revolutionary new solutions – there only needs to be technical uncertainty regarding the appropriate design being developed, and a process of evaluating the alternative, competing design options. What’s more, higher salaries paid to engineers, designers, drafters, and other technical employees can result in a potentially large credit for the firms that are assuming the economic risk for the work they do. Tri-Merit can help substantiate these claims and get the firm the return they deserve.
Examples of qualifying activities for engineering firms seeking the R&D credit may include:
- The design and development of innovative new or improved infrastructure projects such as bridge structures, and light-rail systems
- The design and development of innovative or unique waste-water treatment facilities, pump stations, or other water supply facilities
- Drainage design, structural design, and other ancillary engineering design and development efforts
- GIS and other software development activities
- The design and development of SCADA and other control or management systems
- Modeling and simulation of new or improved designs for testing and evaluation purposes
- Computer-aided design (CAD) and computer-aided engineering (CAE) activities
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