My company does not have a dedicated research center or laboratory. Can I still claim R&D Tax Credits for my expenses?

Contrary to general belief, businesses do not have to have employees in white coats working in a laboratory to claim R&D Tax Credits. Many activities across a wide range of industries are considered qualified research expenses (QREs). Investments your company makes in developing innovative solutions, creating novel products and formulations, or even making process improvements are claimable expenses as long as the project satisfies the 4-part test. 

Tax Credit 4-part test requirements are as follows:

Permitted Purpose: In simple terms, the purpose of the activity or project must be to create a new or improved product, process, software, invention, patent, or formula (referred to as a business component). The permitted purpose falls under a broad umbrella that includes improving functionality, performance, reliability, or quality of the business component. 

Elimination of Uncertainty: The activities and project in question must attempt to eliminate uncertainty related to the optimal design, development methodology, or component’s capability to achieve the permitted purpose.

Process of Experimentation: Substantially all of the activities constitute elements of a process of experimentation. The activities must include a systematic evaluation of alternative solutions to eliminate the technical uncertainty through, for example, trial and error or a Product Development Lifecycle (“PDLC”).

Technological in Nature: The activities and process of experimentation must rely on the fundamental principles of hard science, including biological sciences, computer science, engineering, physics, or chemistry.

Click here to read more about industry-specific qualified research expenses (QREs).