Over the past 20 years, development in the software and IT industry have changed the way we interact with the world both in business and on a personal level. One of the biggest byproducts of this revolution is the creation of massive amounts of data. In recent years, the IT industry has sought to develop technologies that manipulate and use this data in a manner that improves the quality and capability of services. Companies pursuing these solutions must engage in heavy R&D to build the algorithms and database processes needed to implement actionable results from all of this data. These types of projects are perfect candidates for the R&D Credit.
Advancement in the world of data analytics has led to projects surrounding reporting rules development, machine learning, and artificial intelligence (AI). Engineers working on these projects rely heavily on the scientific method by proposing technical end states, forming hypotheses, and testing hypotheses through the creation of architecture and code. IRS internal guidelines have deemed any software-based work requiring the development of new architecture, new algorithms, new database management techniques, and new AI processing methods as activities that “rarely fail to constitute qualified research.” As a result, R&D Credits may be available if your company engages in the following activities:
• Designing database processing rules and architecture
• Creation of rules-based algorithms
• Creation of processing engines
• Development of relational architecture
• Development of machine learning algorithms
• Designing acceptance criteria or technical requirements
• Developing reporting tools that process large data sets
• Development of source code using various languages
• Testing alternative database programs
• Proof-of-concept testing
• End-user testing
Solutions built to process and act upon large data sets are often at the cutting edge of knowledge within the IT industry. As a result, companies investing in such projects will likely be able to realize a substantial R&D Tax Credit benefit. For a free analysis of your potential R&D Credit benefit, please contact the team at Diligentiam or visit our R&D Credit Estimator.
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