IRC Section 199 Domestic Production Activities Deductions (DPAD) represents a valuable tax incentive for businesses that perform domestic architecture, engineering, and construction services. Eligible engineering and architecture services include consultation, investigation, evaluation, planning, design and supervision of construction. Construction activities must be domestic and can include residential or commercial building improvements as well as infrastructure projects. Generally, the tax deduction can be as much as 9% of taxable income.
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Many owners, officers, and CPAs of oil and gas companies are unaware that they are eligible for valuable federal and state Research & Development (R&D) Tax Credits. However, due to the expansive definition of R&D for tax credit purposes, many of the tooling design, extraction technique, and refinery process development projects performed by oil and gas companies often qualify for such treatment.
Example of Qualified Activities
Petroleum Pump Manufacturer Case Study
|Item||Average Annual Amount|
|Qualified Research Expenses (QREs)||$700,000|
|Net Federal Credits||$55,000|
|Net State Credits||$25,000|
|Net Federal and State Credits - 1 Year Study||$80,000|
|4 Year Study (3 States)||$295,000|