BeansTalk
BeansTalk: Where Expertise Meets Opportunity, Mauldin & Jenkins' podcast, where we are sharing and showcasing our areas of expertise through conversations with practice leaders on their knowledge and experience.
BeansTalk
The R&D Reset: What It Means for Your Bottom Line
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Think R&D tax credits are only for high-tech labs? Frank Battaglia joins the latest episode to explain how recent tax law "resets" allow businesses in manufacturing, software, and beyond to claim immediate deductions for U.S.-based innovation. Learn how to stop leaving money on the table and leverage these incentives to boost your bottom line, regardless of your company's size or profitability.
About Our Guest
Frank specializes in helping clients identify and maximize supportable research and development (R&D) tax credits and other incentive opportunities. He has extensive experience assisting privately held businesses across a variety of industries in capturing valuable tax incentives that support innovation and growth.
About Our Host
Brandon Smith, CPA, is a Partner based in the Atlanta office and the Advisory Practice Leader.
Learn more about R&D Tax Credits here: https://www.mjcpa.com/services/consulting-advisory-services/research-development-tax-credit/
Welcome to BeansTalk, M&J's podcast where we are sharing and showcasing our areas of expertise through conversations with practice leaders on their knowledge and experience. When I say research and development, what image pops into your head? Are you picturing a scientist in a white lab coat or some tech giant coding the next AI? If that's what you pictured, you are not alone, but you may be leaving money on the table. The reality is our tax code allows for rewarding innovation in places you might not expect, like at a dusty construction site in the middle of a harvest, or on a loud factory floor. And to help me demystify innovation and the R&D tax credit, I'm very excited to be joined by an expert from our specialty tax practice who specializes in R&D tax credits, Frank Battaglia. Hey, Frank.
Speaker 02Hey. Thanks for having me.
Speaker 01Yeah, Frank, thank you so much for joining me. Because this is this isn't a topic I've really been looking forward to diving into because people who follow this podcast series know that I love to talk about innovation. And I love to talk about relevancy and as business leaders doing all we can to stay relevant. And this topic kind of makes me think like, well, not only can we innovate like we should be doing, but maybe we can kind of get some, some money for innovating and staying staying relevant. So with that, will you just do me a favor and kind of tell me a little bit about yourself and your background and your role at Mauldin & Jenkins?
Speaker 02Sure yeah. So I Mauldin & Jenkins pretty recently and been working in this space. I'm I'm a CPA, but really I'm a one-trick pony. Working in this space and the R&D credit for about 14 years now. And so my experience working with startups up through public companies, worked on at this point, probably a thousand clients over the years, and came here to Mauldin & Jenkins to start an R&D credit practice.
Speaker 01Well, so so when I say I'm kind of viewing the R&D opportunity as something that kind of rewards innovation. Am I framing that correctly? Is that the right way to think about it?
Speaker 02You're right. No, exactly right. Yeah, the framers, and back in 1981, when this was enacted as an incentive to create technical jobs in the U.S., that's what it comes down to. You know, you you kind of picture folks in a lab coat, but really if you're innovating in a manufacturing floor or out in the field, you can qualify and claim an R&D incentive.
Speaker 01So I imagine you've seen a lot of different types of operations and activities over the years, then with you saying like the different types of client profiles you've worked with, the sizes, maybe even industries and all that. So I'll be interested to uh to dive into some of that with you. But but to start, will you just kind of help me get an overarching view of what we're talking about here? So what services do you offer?
Speaker 02Sure. Yeah. So the bread and butter is mentioned enacted in 1981 and made permanent in 2015. It was the the R&D tax credit. And so uh at the end of the day, if you are a U.S. taxpayer, a company that is creating a product or a manufacturing process, creating software, uh formulations, uh, and other things, you can get an incentive for that based on the dollars you spend to create those jobs, spend dollars on the materials to create that product, to hire consultants to help you with that with that development process. Ultimately, all those dollars that you spend, you can qualify for tax savings to apply against your income tax as a business.
