With New Tax Legislation, MCAA Contractors are Still Able to Claim R&D Tax Credits for BIM and Design

During the negotiation process of the Tax Cuts and Jobs Act at the end of 2017, the tax credit for R&D spending was temporarily removed. Fortunately, MCAA and others worked hard to ensure that the final bill re-inserted the language for the Research Tax Credit (“RTC”) and made changes that potentially increase the credit by more than 20%. With the RTC in place, contractors are able to continue to claim tax credits for qualifying BIM and design work. Unfortunately, many mechanical and plumbing contractors are unaware that they can even claim part of their design and bid work for these tax credits.

This article is intended to offer an overview of the Research Tax Credit for mechanical contracting personnel presented in general non-tax terms, wherever possible. The credit is, however, “tax based”, and as such, the inclusion of all of the applicable rules for every situation is not possible in a brief discussion.

In order to qualify for the research tax credit, activities must pass several tests. Although these tests are fairly specific, “qualifying activities” are generally much broader than many people think. When contractors hear the term “research” they often associate the term with scientists wearing white lab coats who are mixing chemicals in beakers. However, the Internal Revenue Code definition of research, as defined under IRC §41, is much broader than this traditional definition. As a result, many contractors may typically associate a large portion of their research activities as “routine” or “ordinary”, when in fact many of these activities might qualify for the Research Tax Credit.

To successfully build a structure, there may be experimentation or an iterative process on technical design issues and the installation process to properly build it. Although it might seem complicated if you are not claiming these credits, many contractors have been doing so for years. Before you begin, it is recommended that MCAA members contact their tax professionals to ensure that they are properly claiming the appropriate costs and activities under the RTC.

To begin, the Internal Revenue Code states that the activities “must be intended to discover information to eliminate technical uncertainty concerning the capability or method for developing or improving a product or process, or the appropriateness of the product design”. The Code also requires a “process of experimentation” involving the evaluation of alternatives, confirmation of hypotheses through trial and error, testing and/or modeling (this can include iterative steps in evaluating design alternatives, alpha/beta tests, pilot trials, scale-up testing, marketing/field tests directly associated with the R&D efforts, qualification Trials, etc.). Finally, wages, supplies, and contracts associated with qualifying activities qualify. The expenditures can also be either capital or expensed items.

Broadly, this includes any activity where there is some technical uncertainty involved in the development or improvement efforts- i.e., is there a technical problem that needs to be solved before you can effectively launch/implement this equipment design, software, product, process, prototype, etc.? Personnel who are directly engaged in resolving the technical issues will qualify and those individuals who have a support role will also qualify (i.e., performing alpha/beta/unit testing, collecting data or writing programs to collect data, supervision, technical project management, etc.)

Uncertainty exists if the information available to the contractor does not establish the capability or method for developing or improving the product/process or the appropriate design of the product/process. The required level of uncertainty may be established in instances where your work requires the resolution of technical issues when either designing the mechanical and plumbing system or working from a set of drawings that are incomplete or need modification to function.

The definition of activities that qualify for the credit is fairly broad and the driver for the effort can be to produce a new, better or more competitive product/process, to increase reliability/quality, to increase general product/process safety, to respond to new federal/state requirements, to reduce costs or increase speed/efficiency, etc. Furthermore, the success or the degree of technological advancement is not a factor.

Below is a representative sample of activities a taxpayer would typically perform, which often times are misclassified as “routine” or “non R&D” related:

  • Evolutionary advancements to the functionality, performance, reliability or quality of an existing product (Change orders for process improvement);
  • Development of prototypes or models to prove out conceptual ideas (Including BIM);
  • Experimentation to verify if an existing construction technique or process can support a new product with differing characteristics (Testing point loads);
  • Experimentation to verify if a new or existing construction technique or process can be implemented in a new or different geographic region, new environment, or different industry/application;
  • The design and development of custom equipment, tooling, molds and/or dies;
  • The development of microcode used within machinery or robotics;
  • The redesign of an existing construction or building process to improve efficiencies, increase safety or reduce operating expense;
  • Testing to prove out the use of new materials in existing products;
  • Plant and/or Process scale-up activities;
  • Qualifying “Bid and Proposal” efforts; and
  • The development of custom software that is either intended to be used internally or sold, leased or licensed to third parties as a commercial product offering.

