Mechanical, Electrical, and Plumbing (MEP) Research & Development Tax Credit Study

The R&D tax credit (officially “Credit for Increasing Research Activities”) is a dollar-for-dollar reduction to your tax liability and can amount to large savings, not just this year, but retroactively as well. Despite being a huge benefit to Mechanical Electrical and Plumbing (MEP) contractors around the country, the credit it is often overlooked by both big and small companies. From pre-bid meetings and concept development to completing the final design and fabrication, there are qualified activities throughout the MEP design and development process.

The Calvetti Ferguson R&D tax credit specialists stay current with relevant IRS whitepapers, regulations, and case law so that your study is well-supported and accurate. This accounting and legal knowledge coupled with extensive experience working with mechanical, electrical, plumbing, engineering, manufacturing, and product development companies gives Calvetti Ferguson the expertise required to assist any MEP company with their R&D credit claim.

The internal revenue code, section 41, outlines the requirements for the R&D credit, however, the high-level requirements for an activity to qualify can be summarized by the “four-part test” as explained in the right column.

If your activities satisfy this four-part test, the associated wages, supply costs, and/or third-party contractor expenses could qualify towards the tax credit. We often see the credit amount to 10% of those qualified expenses.

Qualified activities example:

If a CAD designer ($230,000 in 2019 wages) spent the entirety of 2019 evaluating and designing new or improved MEP systems through the use of AutoCAD software to achieve the reliability, performance, functionality and quality required to meet project specifications, the tax credit for their development efforts could amount to $23,000.

 

All employees involved in the development efforts associated with the development of new or improved MEP systems are eligible for the credit. From meetings with Customers to discuss the specifications and requirements of their product to testing the materials identified in the design, a variety of activities and expenses associated with the development efforts can be taken via the R&D tax credit.

While the scenario highlights the benefit attributable to the activities of one employee, an R&D study evaluates the entire company’s operations, often resulting in hundreds of thousands in tax-reducing benefits. Our study process is unobtrusive and thorough to ensure you get the credit you deserve, while always staying within the letter of the law.