Research & Development Tax Credits
A dollar-for-dollar credit against tax owed for work most companies think of simply as engineering, process improvement, or product development.
- Specialty tax and engineering since 2006
- $2.5 billion+ in client savings
- Typical value: Hundreds of millions generated nationally
What it is
What is the Research Credit
The Research and Development (R&D) tax credit, established under Section 41 of the Internal Revenue Code, is designed to encourage businesses to invest in innovation by offering a direct reduction in federal taxes for eligible research expenditures. Unlike a deduction, which lowers taxable income, a credit reduces the actual tax owed, making it particularly valuable for companies investing in new products, manufacturing, processes, software development, or formulas each year. The credit was made permanent by the PATH Act of 2015, providing stability for long-term R&D planning.
Only about 30% of US companies that qualify for the research credit actually claim it. The bigger the payroll, the bigger the credit. CORE has performed R&D credit studies nationally for over a decade.
Key benefits
Why Research & Development Tax Credits?
A credit, not a deduction
Dollar-for-dollar against tax owed: worth more per dollar than any deduction against income. Approx 10% of qualified payroll can be claimed each year.
Driven by payroll
The bigger the payroll attached to qualifying work, the bigger the credit. Engineers, developers, technicians and the people who supervise them all count.
Look Back Opportunity
We can go back 3 years plus the open tax year, so our work usually captures more than one year compounding the credit / refund size.
Built to be defended
CORE builds the substantiation: project narratives, payroll allocation, the four-part test applied project by project. So the claim holds up against IRS scrutiny.
Do you qualify?
The four-part test
The IRS applies a four-part test to every activity claimed. CORE documents each qualifying project against all four:
Best fitManufacturers, software, engineering and design-build firms
1 · Permitted purpose
The work aims to create or improve a product, process, software, technique, formula or invention. Better function, performance, reliability or quality.
2 · Technological in nature
The work fundamentally relies on the hard sciences. Engineering, physics, chemistry, biology or computer science.
3 · Elimination of uncertainty
At the outset, you were uncertain about the capability, the method, or the appropriate design. And the work set out to resolve it.
4 · Process of experimentation
You evaluated alternatives to get there. Modeling, simulation, prototyping, systematic trial and error, testing.
- You design, engineer, develop, or improve products or processes
- You employ engineers, developers, designers, or technical staff
- You have made process improvements on a shop floor, not only in a lab
Our process
How the study runs
- 1
Qualification review
CORE establishes which projects and which people meet the four-part test, and over what tax years.
- 2
Quantify the qualified spend
Wages, supplies and contract research are identified and substantiated against the underlying records.
- 3
Documentation package
The credit is documented to the standard required to support it, including the technical narrative behind each qualifying project.
In their words
What clients say about working with CORE
Q&A
Questions, answered
The detail behind this service, one line each until you open it.
Read the guide: The R&D Tax Credit: The Incentive Most Qualifying Companies Never Claim →We are not a laboratory. Can we still qualify?
The four-part test is about the work, not the industry. Manufacturers, software teams, engineering firms, food producers and agricultural businesses qualify routinely.
Do the projects have to have succeeded?
No. A project that failed can still qualify. Resolving technical uncertainty through experimentation is the point of the test, not the outcome.
How far back can we claim?
Open tax years, typically the last three, which is why the qualification form asks which years to look at.
What documentation will we need?
Payroll records, a list of projects, and a technical narrative of what was uncertain and what was tried. CORE builds the substantiation so the claim stands up. What you’ll need for your claim: Proper documentation is what makes a credit defensible. CORE guides the gathering; you rarely need to create anything new.
Financial records
- Payroll records and W-2s
- Time tracking, where it exists
- Contractor and consultant invoices
- Supply and material costs
Technical documentation
- Project documentation
- Design documents and specs
- Testing protocols and results
- Patents or patent applications
Business records
- Organizational charts
- Meeting notes and emails
- Progress reports
- Product development timelines
Don’t have everything? Most companies don’t. CORE’s team helps identify and organize what you do have.
Is this a deduction or a credit?
A credit: a dollar-for-dollar reduction of tax owed, which is worth more per dollar than a deduction against income.
Federal and state | Both credits, not just one
The federal credit is the headline. Many states run their own. And they stack.
Federal R&D credit
- A credit against federal income tax owed
- Qualifying small businesses can apply it against payroll tax
- Unused credit carries forward
- Available for open tax years
State R&D credits
- Many states offer their own credit on top of the federal one
- Some are refundable
- Stackable with the federal credit
- Qualification rules vary by state. CORE checks each
Which industries qualify?
Manufacturing
- New product development
- Process improvements
- Automation integration
- Quality control systems
Software & technology
- Custom software creation
- Integration testing
- Cloud architecture
- Mobile app development
Engineering & architecture
- Structural design optimization
- Building system improvements
- Energy efficiency solutions
- Construction method development
Tool & die, machining, fabrication
- Fixture and tooling design
- Prototype runs
- New materials and coatings
- Tolerance and yield improvement
Food, beverage & agriculture
- Formulation and shelf-life work
- Process innovation
- Packaging development
- Crop yield improvements
Life sciences & medical devices
- Device design and testing
- Clinical trials
- Formulation development
- Regulatory test protocols
- Construction & design-build
- Aerospace & defense
- Automotive & suppliers
- Tool & die / machining
- Plastics & metal fabrication
- Electronics
- Medical devices
- Pharma, biotech & life sciences
- Chemicals & materials
- Food & beverage
- Agriculture
- Consumer products
- Energy & utilities
The four-part test is about the work, not the label on the door. Many other industries qualify.
Anything I should know before starting?
- Only about 30% of US companies that qualify for the research credit actually claim it.
- The bigger the payroll attached to qualifying work, the bigger the credit.
- It is a credit against tax owed, not a deduction against income. Which makes it worth more per dollar than a deduction.