However, simply because some items may be new, unique, customized or involve special problems does not mean that they will automatically qualify for a credit. For instance, there may be options or choices in regard the application of standard engineering techniques, but no uncertainty in regard to the resolution of a technical issue facing the project team. Qualifying activities that are intended to resolve technical uncertainties should also involve some iterative type of testing, experimentation, the consideration of alternatives, trial and error evaluations, prototyping, validation, etc.

Thus, although no qualifying activity might occur for most HVAC systems (even where custom designs are involved), technical uncertainty might arise on mechanical engineering and/or design efforts in instances where there are unusual requirements involving, for example: complex temperature, humidity, pressure, ambient air ratio range controls with differing protocols for numerous chambers/rooms; the need to design for particulate and/or chemical fume control/mitigation where the chemistry might require special construction materials; unusual space limitations, local regulations, cost mandates, etc.; instances where numerous alternative methodologies for technical solutions are necessary; development of technical alternatives to address repeated system failures; etc.

The PATH Act of 2015 made the Research Tax Credit permanent but also broadened the impact of the credit for many small to mid-sized businesses. Starting January 1, 2016, small businesses that meet certain criteria can also use the Research Tax Credit to offset the FICA employer portion of payroll tax, with a credit cap of $250,000 for each eligible year.

 

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Mike Foley is the Managing Partner at Foley & Smith, LLC, a firm specializes in Research Tax Credits.

Mike D’Allesandro is the Managing Director at Research Tax Credits, LLC

 

 

The Next Qualified Level Arc Flash Safety Training Webinars are February 15, 2018

Make sure your service techs have the up-to-date safety training they need to protect themselves from arc flash and electrical shock hazards while working on equipment pushing 480 volts or less. The session covers all applicable OSHA requirements, NFPA 70E provisions, best practices, and real-world accident information.

Take advantage of the MCAA/MSCA member discounted webinar prices. The next two webinars are being held on February 15, 2018. The first is from 7:00 a.m. to 9:00 a.m. Eastern Time, and the second is from 10:00 a.m. to Noon Eastern Time.

Pricing

# of trainees from

your company

$/person
1-5 $200/person
6-10 $175/person
11-25 $150/person
26-50 $100/person
51-100 $ 75/person
101+ Email for Pricing

 

Register for this date

If you can’t make it in February, the webinar will be taught again twice on March 15, 2018. Watch for the posting of those dates.

Questions? Contact Pete Chaney.

MSCA’s Popular Plumbing Service 101, Fifth Webinar is February 8th and Registration is Now Open!

This fifth webinar in the MSCA original series, Plumbing Service 101, Operations Part 1, will explore the key personnel and organizational structure required to establish, sell, and grow a viable plumbing services division.

There are many similarities between HVACR and plumbing operations. While some of a company’s existing resources can be shared, others are unique to plumbing. Failing to take these exclusive requirements into consideration can spell disaster. This webinar will explore the key personnel and organizational structure required to establish, sell, and grow a viable plumbing services division.

The webinar is scheduled for February 8th at 1:00 pm EST, sign up today!

Get Profitable Results and Improve Performance with MSCA’s Sales Basecamp!

Have you recently added new sales staff to your team? Could your current sales team members benefit from taking a refresher course? If your answer is “Yes”, register them now for MSCA’s Sales Basecamp, February 5-6 to be held in Phoenix, AZ. Class size is limited and fills up fast so don’t miss out!

This popular, in-demand, two day program will provide your sales team member with the skills needed to build long-term customer relationships, efficiently and effectively prospect for results, understand the MSCA Sales Cycle, prepare for that first critical meeting and handle objections professionally during the proposal presentation.

Click on the buttons below to register or learn more!

Coming Soon – A New Way for Women Professionals to Connect at MCAA & MSCA

MCAA and MSCA are hard at work putting together a new and free benefit of membership for the women executives and employees of our member companies. Our new forum will enable women in the mechanical industry to further enrich their careers through networking, educational, mentoring and career development opportunities beyond those already offered through membership in MCAA and MSCA. We’ll kick things off with a networking reception and special workshop at MCAA18. Keep an eye on mcaa.org for more information…coming soon!

