A $200M food equipment manufacturer with a history of claiming the Research Tax Credit (RTC) conducted an in-house study that included costs related to the Engineering department. The methodology used for the study was a costing/accounting basis, where the financials drove the inclusion of costs as qualified research expenses (QREs) alone.
The client agreed that they did not have any technical substantiation to support the annual credit claim, and were limited with respect to identifying departments outside of their core engineering team. Their Engineering department is comprised of 25 degreed engineers. DST conducted a detailed scope out assessment and determined that the taxpayer’s credit should be at least 35% higher than what was being claimed.