Speaker 01So it's just looking at you, you said product and also process and and maybe even a software. So you're just you're working to create something kind of new, I guess.
Speaker 02That's right. That's right, yeah. It's using using principles of of engineering to create something new or to improve something.
Speaker 01Gotcha. And then and then just going through the process of doing that, of making that new product, or a new way of making that product or or software or process or whatever it might be, that actual raw materials costs, the people you're hiring, the consultants and contractors, all of those can go in to kind of qualify for this credit opportunity.
Speaker 02That's correct.
Speaker 01Okay.
Speaker 02Yeah.
Speaker 01Very cool. Very cool. Well, what kind of industries do you work in then? Because you know, I mentioned at the front end, you know, I I picture a white lab coat. That was when I kind of put that thought experiment out there. What do you picture? We say R&D. I was just giving the picture I usually think about. I'm not sure if our listeners uh agreed on that. But but it really is this can apply to a lot of different types and sizes of businesses. So so I know you you mentioned that you've worked with a a wide range of different types of clients in this space, but just kind of tell me through what what kind of organization you you typically work with on this?
Speaker 02Yeah, so I'd say that they're really the the bread and butter, uh the industry that claims the most R&D credits are going to be manufacturers. Uh I'd say number two would be software companies. You know, it really the last 20, 30 or so years, you see technology enhance, increase so well day to day that those two industries probably are the largest ones. And then you have subsets beyond that, whether it's it's design builds, uh, engineering firms, architecture, agricultural like uh businesses, uh medical device, you can it can go on and on.
Speaker 01Yeah, really. Anybody who's just kind of applying those engineering principles.
Speaker 02That's right. That's right. Yeah, there's there's more to it, but really if inherently if you have an engineer in that kind of role to create something or improve something, you're you're probably doing R&D.
Speaker 01Right, exactly. And so, you know, is there kind of a process that you work on? I don't want to get too much in the weeds of like a step-by-step A to Z, but but generally are you kind of working with them just to get an understanding of their business and understand their activities, kind of help assess if it's eligible?
Speaker 02Exactly. Yeah, so I'll do some research, whether it's a brand new to me kind of company, I'll look at the website, get some background. If if they're a current client, I'll I'll talk to maybe yourself, they'll hear about them, and then I'll have a conversation with them and say, you know what, you might have heard the R&D credit, but tell me about your business. It really, without really understanding that, right? Uh, can I really I can dig in and figure out where I can find some value for you?
Speaker 01Yeah.
Speaker 02And really the best part really is a tour. So if you're a manufacturing facility, taking a tour, walking the floor, seeing those operators online, thinking about trial runs, those things really jump out at me as far as calling out those kind of opportunities.
Speaker 01Yeah, yeah. No, that's a great idea, actually. Going out there and and seeing what we're doing, not just hearing about what we're doing. Exactly. Seeing the activities uh in action. Uh well, kind of taking a step back, just thinking about this environment of the R&D tax credit. You know, it feels like this has been a bit of a moving target, you know, in relatively recent years in terms of it was one thing for a while, then it changed to a new thing for a while, and now it shifted to another thing. Um can you just kind of tell me about the environment? Kind of where were we? What's been happening, and where are we?
Speaker 02Sure. Yeah, so it uh at a super high level, the R&D credit was part of the extenders that kind of expired every couple years early in my career, and that's made permanent back in 2015. And then since then it's it's been tweaked in a little bit. But I say that the the biggest difference though was on code section 174, and that was part of the the Tax Cuts and Jobs Act. And what that really did was take those same kind of costs that can qualify for the credit and then some and required you to take those costs and spread them out over multiple tax years. And so that timing difference was impactful to so many small and mid-sized companies.
Speaker 01Help me get a little bit more in the weeds. Like, let's like when it comes to the actual tax provisions, I've heard like, you know, 41 and 174, if I'm getting those right, I hope. But but kind of talk me through those, how do those kind of code sections come into play with all this? How how does the detail tie into what we're talking about from a high level?