Webinar Offers the Latest in Tech Trends

For the third consecutive year, MCAA has sponsored the JBKnowledge Construction Technology Report, offering MCAA members salient insight on the technology habits of today’s contractors.  On Tuesday, January 30, James Benham, CEO of JBKnowledge will present a live webinar showcasing the reports findings and providing further insight to its data.

This webinar will be provided as a free benefit to MCAA member.  The report is already available for download in advance of the webinar.

Registration for Growing and Developing Service Supervisors is Now Open!

MSCA’s Growing and Developing Service Supervisors program, scheduled for April 19-20, 2018 and to be held in Brookfield, WI, is a two-day hands-on program that uses real world exercises and relatable video recorded role plays that engages participants. Your Service Supervisor will be able to easily incorporate the skills learned from this program into their everyday responsibilities.

Every participant who completes the program will receive a Certificate of Completion and a comprehensive workbook to use for day-to-day responsibilities in areas such as safety, operations, training, tools and vehicles. This valuable workbook contains more than 100 sample forms, procedures, checklists and reports that field supervisors use daily. Sign up for this program by clicking the button below.

Past MSCA Chair Dick Starr Featured in Contracting Business Magazine

The CB Interview: Dick Starr

Controls innovator and past MSCA chair, Dick Starr, reflects on his career in controls, the HVAC industry, his experience and service with MSCA and MCAA and shares his years of knowledge in this interview.

Dick recently sold his company, The Enterprise Corporation, that he purchased in 1977 to a colleague within his network but he will continue to be involved in its daily functioning.

Read the article by clicking the button below.

2018 Regional Training Course Catalog Now Available

The United Association Training Department is pleased to offer HVACR industry courses in an agreement with the following major HVACR manufacturers through the 2018 Regional Training System: Carrier Corporation, Daikin and Johnson Controls.

These classes are being offered at NO charge to attendees – registration fees will be covered by the ITF. Employers will be responsible for wages and all travel costs. Class size is limited and these classes fill up quickly. Priority is given to UA instructors.

Contact your local UA Training Coordinator to register through UA University. For course descriptions and requirements, please download the course catalog. You can find the courses described below beginning on page 12.

MSCA Connect DATELINE December 2017

Happy Holidays! All of us at MSCA wish you a very happy, healthy and prosperous hoiliday season!

Click and CONNECT with DATELINE, MSCA’s monthly newsletter! What you need to know to catch up on the latest news and information and all things – MSCA.

MCAA President Greg Fuller Tells You All About MCAA18 in Just 30 Seconds!

MCAA CEO John Gentille recently challenged MCAA president Greg Fuller to put together a compelling video that would convince everyone to go ALL IN at MCAA18 this March 25-29 at the beautiful JW Marriott Hill Country resort in San Antonio in only 30 seconds. See what you think! Online registration remains open through our MCAA18 website, and for you procrastinators, we’ve extended the early-bird cutoff a week, to January 12th!

 

MSCA CONNECT 2017 Featured in the NEWS (ACHRNews)!

MSCA CONNECT 2017 is featured in the current issue of the NEWS, the HVACR Contractor’s Weekly Newsmagazine. Under the title, “MSCA Connect – Where Everybody Knows a Trade”, the article is a well-written summary of our action-packed, education-filled, exciting and fun four-day conference at the Boca Raton Resort and Club in Boca Raton, Florida this past October!

Read the article by clicking the button below!

MSCA CONNECT 2017 Session on Planned HVAC Maintenance Featured in Contracting Business Magazine!

MSCA CONNECT 2017’s recent session on preventative maintenance is featured in Contracting Business Magazine’s latest article about how the value for preventive HVAC maintenance continues to be a popular topic at industry events.

The article highlights three of the industry’s best preventatice maintenance proponents: David Bavisotto, vice president, service with Illingworth-Kilgust Mechanical and past chair of MSCA board of managers; Steve Smith, senior vice president, ACCO Engineered Systems and treausurer of MSCA board of managers; and Jon Finch, vice president, training and recruiting, Milwaukee Tools.

Click the button below to read the article.

Explore the Latest from EVAPCO, Inc., Delta Faucet Company and More in MCAA’s Virtual Trade Show

MCAA’s Virtual Trade Show connects our contractor members with the members of MCAA’s Manufacturer/Supplier Council.

