R&D credit reduces one company's effective federal tax rate

Client description

A New England-based engineering firm with > 500 employees

Problem

The company’s management team was looking for ways in which to reduce the company’s overall income tax burden. Its market presence had been expanding and the company needed all available cash to fund rapid growth.

BerryDunn’s solution

The BerryDunn tax team:

1. Met with management to discuss the various types of engineering projects that the company had performed over the past several years
2. Researched the availability of the federal Research and Development (R&D) tax credit with respect to certain design projects
3. Introduced the client to a third-party provider of R&D tax credit studies for engineering and architecture firms
4. Quarterbacked a team consisting of BerryDunn advisors, the client, and the third-party provider to prepare the credit study and amended tax returns to claim three years of available credits.

Outcomes

The company was able to claim over $500,000 of tax credits as a result of the study. This reduced the company’s effective federal tax rate from 35% to 20% for the years of the study. The initial credit study provided the company a basis for the calculation of future R&D tax credits that will be claimed by the firm.