Taxpayers claiming the federal research tax credit for work under fixed-price contracts received a significant win from the United States Tax Court (“the Court”). In December of 2019, the Court issued an order granting summary judgment to the taxpayer, Populous Holdings, Inc. (“Populous”), finding that the company’s architecture work performed under fixed price contracts qualified for federal research tax credits and was not excluded as funded research under IRC Section 41(d)(1)(H). Specifically, the Court held that 1) payments to Populous were contingent on the success of the research, and 2) Populous retained substantial rights in the research. The Court established a helpful framework for funding analysis by integrating guidance from both regulations and three of the cornerstone research credit cases in Geosyntec, Fairchild, and Lockheed.

Populous, an architectural design services firm, claimed R&D credits for research activities conducted in tax years 2010 and 2011. The IRS denied Populous’ claims, arguing that the activities were excluded as funded research. The Service and Populous agreed to limit the Court’s analysis to the funding issue, selecting five representative fixed-price contracts from a population of over 100 that formed the basis of the research credit claims. Service contended that the Taxpayer’s activities were not contingent on the success of the research for all five projects and that three of the five projects did not meet the substantial rights requirement.

BRAYN secured almost 1,500 pages of US Court documents regarding this case in order to break down the facts and advise the AEC community accordingly.

Learning Objectives

Participants will be able to:

1. 1. Celebrate the positive outcome for the A/E/C industry from this recent court case
      Understand how qualified research occurs in the architecture and engineering industries
   2. Effectuate necessary changes in future tax incentive claims to better position company and owners in case of audit
   3. Understand projects under contract can qualify for R&D Tax Credits not solely based on the TYPE of contract, but on the actual RIGHTS and RISK
   4. Learn how to leverage the right kind of internal systems and existing documents to properly substantiate tax incentive claims

About the Presenter

Yong Jeon joined BRAYN Consulting LLC after nearly 8 years of tax consulting experience at Big-4, both at Deloitte Tax and PwC. He is a tax partner at BRAYN’s Northern California practice. At Big-4, Yong spent a majority of his time in the Research and Development (R&D) Tax Incentive practice, where he led engagements for several Fortune 500 clients. He also worked at McKesson for 5 years on various projects, including implementation, maintenance, and improvement of the in-house R&D Tax Credit process. Yong also has significant experience in Tax Controversy. In addition to his B.A. and J.D., Yong holds an LL.M. in Taxation from Boston University. Yong is a member of the AIA San Francisco, Silicon Valley, and East Bay chapters and a member of the national and local Construction and Finance Management Association (“CFMA”).

This course is accredited to provide 1 AIA LU by BRAYN Consulting LLC