Participating companies highlight and link to new products, product lines, services, solutions or web pages of particular interest. Here are just a few of the recent additions:

EVAPCO, Inc. MCAA Virtual Trade ShowEVAPCO, Inc.
The new eco-Air Series of dry and adiabatic products provide a broad range of heat transfer solutions with minimal or no water use with V or flat coil configurations. These coolers and condensers offer great flexibility.

Learn More


Delta Faucet Company - MCAA Virtual Trade ShowDelta Faucet Company
Set apart from typical modern design by its divergence from cool, straight lines, the Tesla™ Bath Collection is an elegant, soft, contemporary solution for a modern space.

Learn More

Need Something Else?

Find many more smart solutions in MCAA’s Virtual Trade Show!

Visit the Virtual Trade Show

Speaking of Smart Solutions

Visit the Smart Solutions Case Studies area of our website to learn how other mechanical contractors found their win-win with cost-saving and productivity-enhancing applications from members of MCAA’s Manufacturer/Supplier Council.

This section of our website also includes tips and ideas to help your company save money and enhance your productivity. Don’t miss it!

VISIT SMART SOLUTIONS

Announcing MSCA Sales Institute Program Schedule for 2018!

Announcing the MSCA Sales Institute Program Schedule For 2018!
Registration is Now Open So Sign Up For Your Class Today!

January 29 – 30, 2018, Sales Leadership Symposium in Irvine, CA
February 5 – 6 , 2018, Sales Basecamp in Phoenix, AZ
April 15 – 19, 2018, Sales Masters Week 1 in Oak Brook, IL
May 7 – 8, 2018,  Sales Basecamp in Chicago, IL
November 4 – 9, 2018, Sales Masters Week 2  in Houston, TX

MSCA’s Sales Institute, an MSCA University program is the first and only focused training program specific to service sales in the HVACR industry. This program, unlike any other, provides a clear career path for growing and developing service sales professionals to ensure their success, enhance their value to the company, encourage retention and, ultimately, increase sales. Nowhere else does such a comprehensive educational offering exist that focuses on your needs.

Sign up using the links below:

Sales Leadership Symposium

Sales Basecamp

Sales Masters Week 1 Sales Masters Week 2

Find the Latest from MILWAUKEE TOOL, Mathey Dearman, Inc. and More in MCAA’s Virtual Trade Show

MCAA’s Virtual Trade Show connects our contractor members with the members of MCAA’s Manufacturer/Supplier Council.

Participating companies highlight and link to new products, product lines, services, solutions or web pages of particular interest. Here are just a few of the recent additions:

MILWAUKEE TOOL - MCAA Virtual Trade Show
MILWAUKEE TOOL

Milwaukee Tool revolutionizes tool transportation, organization, and storage for the trades with the new PACKOUT™ Modular Storage System. Designed to provide users with the ability to interchange and interlock a wide assortment of heavy duty tool boxes, organizers, and storage totes in multiple different configurations, PACKOUT™ is the most versatile and durable modular storage system in the industry.

Learn More


Mathey Dearman, Inc. - MCAA Virtual Trade ShowMathey Dearman, Inc.
Mathey Dearman’s new groundbreaking saddle machines place CNC Pipe Cutting accuracy into the hands of field welders giving them an unmatched level of skill, precision and productivity. See this and all of the other quality, USA made Mathey Dearman products today at www.mathey.com.

Learn More

Need Something Else?

Find many more smart solutions in MCAA’s Virtual Trade Show!

Visit the Virtual Trade Show

Speaking of Smart Solutions

Visit the Smart Solutions Case Studies area of our website to learn how other mechanical contractors found their win-win with cost-saving and productivity-enhancing applications from members of MCAA’s Manufacturer/Supplier Council.

This section of our website also includes tips and ideas to help your company save money and enhance your productivity. Don’t miss it!

VISIT SMART SOLUTIONS

Workplace Violence Prevention and Protection Safety Training Video & Materials Now Available

MCAA’s new worker safety training video, Workplace Violence Prevention and Protection, and its accompanying materials are now available to members. The video teaches viewers to identify warning signs and take appropriate action to prevent workplace violence. It also shows viewers how to protect themselves and others if they find themselves in an active workplace violence situation.