Speaker 02Sure. Yeah. So the the R&D credit, we talked about the incentive, that's code section 41. And that's pretty much driven by by labor. So folks are paying to perform R&D efforts, as well as any consultants, and then materials as part of that process that will be that will drive that that incentive. Code section 174, which really was an impactful requirement to capitalize and spread out those costs over many years. That's a different code section, of course, but it's also much more expansive and what's included. So it's everything that's that's covered by the credit, kind of think about it like a softball. 174 is more like a basketball. So you're throwing in overhead, rents, depreciation, many things that are not incentivized, but are required to be capitalized. And so that's that's the kind of the big news, I say the last few years was this code section 174, but the requirement to capitalize R&D.
Speaker 01Yeah. And so today we're still subject to 174, as we have been. That's the basketball. That's the more encompassing code section that we're having to figure out to see, okay, for these activities, what gets capitalized and amortized over future years. Uh, but then 41 comes into play, that softball, a little bit more focused on okay, where can the credit now apply to those 174 costs? Am I outlining that right?
Speaker 02So um the 174 is still applicable, agreed. The good news is that if it's in the U.S., it doesn't really matter. It's just that that foreign, that that foreign component of it.
Speaker 01Gotcha. So this is an area where I'm I'm just happy there's an expert like you to help us navigate all this.
Speaker 02Sure, yeah.
Speaker 01So so oftentimes I kind of feel like that the billboard message happening right now is this R&D is deductible again. Like you're right, almost like celebration time, but it kind of sounds like that might kind of be the case.
Speaker 02You're exactly right. Yeah. It's it was news that we've been waiting for for years, uh, both me as a practitioner, but also so many business owners. And part of the One Big Beautiful Bill Act, uh, the the biggest impact to my my arena was that for all U.S. R&D, you can now fully deduct those costs the year you incur them, which is pretty much how it used to be before that change in tax law. Um foreign R&D is still spread out over 15 years, but by and large, our client base, it's all U.S. RD based. And so that's excellent news for so many taxpayers.
Speaker 01Right. So for for a long time, or for for for for a period of time, R&D could be deductible all in the year it was incurred. And then for a sprint, we were amortizing that cost over multiple years, and now we're back in the situation where you can take it all in the year one, you know, with some differences on you know onshore versus offshore.
Speaker 02That's right. That's right.
Speaker 01The way for me to try and summarize it from a business leader perspective.
Speaker 02Sure.
Speaker 01I know there's a lot more mechanics to it than all of that.
Speaker 02But yeah, if if you were, you know, if you weren't aware of R&D, you know, prior to right now, it's not that different than maybe you heard about it years ago. So uh really it if you're aware of it recently, then that's when the big news is really impactful to you.
Speaker 01So so kind of you know, putting my business leader hat on, you know, for first, I want to kind of look at this from a small business perspective, then maybe you know, kind of a newer maybe I'm a founder of a startup into just a larger, more established, maybe a little more mature business, um, kind of how this really impacts me. So for the first, I'm just I'm kind of a founder of startup. I have a smaller business maybe, and I'm looking back the last few years where I have been spraying those costs. Are there opportunities for me to kind of you know look back and recover? Or is this just a look forward thing, or what are things that I can kind of think and keep top of mind as a small business owner?
Speaker 02Yeah, great question. So for small businesses, you can actually go back and amend those prior years. So if you pay tax because of this tax law, you can go back and get those refunds, or you can go back and accelerate those costs in 2025 or 2026. So I think really the the biggest thing from a tax planning standpoint is to look at your your big picture and help you weigh for your clients what makes the most sense for you. So there's no one size fits all in this scenario, but certainly it's good news for small businesses.
Speaker 01Yeah, so so it sounds like I have some options then.
Speaker 02Yes, you do.
