Claiming Research and Development Tax Credits for Construction & MEP

Typically, a construction project has different stages, and activities relating to research are most prevalent during the early stages but this can also occur in the later stage as well.

Even though in the field of Architecture, Engineering, and Construction or AEC there are already a lot of R&D Tax credits that were claimed that are directly attributable to engineering and design activities, construction firms can claim the credit for a wide range of activities they perform on a day-to-day basis in connection with new building projects. Companies in the Mechanical, Electrical, and Plumbing (MEP) engineering field are also eligible, even if they are simply working on certain systems as part of a broader building construction project.

However, there is technical uncertainty, which is symptomatic of research efforts in all engineering trades, particularly in the design of unique systems for both new as well as existing buildings. Design reviews for constructability, the creation of innovative construction methods, the exploration of new raw materials, in addition to alternative evaluations that are carried out continually during the life of building projects, may all be qualified.

The costs connected with employing outside consultants to execute these activities are frequently included in qualified research expenses (QREs), in addition to the costs associated with internal labor.

Typically, a construction project has different stages, and activities relating to research are most prevalent during the early stages but this can also occur in the later stage as well. Below are the stages of construction:

1. Estimating and bidding
2. Design
3. Development and documentation
4. Construction
5. Completion

Qualified Research Activities (QRAs) for General Construction
Estimation of costs based on architectural or engineering concepts
Green initiatives and LEED
Evaluation of engineering and construction procedures to reduce construction time or increase overall performance and dependability.
Process development for prefabrication
Creation of one-of-a-kind material transfer systems for project sites (e.g. crane design)
Design and installation of auxiliary support structures for ongoing work
Validation and testing of novel mechanical systems to eliminate technical uncertainties
Modeling activities through BIM, AutoCAD, and Revit
Mechanical, Electrical & Plumbing (MEP) Qualified Research Activities or QRAs
Designing and developing HC
HVAC system design and development for new or existing structures
Analyze and calculate building requirements and loads about environmental systems
Inventive solutions for heat exchange, humidity management, and air filtering
Increased energy efficiency through system design
Conceptualization and implementation of novel active/passive cooling systems
Control and instrumentation system design and development
Programming to monitor data as well as temperature controls automatically
Electrical system design and development
Lighting design for architectural structures
Research and development of renewable energy systems
Research and development of backup energy storage technologies
Plumbing system design and development
Hydroponic system development
Improvement of water distribution infrastructure to accommodate increased consumption and load
Developing technologies for recycling greywater and blackwater
Refrigeration coolant supply system development
Development of systems for the distribution of pressurized air, water, and other substances
Designing and developing a system for fire prevention and sprinkler system
System design for specialized applications such as clean rooms as well as bio-containment laboratories
Case Study

Construction / MEP R&D Tax Credit Case Study

This full-service construction corporation serves clients in both the public and private sectors across the United States. Their people are extremely experienced in engineering, architecture, and construction, enabling them to propose novel methods for each project. Corporate, cultural, healthcare, education, life sciences, residential, retail, and hospitality are all service industries while HVAC Engineering, Electrical Engineering, Plumbing, Sanitary Engineering, and Fire/Life Safety Engineering are all core MEP services.

Qualifying for R&D Tax Credits

in Construction / MEP

Clients submitted requests for proposals (RFPs), and the company evaluated the delivery system, which could be Design-Bid-Build (DBB), Design-Build (DB), or Integrated Project Delivery (IPD), as well as the building plans and technical specifications, with an emphasis on public safety, reliability, and energy efficiency.

During the research and conceptual design phases, activities frequently included an examination of the building's energy requirements and utility systems. The business analyzed architectural schematics and addressed various mechanical, electrical, and plumbing (MEP) engineering system kinds and classes.

Building restorations sometimes exhibited a high degree of uncertainty, as building records and historical data may be inaccurate or lacking in information. This resulted in the development of designs geared at minimizing occupant disturbance through the use of temporary system connections.

The electrical needs, repositories of general-purpose, systems for electrical distribution, lighting systems, as well as any unique electrical provisions, are being assessed by the engineers. We established the load requirements for machinery, equipment, and receptacles and the position that is ideal for the electrical distribution system of the b

The ideal position of the building's electrical distribution system (EDS), main switchboard, and panelboards for power distribution to branch circuits was then determined. Tests were conducted before the circuits and feeders were installed.

The design of the plumbing system necessitated an examination of the building's occupancy and plumbing fixture needs to estimate the needed flow for all water supply fixtures. Engineers conducted extensive technical computations to determine pipe diameters depending on the flow rate and velocity constraints. Static and residual pressures were examined by the business. The available pressure was also determined using hydraulic engineering methods. The expected high and low pressures were critical for the plumbing systems to operate properly, and efforts were made to determine pressure losses inside the interior of the building's supply systems, including pipe friction, elevation loss, as well as equipment loss. To ensure the accuracy of load predictions, piping and instrumentation diagrams (P&ID) were assessed to document pipe lengths, diameters, flows, and materials.

A thorough examination of Heating, Ventilation, and Air Conditioning (HVAC) technology was undertaken, which included controls, distribution systems, installation, operation, including maintenance processes. This firm then analyzed the building's orientation, the number and kind of windows, the insulation levels, the space and process requirements, general performance indicators, load, and climatic circumstances. Engineers determined the surface area of each building feature associated with heat gains or losses, energy consumption, and airflow to develop new loads and equipment capacity needs.

Throughout the construction and MEP processes, software tools for developing 2D, 3D, mathematical, and analytical models were employed, including BIM and AutoCAD. These tools aid in determining if engineering calculations adhered to specified geometry, material, and installation constraints. Multiple design possibilities were evaluated using virtual testing against a variety of criteria. Data were gathered to assess failures, faults, and associated performance requirements.

After resolving all difficulties discovered during this step, construction documentation was generated. Oftentimes, design adjustments are necessary during construction. As the project neared conclusion, teams verified that all deliverables were completed according to specification. If required, a project may require commissioning and/or specific inspections and/or analysis and testing upon completion. Frequently, work was made more difficult by persistent public access difficulties and resulting safety concerns. As a result, several design and construction initiatives included the development of temporary solutions that fulfilled regulatory and safety criteria; some of these operations qualified for the R&D tax credit as well.

Results Speak For Themselves

Annually, this $115 million MEP firm receives around $440,000 in total federal and state tax benefits.

$440K

Total federal and state tax credits

$115M

MEP firm receives

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Hire US-based engineers, developers, or scientists.
Designs and develops product prototypes and/or software.
Performs experimentation and validation on products, manufacturing processes, and/or software.
None of the above.

This calculator has been developed utilizing data from a variety of studies conducted in the industries listed. This is only an approximation based on a variety of assumptions and should be treated as such.

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Please check back with us if you perform any product or software development-related work in the future.

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