Download or play the video

There’s More…

Accompanying materials are also available to assist you in highlighting key training points, documenting worker training and confirming that workers understand the training concepts:

Highlight key training points

Download the Pocket Guide

Document worker training

Download the Documentation Sheet

Confirm that workers understand the training concepts

Download the Test

Download the Test Answer Key

Want Even More Safety Resources?

MCAA has you covered, with a full range of resources to help you protect your workers from injury and comply with applicable safety regulations. Here’s where to find them:

On our Direct Links to MCAA & MSCA Safety Resources page, where they’re listed by category with links.

Go there now

In the Resource Center, where you can use the blue Refine Your Search bar to pinpoint exactly what you’re looking for.

Visit the Resource Center

Have questions or need personal assistance?

Contact MCAA’s Pete Chaney.

Find the Latest from Sloan Valve Company, Mueller Industries, Inc. and More in MCAA’s Virtual Trade Show

MCAA’s Virtual Trade Show connects our contractor members with the members of MCAA’s Manufacturer/Supplier Council.

Participating companies highlight and link to new products, product lines, services, solutions or web pages of particular interest. Here are just a few of the recent additions:

Sloan Carbon Neutral ProductsSloan Valve Company
Sustainability in the Commercial Restroom – Sloan now offers a series of carbon-free products to reduce environmental impact.

Learn More


Mueller Streamline PRS MCAA Virtual Trade Show
Mueller Industries, Inc.
Mueller Industries’ Streamline PRS press fittings are the trusted, quality solution to flameless copper joining.

Learn More

Need Something Else?

Find many more smart solutions in MCAA’s Virtual Trade Show!

Visit the Virtual Trade Show

Speaking of Smart Solutions

Visit the Smart Solutions Case Studies area of our website to learn how other mechanical contractors found their win-win with cost-saving and productivity-enhancing applications from members of MCAA’s Manufacturer/Supplier Council.

This section of our website also includes tips and ideas to help your company save money and enhance your productivity. Don’t miss it!

VISIT SMART SOLUTIONS

Find the Latest from Baltimore Aircoil Company, Inc., Parker Hannifin and More in MCAA’s Virtual Trade Show

MCAA’s Virtual Trade Show connects our contractor members with the members of MCAA’s Manufacturer/Supplier Council.

Participating companies highlight and link to new products, product lines, services, solutions or web pages of particular interest. Here are just a few of the recent additions:
Baltimore Aircoil Company, Inc. MCAA Virtual Trade Show
Baltimore Aircoil Company, Inc.

The ENDURADRIVE™ Fan System Retrofit Kit is a direct drive motor system that provides 100% reliability on transmission components and a 90% reduction in maintenance costs, all while providing an increase in energy savings by 10%.

Learn More

Parker Hannifin MCAA Virtual Trade Show
Parker Hannifin
Transair® is the original aluminium pipe work system for industrial fluids and your best solution for Compressed Air, Inert Gas and Vacuum applications.

Learn More

Need Something Else?

Find many more smart solutions in MCAA’s Virtual Trade Show!

Visit the Virtual Trade Show

Speaking of Smart Solutions

Visit the Smart Solutions Case Studies area of our website to learn how other mechanical contractors found their win-win with cost-saving and productivity-enhancing applications from members of MCAA’s Manufacturer/Supplier Council.

This section of our website also includes tips and ideas to help your company save money and enhance your productivity. Don’t miss it!

VISIT SMART SOLUTIONS

Emily Murphy Confirmed to Lead the U.S. General Services Administration

Emily Murphy, a former procurement policy consultant for the MCAA Government Affairs Committee and daughter of former MCAA President Jim Murphy and Mimi Murphy, was confirmed by the Senate as the new leader of the U.S. General Services Administration. The GSA is the lead civilian agency focusing on procurement policy and government operations.

Ms. Murphy’s confirmation hearing was held on October 18, 2017. She was introduced by Missouri Senator Claire McCaskill, the Ranking Democrat on the Senate Homeland Security and Governmental Affairs Committee.

Lawmakers on both sides of the aisle were supportive of Ms. Murphy’s appointment and exceptionally strong credentials for the position.

Watch the confirmation hearing