Speaker 01Because I already I already spent the money. Right. I already incurred those costs in recent years, but now I can I can look back and either amend or just accelerate them in this year rather than continuing that kind of plan I currently have, which is just to keep on spreading them out over future years. So that's that's nice to know I have some options, some opportunities for some tax planning and strategy there. Now, you mentioned kind of a threshold though from that small business. Now let's imagine I'm kind of above that threshold. I'm a slightly larger business, a little bit more established. Um what are things that I could be thinking about?
Speaker 02So for those companies you cannot go back and amend to reverse the R&D capitalization. However, you can carry it forward and twenty to twenty-five or equally over twenty-five and twenty-six.
Speaker 01Okay, okay. So I'm still gonna be able to get that benefit.
Speaker 02You will.
Speaker 01I just don't have the same number of options like looking back and amending.
Speaker 02Exactly.
Speaker 01Okay, very nice, very nice. Um now now something we were talking about kind of on the front end when when discussing that there's been some some shifts in the environment, you know, over the years, but but we mentioned how uh in the current iteration there are some things to think about from an onshore versus offshore perspective. So kind of walk me through that a little bit. You know, what's something under kind of the new rules, the current way of doing things, um, what I'm planning around today, what do I need to have in mind when it comes to me doing um onshore activities and then maybe even uh looking then towards some offshore uh support and resources for my innovation and relevancy efforts?
Speaker 02Sure. Yeah, so as a business owner, I'm I'm sure you're you're weighing the cost of overseas versus domestic resources. And so that calculus uh will also be impacted by this requirement to capitalize those costs. And so if you're paying the same amount of money to uh a U.S. resource as you would to foreign, then certainly it's a slam dunk clear case to keep those costs domestically. Um otherwise, though, you have to think about those costs being spread out over 15 years, which can be very impactful to you from a cash flow standpoint and realizing that the benefit of those deductions.
Speaker 01So if I'm just starting to leverage some offshore resources that might be more cost effective in the near term, that the math might still work out to where at the end of the day, from a cash flow perspective and in a tax credit opportunity perspective, the onshore resource might at the end of the day come out a little bit less expensive. Is that how it works out, or just for less better cash flow?
Speaker 02Yeah, that that's right. Yeah. So it kind of depends on the numbers at the end of the day. But yeah, the the U.S. R&D credit incentivizes the kind of the boots on the ground here in the U.S.. And so that's part of the calculus to evaluate, do I want to hire folks overseas or or domestically? And you have to weigh both losing out on the R&D credit, but also taking those costs and spreading them out over 15 years. So definitely we're it's not not as easy of a decision, I'd say, than it maybe used to be in prior years.
Speaker 01Well, that's you know, something I was kind of wondering about too is when you look at a credit like this, is it a one-size-fits-all thing? And I think that's a a great illustration to me that this is not a one-size-fits-all. Like there are different things we need to consider, evaluate, kind of map out and math out to see what works out best for us.
Speaker 02That's right. Yeah. And and certainly, you know, kind of like you may be able to use TurboTax for tax preparation, but you have more complex scenarios or maybe higher risk scenarios, you want to bring in an expert. And that's where, from from my standpoint, our team standpoint, is we look at each client differently and looking at what they're performing uh as qualifying for the R&D credit, helping to document that, quantify all the costs, and you're feeling good about what we're quantifying. And then ultimately, should that come under examination, we feel good about supporting those activities.
Speaker 01Yeah, so this is not just a same process for every single client you work with.
Speaker 02That's right. Yeah. And and uh there's some some changes to the forms that the the IRS is requiring that that want more detail and support for what's being claimed. And that's where you're gonna need more of that help to really craft out detail in those forms.
Speaker 01Yeah, the IRS just they do seem to be getting more and more just information about activities, just so some more kind of uh descriptions of things. So that applies to this too. They're just trying to get more of a good sense of what are we actually doing here? What what what are we innovating? What are we building? What are we improving kind of thing?
Speaker 02That's right. Yeah. And you know, it's not, you know, from from what my process, we already have that information, so it's not challenging, challenging to do. But you know, for those that maybe never got that data on the front end, it's more work for them to try and feel good about what they're putting on the forms.
