It may not seem like it, but many companies in the financial industry are prime for research and development opportunities. Bank and Insurance companies are most likely spending extensively on technology that qualifies for the R&D tax credit but are hesitant to claim the credit because they are unaware that they qualify.
Given the rapid advancement of technology, the financial industry is quickly adapting to the changes. Software development is seen as a competitive advantage that most bank and insurance companies have had to rely more and more on their own software development capabilities. To improve operations, these companies are now frequently developing or improving software to increase productivity, improve security, develop new features, or make other advancements.
What Bank and Insurance activities qualify for the R&D Tax Credit?
You may be eligible for R&D tax credits if your company has engaged in approved research activities for the last several years. Some qualified Bank and Insurance activities include:
- Customizing existing financial software
- Developing online and mobile banking services
- Developing proprietary banking systems and tools
- Developing software to automate manual processes
While non-qualified activities include:
- Minor bug fixes not rising to the level of the four-part test
- Pure aesthetic/marketing portions of the design effort
- Founder time spent on the business aspects of the software
Applying the Four-Part Test
Eligible qualified research activities (QRAs) must also meet all the criteria established in the 4-part test:
1. Permitted Purpose – Requires the project to fulfill a qualifying function that is critical to the business. The purpose can be to develop a new or improved product or process.
2. Elimination of Uncertainty – The activity must deal with a specific technological uncertainty.
3. Process of Experimentation – Implementation of a comprehensive method for identifying and evaluating potential solutions to attain the desired outcome
4. Technological in Nature – The process of experimentation must rely on the hard sciences such as chemistry, biology, computer science, or engineering.
How can KPT Consulting help?
KPT Consulting has helped numerous companies with their R&D tax credit, and now it’s time for you to take advantage of this opportunity! Contact us today to discuss your software development operations and see how your company could qualify.