By Angela Jackson


On November 21, 2019, Morgan Lewis hosted its Fifth Annual Research and Development Tax Credit Symposium in Palo Alto, CA. Attendees of the conference included tax directors, tax managers, accounts and other tax professionals who assist companies that engage in R&D tax credits.


The purpose of the conference was to discuss the current trends in R&D as well as the latest developments impacting the R&D Tax Credit under IRS Code Section 41, which also included discussions on the most recent court cases.


It appears that there are two approaches to identifying and justifying tax credits:


  1. An accounting/survey approach where the service provider collects data and justifies the claim via surveys. This is the approach of the major CPA firms and smaller service providers.
  2. An engineering/technical approach in which engineers review project activities and costs and justify compliance with the four tests based on engineering/scientific principles. This is the approach used by BCP.

Based upon discussions during the conference and side bars with several legal experts, the engineering/scientific approach is the most valid method for justifying tax credits. This is particularly true given the most recent court case Siemer Milling Co v. Commissioner of Internal Revenue where the court ruled in favor of the Commissioner and disallowed the claim because Siemer failed to provide adequate documentation of the activities performed.