Speaker 01All right. So so this is nice, it gives me kind of a nice high-level view of kind of where we're at, you know, what's what I've been experiencing as a business leader and how that's been impacting my taxes in terms of when I could take a full deduction and take a tax credit to when I had to start amortizing it over future years, um, to now kind of where we are today, to where the the credit's kind of back on the table, deductions back on the table. But there are some things for me to consider, especially when it comes to you know domestic versus foreign um activities. Okay, well now I I guess when it comes to me making the determination of, you know, is this research and development? You know, to kind of analyze my activities, walk with you over my production floor to kind of get a sense of what we're doing, take a look at the costs to see where does 174 apply, where does 41 apply, all of that? Like, I guess is there strategy to have here, or is it like if this is research, it's research. If it's R&D, it's R&D. Like, what does that look like? Is there a tremendous amount of judgment here and and strategic opportunities, or is this you know just calling balls and strikes?
Speaker 02Good question. Yeah, there certainly is some judgment there, and that really is relying upon guidance from the IRS, from treasury, from court cases over the years. And that's something I think maybe in many years past you might see one court case covering the R&D credit. And lately it's been three or four the last couple of years, and so there's a lot that's kind of coming down that are lessons learned from other taxpayers that we can take and apply to our own clients. And that comes down to my own experience and and walking through each client fact pattern and seeing if it maps closely to another court case or not, and helping them weigh way if if it's worth including um or or or not.
Speaker 01Right. And that's something that once we've identified something that is you know worth including and some that really is RD. I mean, once the determination is made, we have to classify it the way we have to classify it. Therefore, you kind of might as well take the credit if you can, right?
Speaker 02Exactly.
Speaker 01It almost feels like we're just leaving free money on the table if we're if we're not doing that.
Speaker 02Agreed.
Speaker 01Yeah. Okay, perfect. Nice. So so there is some some judgment that goes into it, but there's a lot of precedence, a lot of expertise, a lot of guidance toward this that this, you know, there there's a clear answer.
Speaker 02Yes.
Speaker 01Okay, that's not something that's gonna have a we're not gonna come out on the backside of this with a lot of ambiguity. That's nice to know.
Speaker 02Agreed.
Speaker 01Now now what about if I'm kind of putting back on my my founder cap, you know, my small business. Um and maybe I'm not quite profitable yet. You know, I I have a good strategy, a good business plan to obtain profitability, but right now I'm not profitable yet. Um, but innovation and relevancy are are key to my operations, so I am investing capital in engineering type processes. Um it kind of feels like I'm kind of left on the sideline of this. Is that is that an accurate sentiment?
Speaker 02It's not. Um so I fortunately for you.
Speaker 01Yeah.
Speaker 02So in in those cases, there are taxpayers. If uh if you have less than five million dollars in revenue and fewer than five years of revenue, you can actually take the federal R&D credit and apply against payroll tax. So that's a way for companies, small companies, to monetize the benefit in in the short term.
Speaker 01I'll go love when my intuition is raw. So so even though I have no profit, I have nothing to kind of credit against, there are other opportunities for me to kind of take take, you know, leverage the tax credit in my benefit, like you said, through payroll taxes and the like.
Speaker 02That's right. Yeah. And again, that's there are certain elections to make, so that's where it's getting the help to do that. But again, if if you're a company that's already doing R&D, you have to you have to claim it timely on the return. So if you miss it, you can't go back and amend for it. So that's really you don't want you don't want to miss out on that opportunity. And and kind of beyond that, many states have their own incentives. So we're we're here in Georgia. Georgia has another payroll benefit. So if you're a small business in Georgia that you're not profitable, you can monetize both the Georgia and federal benefit against payroll tax.
Speaker 01Oh, that's interesting. So it's not when we're talking research and development and tax-related credits and and and strategic opportunities, we're not just talking federal here. Like so there are some state-specific things for us to navigate as well.
