Project Summary
CSSI Services completed a federal and state R&D Tax Credit study for a revenue-generating, mid-sized MedTech company operating in California. The engagement focused on identifying and documenting qualifying research and experimentation activities conducted throughout the tax year, applying CSSI’s engineering-based methodology to ensure every dollar claimed is accurate, compliant, and fully defensible under IRS scrutiny. Through the study, the company claimed $224,357 in California State Credits and $428,496 in Federal Credits.
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: Improving the safety and functionality of a surgical device by adding pressure-sensing capabilities.
- Elimination of Uncertainty: The team was uncertain if the miniature sensors could withstand repeated autoclave sterilization without losing calibration or structural integrity.
- Process of Experimentation: Engineers evaluated multiple sensor encasements and high-performance polymers through thermal cycling tests and computational fluid dynamics (CFD) simulations.
- Technological in Nature: The project relied on principles of biomedical engineering, materials science, and electronics.
|
Total State QREs |
$3,579,365 |
|
Total State Credit |
$224,357 |
|
Total Federal QRE’s |
$5,239,568 |
|
Total Federal Credit |
$428,496 |
|
Total Credit |
$652,853 |
Study Results
The analysis identified a total of $5,239,568 in federal Qualifying Research Expenses (QREs) and $3,579,365 in California QREs across the tax year. The difference between the two figures reflects California’s narrower scope for qualifying expenses, which limits credit eligibility to research activities performed within the state. Based on those qualifying expenses, the study produced a federal R&D Tax Credit of $428,496 and a California state R&D Tax Credit of $224,357, bringing the company’s combined tax credit benefit to $652,853.
Key Takeaways
- A meaningful capital injection: The combined $652,853 in federal and California credits represents substantial recovered cash flow, capital the company can redirect into product development, regulatory work, or commercial expansion without taking on dilution or debt.
- California’s R&D credit punched above its weight: At $224,357, the California credit came in at roughly 52% of the federal credit, a notably high ratio. California operates one of the most generous state R&D credit programs in the country, and capturing it correctly required a separate, state-specific calculation rather than a derivative of the federal claim.
- The federal vs. California QRE gap reflects careful, jurisdiction-specific work: Federal QREs came in at $5.24 million while California QREs landed at $3.58 million, a $1.66 million difference. CSSI applied each jurisdiction’s distinct rules rather than copy-pasting federal figures to the state return, a discipline that protects against both over-claiming (which invites audit risk) and underclaiming (which leaves money on the table).
- MedTech work routinely qualifies: Device development, FDA-driven testing and iteration, software and firmware engineering, and manufacturing process refinement are core MedTech activities that consistently meet the IRS four-part test. This study captured that work systematically rather than leaning on one or two headline projects.
- Defensibility is non-negotiable in regulated industries: MedTech companies already operate under FDA scrutiny, the last thing they need is an avoidable IRS audit. CSSI’s engineering-based methodology documents each activity against the four-part test so the claim holds up under examination, regardless of credit size.
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.
