DST Methodology:
DST worked towards achieving the following goals:
- increase reach into several departments who were directly engaged in qualified activities or supporting the activities,
- discover if a change in calculation method could be achieved through record keeping, documentation, and financials,
- compile a strong technical study filled with contemporaneous documentation, and engineering facts.
DST conducted site visit tours and multiple conference calls with the various departments and was successfully able to engage additional employees and verify that they were spending time on qualified research activities. In addition, DST was able to ascertain that these individuals had ample contemporaneous documentation to support their level of activity. In some cases, the qualified business component was outside of the engineering group’s scope. This led to increased QREs to be picked up for purposes of the credit computation.
During the assessment phase, DST discovered that the facts of the taxpayer were aligned with the possibility of changing their selected calculation method. During the course of conducting the study, it was confirmed that the nature of financial and technical record-keeping was in great shape. DST worked with the technical subject matter experts (SMEs) and the tax department, to obtain and review tax returns, financial records, patents, and laboratory notebooks (signed and dated). Technical interviews with engineers allowed for credible testimony to be included as evidence, linking the facts to the records. DST was able to build a strong base period and establish and substantiate a strong nexus between the QRAs and QREs from the base period. This detailed effort builds the foundation for a very advantageous credit methodology for years to come.
The final deliverable was science and engineering-based, incorporating strong contemporaneous documentation to illustrate a strong nexus of QRAs and the required 4-Part Test. This methodology is a strong starting point for future years and allows for increased compliance and efficient interactions with the various departments.