Speaker 02That's right. Yeah. So it's, I'd say maybe 50% or more of different states have their own R&D incentive. And it ultimately depends upon where those activities occur, of course. So if you're a manufacturer here in Georgia, but have a facility in South Carolina, we look at where the Employees are sitting. And so you might have an incentive at the federal level, but also South Carolina and Georgia wrapped into one project.
Speaker 01So I I had a conversation with Jeff Doris on one of these podcasts not too terribly long ago about like nexus concepts with respect to, you know, state and local taxes. Is like a similar kind of nexus concept when it comes to this? Or I guess maybe you mentioned like where where is the factory? Where are the employees? Is that kind of what drives the determination?
Speaker 02That's right. Yeah, we look at where the resources are sitting. You know, for example, we talked earlier about the foreign R&D. You might have some uh maybe a U.S. company that that consults with uh another U.S. company to do R&D, but that subsidiary or subcontractor outsources the work overseas. And so you might think it's in the U.S., but really it's a foreign expense at the end of the day. So it comes down to where the actual R&D is occurring.
Speaker 01We have to kind of consider our supply chain.
Speaker 02Exactly.
Speaker 01Right? And even the who we're hiring and who they're working with can can impact us. Okay. So so we really have to take a look at it. But but this is nice to know. So even if I'm small, there are still opportunities for me, and and we can be strategic not just from a federal perspective, but also a state perspective. Seems like there's there's a lot of opportunities for value here.
Speaker 02Exactly. Exactly.
Speaker 01Now, what about just businesses in general, kind of looking back to recent years? What are things they can have in mind? And I know you mentioned for certain size organizations they have some options, for others, um, they can't necessarily amend, but you know, that they can kind of accelerate some things. So just kind of re refresh me on what can I think about today? What are things that need to be top of mind for me right now to kind of ask myself to try and get the most out of this opportunity that I can?
Speaker 02Sure. Yeah. So if you're a company that that creates a product, you manufacture a product, you create something, and you're using an engineer to do it or a technical role to achieve it, you're probably doing R&D. And then beyond that, it's thinking through how much you're spending on it. So if you're spending, you know, if you got a couple FTEs on it, it's worth having a conversation, taking a look and seeing if if you qualify for the credit. And we we're never afraid of having a conversation. I have those every single day. And so we we can help weigh if it's worth pursuing or reevaluate when you spend more, you know, the following year. It's a permanent annual incentive. So if you miss it this year, you can get it next year. Um things change as a business. So um, you know, don't just don't miss out if you have a chance to take a look into it.
Speaker 01So so I'm definitely getting the picture here that this is not a one size fits all out-of-the-box process. You know, it is different based off of where are my activities? What consultants am I working with? What states am I operating in? You know, that this really has to be considerate to me, my footprint, my activities, which honestly kind of makes me a little nervous. Like this is a big project to take on. You know, I realize there could be a big financial benefit to this, you know, and a successful outcome. But it does feel like there's gonna be a lot of analysis that has to go into this. So kind of talk me through well, what does an engagement like this look like? What does a project like this look like?
Speaker 02Sure. Yeah, and it it can be a lot. And and you know, my goal, our team, is to really own almost all of that work as much as we can, and ultimately have maybe two total hours with the business owner to really navigate the whole process. And so what it comes down to is one, the conversation to understand the business. And then two, we'll we'll get the data request together. So it comes down to you mentioned earlier, the the payroll detail, the supplies, et cetera. And then we'll have a conversation. We're gonna understand, hey, we're we're in 2025, 2026. What did you work on this year? What's your what's your project list? And then we'll talk through those projects, help walk through and navigate which ones are qualifying versus not, and then drill down into figuring out what employees are working on those projects. So we've our process is is pretty nailed down and make it seamless as we can, even if it's multiple years that we're looking at. But uh we'll navigate through with you, and again, the goal is to really have you in and out two hours of total time on your end.
