Project Summary
A bioscience company set out to develop a custom lipid nanoparticle (LNP) delivery system for CRISPR-Cas9 gene editing, after standard LNP formulations failed to achieve acceptable endosomal escape and produced off-target editing rates that prevented reliable on-target gene correction in primary human cells. Through iterative formulation development and testing, the team worked to overcome significant technical uncertainty around delivery efficiency and editing precision. By applying for the R&D Tax Credit, and satisfying the four-part test, this company was able to attain a Total Federal Credit of $272,344.
Project Overview
To qualify for the R&D Tax Credit, each activity must satisfy the IRS four-part test. CSSI’s analysis confirmed that the qualifying activities identified for this company met all four criteria:
- Business Component: Activities aimed to develop a new and improved LNP delivery system to enable reliable CRISPR-Cas9 gene editing in primary human cells.
- Elimination of Uncertainty: Scientists faced uncertainty around optimal lipid composition, formulation parameters, and methods to improve endosomal escape while minimizing off-target editing.
- Process of Experimentation: The team systematically formulated, tested, and refined LNP variants through controlled in vitro experiments, performance assays, and iterative design optimization.
- Technological in Nature: Work relied on principles of molecular biology, biochemistry, pharmacology, and nanoparticle engineering.
|
Employee Wages |
$6,346,774 |
|
Supply and Contractor Costs |
$597,630 |
|
Total QRE’s |
$2,895,482 |
|
Total State Credit |
$0 |
|
Total Federal Credit |
$272,344 |
Study Results
The analysis identified a total of $2,895,482 in Qualifying Research Expenses (QREs) across the tax year. Employee wages accounted for the majority of the QRE figure, with $6,346,774 in total payroll and $2,507,022 attributable to qualifying research activities. Contractor expenses contributed an additional $388,460 in qualifying costs, representing the 65% allowable portion of the $597,630 paid to third parties under IRC §41. No supply costs were identified for this engagement. Based on those qualifying expenses, the study produced a federal R&D Tax Credit of $272,344, with no state credit available in the applicable jurisdiction, bringing the company’s total tax credit benefit to $272,344.
Key Takeaways
- $272,344 in federal tax credit identified, providing meaningful cash flow back to the company to reinvest in continued research.
- Wage-driven QREs: Approximately 40% of total payroll qualified as research activity, reflecting the deep technical involvement of the company’s scientific staff.
- Contractor work captured: $388,460 in qualifying contractor expenses recovered under the 65% allowance, ensuring outsourced research effort was not overlooked.
- No state credit available in the applicable jurisdiction, but the federal benefit alone delivered substantial value, a reminder that R&D credit potential exists even where state programs do not.
- Defensible documentation: Activities were mapped to the four-part test and supported by contemporaneous records, positioning the study to withstand IRS scrutiny.
- Industry fit: Bioscience and life sciences companies frequently qualify for the R&D Tax Credit due to the inherent technical uncertainty and experimentation in their work, yet many still leave the benefit unclaimed.
Ready to Discover Your R&D Tax Credits Potential?
If your company is developing or improving products, formulas, or processes, you may be leaving significant tax credits on the table. CSSI’s engineering-based approach ensures every qualifying activity is identified, documented, and defensible, so you capture the full value of the work your team is already doing.
Request a Free Analysis today and find out what your business could qualify for.
