Architecture Firm Saves $163,000 with the R&D Tax Credit
Benefit Illustration for Architect Using R&D Tax Credit
A New York-based architecture firm was hired by the local board of education to design a new school that conformed to several specific requirements. For instance, the school would be built on a small parcel, so the firm had to evaluate new design techniques in order to maximize space for classrooms and other facilities. In addition, the firm had to comply with a municipal code that required the building to match the style of other buildings in the area.
The architecture firm worked on developing designs for the school building over a two-year period. After investing a significant amount of time and resources in the project, the firm sought strategies for offsetting the costs it had incurred. Having heard that it may be able to boost its bottom line through tax savings, the firm partnered with Capital Review Group (CRG) for assistance with identifying and claiming all available tax incentives.
As the architecture firm developed designs to meet the school’s requirements, it faced the following challenges:
- Determining how to create the optimal design for the building
- Evaluating and testing different design alternatives
- Identifying which materials to use in construction
- Reviewing records and preparing the necessary paperwork for claiming tax incentives
Solutions to Minimize Tax Through R&D Tax Credit
CRG guided the architecture firm through the complex process of maximizing tax savings. After reviewing records of the school building project, CRG determined that the firm may be eligible for the Research and Development (R&D) Tax Credit. Contrary to common misconceptions, this newly expanded credit routinely helps businesses in a variety of industries—including architecture—minimize their tax burdens.
To qualify for the R&D Credit, a taxpayer must:
- Intend to create a new or improved business component, including a product, process, or software
- Seek to eliminate uncertainty about the activity’s method, cost, process, or design
- Engage in a process of experimentation—which may range from informal trial and error to computational analysis, modeling, or testing—with the goal of resolving the uncertainties
- Rely on engineering, physics, computer science, or biology in performing the process of experimentation
CRG found that the architecture firm’s activities of developing designs, evaluating and testing different design alternatives, and considering other factors in the construction process fulfilled these four requirements. Therefore, CRG determined that the firm had performed qualified research and was eligible for the R&D Credit. CRG helped the firm prepare and file the required documentation for claiming the Credit, including payroll reports, state and federal tax returns, and project lists.
Based on the architecture firm’s qualifying R&D activities, the firm received $163,000 in tax savings through the R&D Credit between 2014 and 2015. These savings enabled the architecture firm to offset its costs from the school design project and improve net profits.
To discover tax savings opportunities for your projects contact Capital Review Group 877-666-5539.