Speaker 01Okay, so not too much of a time investment, just uh a really targeted conversation to do what I like to do, which is talk about my business, and kind of kind of give you some more insights about what that looks like, and then maybe connect you to some engineers at my company too for some detailed conversations. That's right. Yeah, depending on the size of the company, you know, at you know the average company, you know, we're talking to an owner, and so the owner, maybe they're a founder and they're very involved in the business, so they're they can speak to all the R&D of the organization. Larger companies that may be uh in a uh a superintendent or uh engineering lead and we'll talk to that person and get that detail. And one, document the activities from our end on the on the projects, and then two, have that kind of nexus to crosswalk the project with the underlying expenses to it. Okay, well, that doesn't sound too bad.
Speaker 02It's not.
Speaker 01Yeah, so so Frank, I'll admit coming into this conversation, I thought it'd be kind of daunting, you know, and we've talked about a lot of technical ideas, you know, the different, you know, crossing different state lines, involving our supply chain, um, really you're looking at our different projects and what can and can't qualify. You know, it feels like this is inherently a technical area. And for me, as just a business leader managing a lot and especially focused on my business, this does seem like an aspect that kind of made me nervous of is this something I want to evaluate? But but really in talking to you, like it does feel like this is a pretty easy process. Like this can be relatively streamlined, just a couple hours of my time, just getting an understanding of the activities, getting some documentation, and then your team takes it from there.
Speaker 02And you're exactly right. That's that's our goal at the end of the day. And that's why our team spends so much time looking at different court cases, the outcome, and how that impacts our tax clients at the end of the day. We want to make sure that we feel good about what they're claiming and we give them the best advice we can.
Speaker 01Perfect. Well, with that, Frank, just for our listeners, I'm wondering if you can kind of clue us into any trends you're seeing.
Speaker 02Sure. Yeah. So I mentioned some form changes. So really, whoever you work with, whether it's it's us at Mauldin & Jenkins or or elsewhere, that you've got the documentation to outline what qual what activities do qualify for the credit, and you've got what you need for the forms. But beyond that, though, some recent court cases that are where the IRS is challenging some things that were longstanding that we felt good about in the past, that they don't feel good about today. And so it comes down to documentation. And so um in the past, typically uh in in 2025, you might talk through an engineer to estimate activities in the prior year, but the IRS really wants you to have that real-time um data. And so they really want you talking about 2025 in 2025, and so that's the biggest thing is making sure you're doing it uh in real time as possible, but also any artifacts of documentation, if it's design drawings, uh, meeting minute notes, anything at all that you you have organically as part of the process to create products, try to put it together, put it aside into a folder so you've got it ready if you do need it. But I'd say that's probably the biggest thing that I've seen last couple of years.
Speaker 01So we don't necessarily want to wait until next year to start looking back to this year to get all of our ducks in a row. It's just starting today, be aware this is something we should be mindful of and start to get our documentation together today.
Speaker 02That's right. Yeah, and I'd say kind of create that process internally so that go at year end you've already got it kind of put together, and then you kind of do it each year going forward that you've kind of created your own process and you're more organized and on the ball and can feel very confidently that we did this in in real time.
Speaker 01Perfect. Well, well, Frank, this was a great conversation. This is an area where, you know, talking about a tax credit, I'm always kind of nervous, like, oh man, how dry could this be? But like this really is a good one. This is an exciting one. This this is the activities and operations of businesses that are sometimes some of the more interesting and exciting things we're doing in our businesses. And then just taking something we're already doing, being strategic around it, tax plan around it, come with some opportunities. So, Frank, thank you for talking it through with me. And I guess any any last thoughts for our listeners before I, I let you go.
Speaker 02Yeah, I'd say, you know, don't don't second guess yourself if you think you might have an opportunity to create incentive or create a credit based on what you're already doing, reach out and have a conversation. We're always happy to do that.
Speaker 01Awesome. Well, Frank, thank you so much. And to our listeners, thank you also for listening in. If you have any questions about the financial items we discussed today or any other financial considerations you're navigating, please don't hesitate to contact us at www.mjcpa.com.
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