No Adjustment: A Rare R&D Examination Outcome—and the Work Behind It
How DST’s multidisciplinary team helped sustain a multimillion-dollar credit through over a year of IRS scrutiny.
For a Tax Director responsible for a substantial R&D credit, a formal no adjustment examination result is worth a closer look.
DST Advisory Group recently supported a large U.S. manufacturer through an IRS Large Business & International examination of its 2023 research credit. After approximately 18 months, multiple Information Document Requests, and an IRS engineering site visit, the examination concluded with no adjustment to qualified research expenses and no reduction to the multimillion-dollar federal credit.
In today’s environment, an outcome like this is exceptionally rare—particularly for a claim of this size subjected to sustained scrutiny.
What made the difference? Preparation that began during the study, supported throughout the examination by DST’s multidisciplinary group of Engineers, Tax Professionals, and former IRS personnel.
Strong audit defense starts before the first IDR
During the original study, DST identified and documented more than 220 business components. Our Tax Engineers developed the four-part-test analyses and assessed whether the supporting records substantiated the activities claimed.
That work went beyond collecting documents. The team understood the engineering challenges, evaluated the evidence, and identified where further explanation or support was needed.
When the examination began, DST had a foundation it could return to as questions deepened. The claim’s defense was built into its preparation.
AI & Technology helps. Experienced judgment matters.
Software can store documents. AI can help organize information and assist with preliminary review. Neither independently replaces the engineering understanding and tax judgment needed to assess whether the records support a business component’s qualification.
DST’s Tax Engineers personally reviewed the documentation collected during the study and evaluated its support for the four-part test.
For tax leaders, that distinction matters: accessible records are useful; evidence assessed by experienced professionals is what gives those records value in an examination.
One team connected the technical and financial evidence
Throughout the examination, DST’s team (including Tax Engineers, Tax Professionals, and former IRS agents) worked together to answer the IDRs.
Responses combined the taxpayer’s facts with relevant regulations and case law, clearly connecting the evidence to the basis for the claim.
When questions reached detailed cost accounting matters, DST’s Tax Associates and cost accounting specialists worked closely with the taxpayer’s accounting and tax teams. Their contribution helped explain the financial records and establish the nexus between qualified research activities and qualified research expenses.
The examination required technical knowledge, accounting expertise, and an understanding of how the IRS evaluates a claim. DST brought those capabilities together within one coordinated team.
Prepared people and team continuity made a difference
DST personally prepared the taxpayer’s subject matter experts through meetings and training calls before their IRS interviews. The team reviewed supporting records, explained the examination process, and helped the engineers communicate their historical development work clearly and accurately.
The taxpayer also benefited from continuity. The same core DST team that prepared the study remained involved throughout the examination, with no turnover.
That stability preserved project knowledge, maintained consistency across responses, and allowed the taxpayer’s personnel to work with advisers who already understood their business.
What would this level of scrutiny mean for your claim?
Approximately 18 months of examination ended with the claimed research credit fully sustained and no adjustment.
This exceptional result demonstrates the value of a carefully prepared study and a stable, multidisciplinary team capable of supporting it through detailed review.
For Tax Directors, it raises an important question: how well would your current study—and the team behind it—hold up under sustained IRS scrutiny?
Arrange a call with DST to learn how we supported this rare no adjustment outcome, and how our Engineers, Tax Professionals, and former IRS agents can help strengthen your R&D credit claim and support your team through examination.