Project Summary
A fabless semiconductor company was pushing the boundaries of power management IC design for electric vehicle on-board chargers and industrial inverters, tackling some of the most demanding challenges in efficiency, switching speed, and thermal performance. What they didn’t fully realize was how much of that work qualified under the IRS R&D tax credit. By satisfying the four-part test, the company unlocked $1,614,744 in federal R&D tax credits and $1,104,825 in state credits, amounting to $2,719,569 in total savings.
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: Research was directed at developing high-performance power management ICs with measurable improvements in efficiency, switching speed, and thermal performance, a direct effort to develop a new business component under IRC §41.
- Elimination of Uncertainty: At the outset, it was unknown whether the target performance thresholds for EV and industrial applications could be achieved within the required size, power, and heat constraints. The engineering team worked systematically to resolve those uncertainties.
- Process of Experimentation: Design teams evaluated multiple circuit topologies, switching architectures, and thermal management strategies through simulation, prototyping, and iterative testing, refining their approach at each stage to meet program requirements.
- Technological in Nature: Activities including IC architecture design, power topology development, and thermal modeling relied on principles of electrical engineering, semiconductor physics, and materials science.
|
Employee Wages |
$13,254,800 |
|
Supply and Contractor Costs |
$3,742,500 |
|
Total QRE’s |
$16,997,300 |
|
Total State Credit |
$1,104,825 |
|
Total Federal Credit |
$1,614,744 |
Study Results
The analysis identified a total of $16,997,300 in Qualifying Research Expenses (QREs) across the tax year. Employee wages accounted for the largest share, with $13,254,800 attributable to IC designers, verification engineers, and power electronics specialists directly engaged in qualifying research activities. Supply costs contributed an additional $1,825,000 in qualifying expenses, primarily from prototype fabrication, test equipment, and materials used in performance validation and thermal characterization. Contractor expenses added $1,917,500, representing the 65% allowable portion of third-party research costs under IRC §41. Based on those qualifying expenses, the study produced a federal R&D Tax Credit of $1,614,744 and a state R&D Tax Credit of $1,104,825, bringing the company’s total tax credit benefit to $2,719,569.
Key Takeaways
- High-Stakes Design Work Is Exactly What the Credit Rewards: When the engineering challenge involves genuine uncertainty (new performance thresholds, novel topologies, untested thermal solutions) that’s the IRS definition of qualified research in action.
- A Large Engineering Workforce Means a Large Credit With $13,254,800 in qualifying wages, the company’s deepest credit opportunity came from its own technical staff. IC designers and verification engineers doing their jobs every day were generating R&D credit eligibility with every hour worked.
- Prototype and Fabrication Costs Compound the Benefit The $1,825,000 in qualifying supply costs, covering prototype runs, test builds, and characterization work, added meaningfully to the QRE base and amplified the total credit.
- Contractor R&D Spend Is Recoverable Too At $1,917,500 in qualifying contractor expenses, the company recovered credit on outsourced technical work that many firms leave on the table entirely.
- The EV and Clean Energy Space Is a Credit Hotspot Designing for EV charging and industrial power conversion puts companies squarely in territory where technical uncertainty is high and qualified research is abundant, making R&D credit analysis especially valuable.
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.
