TaxConnections Picture - Books_Hour_GlassAs set forth in the pivotal case of Geosyntec Consultants, Inc. v. United States, No. 9:12-cv-80334 (S.D. Fla. 2013), the United States District Court for the Southern District of Florida ruled that engineering work conducted under select customer contracts was “not funded” and consequently eligible for the Research and Experimentation Tax Credit (hereinafter “Research Tax Credit”) pursuant to I.R.C. § 41, while other contracts were deemed “funded” and not eligible for the Research Tax Credit.

Geosyntec Consultants Inc. (hereinafter “Geosyntec”) is an engineering firm that specializes in matters involving the environment, natural resources and geologic infrastructure. Geosyntec’s core business is to develop innovative and sustainable solutions to environmental problems that are less expensive and disruptive than conventional remediation approaches.

Geosyntec sought a refund of $1,677,432 for Research Tax Credits resulting from 370 client projects on which it worked from 2002 through 2005. At issue before the court in cross-motions for summary judgment motion was whether the services rendered by Geosyntec on those projects should be classified as “funded research” under I.R.C. § 41(d)(4)(H) and thus not eligible for the Research Tax Credit.

Pursuant to Treas. Reg. § 1.41-4A(d) there are two requirements for determining whether research and experimentation analysis rendered for a third party is considered “not funded” and therefore not excluded from the Research Tax Credit under I.R.C. § 41(d)(4)(H): Read More