Best Practices: How do we identify potential Qualifying Contract Research costs?

MASSIE says:

A good starting point to identify potentially qualifying contract research is the transaction detail from the general ledger for the relevant R&D cost centers.

Additionally, operations and R&D leaders will know the specifics about the vendors they use for research, since it comes from their budgets. The best place to start is by asking them questions:

  • Does your team use any outside vendors for design, software development, creating prototypes, engineering services, or testing?
  • Where are the vendors performing the work? Specifically, in which country and state?
    • Research performed outside the United States does not qualify for the US R&D tax credit.
    • For state R&D tax credit purposes, the activities should be sourced to the state in which the activities are performed.
  • Are vendor costs being captured by project?
  • Are your contractors tracking their time in your time reporting system?
  • Are the contractors paid hourly or on a fixed-fee basis?
  • Who can provide copies of the Master Service Agreements and Statements of Work to further determine if the contract research costs would be eligible for the R&D credit?

Please contact the MASSIE team if you want to discuss this topic further or require assistance with your calculations.


Disclaimer: The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation.

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