Case Study

International Headquarters - No Previous R&D Claims - Dozens of Locations

Client Background: 

A $2B international company with over 40 locations across the United States had not claimed any Research Tax Credits (RTC) in the past due to a number of factors. Some were tax related – they were in losses, and had gone through several mergers and acquisitions which resulted in utilization issues. More importantly, this company’s main R&D group and formulations group was based in Europe. Given their fragmented structure in the United States, their tax department was not readily aware of any domestic-based specific Engineering or Research departments.  

DST provided orientation and knowledge about what could qualify as research activities under Section 41. We were eager to demonstrate how the taxpayers’ facts were aligned with the regulations and a substantial RTC could be recognized for multiple years. 

Client Benefit:

DST offered to conduct a detailed assessment to provide an accurate benefit range. During this process, multiple conference calls were held with various divisions and technical personnel. Specifically, DST conducted 8 technical scope out calls, reviewed over 6,000 employee job titles, and evaluated $140M of tracked project costs.  

The proposal included a credible description of the taxpayers’ facts and the areas of qualifying activities, an estimate of qualified research expenses (QREs), as well as the federal credit benefit range for the years under scope. During this assessment phase, DST was also able to propose a detailed workplan and timeline expectation, including estimated hours for both DST and the taxpayers’ SMEs.  The workplan was critical in showing the tax department that the vast majority of the effort was on DST’s side, and that the time required from the various departments would be minimal and efficient. 

The proposal, workplan, estimated benefit range, timeline and any utilization considerations were all presented to the client.  Although the tax department was involved in the assessment at each stage, the final presentation allowed for a deliverable to be reviewed and compared with the other competitors’ bids. 

DST Methodology:

The client’s tax department ultimately opted to engage DST for the multi-year study because our level of accuracy, technical credibility, detailed timeline and workplan, set expectations and unmatched level of service and communication throughout the assessment stage.  The client stated that they felt confident that the study would be done with the same level of effort, if not more.  A detailed milestone workplan was not presented by any of the competing bids, and in some cases, the competitors proposed a significant fee to conduct an assessment like the one DST provided at no-charge. 

The taxpayer felt fully engaged in the process, which was achieved by DST’s open communication at each stage of the assessment. This encouraged the tax team to be invested in the investigation and the outcome. 

The final credit amount was within 5% of DST’s original estimate. Site visits to over 15 individual facilities were conducted within a 3-month time period, with cooperation and efficient interaction experienced at each site.  DST interviewed over 200 SMEs and collected thousands of contemporaneous documentation.  The level of SME engagement the following year was even higher than the first year.  The tax department was extremely pleased with the level of detail in both the calculation model and the full technical study.

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