The Client
The client is a bill processor for the medical and healthcare industries and has internally-developed internet-based software applications to allow users access and manage up-to-date information. The company has operations in several Midwestern states. The company’s annual sales volume is in excess of $30 million with approximately 500 employees. They develop their own new software applications with regular enhancements to more efficiently perform their billing and processing activities and interface with customers.
The Opportunity
Due to the complex research and development (R&D) tax credit laws, expenses incurred in developing and modifying internally-developed software functionality had not been linked with R&D from a tax perspective. Although the client had deducted some development costs, they had not claimed any R&D tax credits on their originally filed tax returns. Analysis of their software development activities allowed identification of significant R&D costs.
The Results
The client claimed their R&D credits and cash flow was enhanced by $420,000. Provided the R&D activities, costs and revenue continue at its present trend, the client should expect approximately $85,000 in annual federal tax savings in addition to annual state tax savings from state R&D credits.
Healthcare Billing Payment Processor
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The RnD Consulting Approach:
The RnD Consulting, Inc. research and development consultants, specializing in the application of federal and state research and development tax credit laws, identified qualifying activities and costs. RnD engineering and tax consultants assisted the client in developing a credit methodology by providing the following services:
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Gathered information reviewed from tax returns and financials. Interviewed client personnel. Participated in site visits. Identified areas where expenses potentially qualified for research and development tax credits. Prepared detailed R&D activity questionnaires.
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Identified qualifying R&D expenditures and fixed base percentage. Projected expected R&D benefit for each year of the study.
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Identified and documented R&D issues and activities, process of experimentation and nexus between activities, costs, project files and personnel. Documented qualifying activity narrative and contemporaneous documentation. Applied recent case law to maximize potential benefit. Delivered file to client to support historical R&D credit methodology as well as template for future use.