Project Summary
An engineering firm developing a custom vibration isolation platform for a semiconductor fabrication facility, where standard isolation mounts could not meet the sub-micron displacement tolerances required by lithography equipment, engaged CSSI to evaluate their R&D Tax Credit eligibility. CSSI’s engineering-based analysis delivered a Total State Credit of $264,587 and a Total Federal Credit of $384,354.
Project Overview
To qualify for the R&D Tax Credit, each activity must satisfy the IRS four-part test. CSSI’s analysis confirmed that the qualifying activities identified for this company met all four criteria:
- Business Component: Engineering structural isolation to meet precision manufacturing tolerances.
- Elimination of Uncertainty: Uncertainty existed around whether a passive isolation system could attenuate adjacent HVAC and process equipment frequencies without introducing resonance at the equipment’s operational range.
- Process of Experimentation: Engineers built finite element models, ran modal analysis to identify resonant frequencies, and iterated on bearing stiffness and damping materials until displacement targets were met under simulated operating loads.
- Technological in Nature: Grounded in structural dynamics, mechanical engineering, and materials science.
| Employee Wages | $9,351,987 |
| Supply and Contractor Costs | $0.00 |
| Total QRE’s | $4,158,122 |
| Total State Credit | $264,587 |
| Total Federal Credit | $384,354 |
Study Results
The analysis identified a total of $4,158,122 in Qualifying Research Expenses (QREs) for the tax year. Because the company’s R&D activities were performed entirely in-house, employee wages accounted for 100% of the QRE figure, $4,158,122 of $9,351,987 in total payroll qualified as research wages under IRC §41. No contractor or supply costs were identified. Based on those qualifying expenses, the study produced a federal R&D Tax Credit of $384,354 and a state R&D Tax Credit of $264,587, for a total tax credit benefit of $648,941.
Key Takeaways
- Engineering firms solving novel technical challenges for clients are often strong R&D Tax Credit candidates. Custom design, simulation, and iteration aimed at performance requirements that standard solutions can’t meet frequently satisfy the four-part test.
- In-house R&D can fully qualify on wages alone. This engagement produced over $4.1 million in QREs with no contractor or supply costs, proof that firms with strong internal engineering talent don’t need outside spend to generate a meaningful credit.
- Combining federal and state credits can significantly increase total benefit. Here, the state credit added $264,587 on top of $384,354 federal, for a total of $648,941.
- Documentation is what makes the credit defensible. Existing design records, simulation outputs, and iteration history supported each component of the four-part test, the foundation of CSSI’s engineering-based approach.
- Many firms performing this work have never claimed the credit. Engineering companies often assume custom client work doesn’t qualify, when in fact the iterative problem-solving inherent to advanced design is exactly what the credit was designed to incentivize.
Ready to Discover Your R&D Tax Credits Potential?
If your company is developing or improving products, formulas, or processes, you may be leaving significant tax credits on the table. CSSI’s engineering-based approach ensures every qualifying activity is identified, documented, and defensible, so you capture the full value of the work your team is already doing.
Request a Free Analysis today and find out what your business could qualify for.
