Qualifying Activities for the R&D Tax Credit
in Architecture and Engineering Firms
The R&D Tax Credit is not an all-or-nothing calculation. Some phases qualify strongly. Some don't qualify at all. And within qualifying phases, some activities count, and others don't — project management and staff scheduling logged to schematic design are not qualified research, even though they occurred in a qualifying phase. Here's the activity-by-activity breakdown that determines how much of the firm's labor actually qualifies.
Why Phase Alone Isn't Enough
The first instinct when approaching R&D Tax Credit qualification for an A/E firm is to think in phases: schematic design qualifies, construction administration doesn't. That instinct is a reasonable starting point — but it's incomplete in a way that matters significantly to the credit calculation.
Phase indicates where qualifying work is most likely to have occurred. It does not tell your CPA what happened within that phase. An architect who spends a qualifying phase doing a mix of structural system evaluation, client status calls, project schedule updates, and schematic drawing production has performed both qualifying and non-qualifying activities — all within the same phase, all logged to the same billing code if activity tracking doesn't distinguish them.
The CPA's job is to determine what qualifies. The labor report's job is to give them the data to make that determination accurately. A labor report that shows only phase and hours gives the CPA a starting point — a pool of potentially qualifying time. A labor report that shows phase, activity, and hours gives the CPA the specific information they need to include a structural analysis hour logged to SD and exclude a project management hour logged to the same phase.
Phase is context. Activity is the determination. Both columns need to be in the report — and both need to reflect how the work actually happened — for the CPA to produce an accurate, defensible, and optimized credit calculation for the firm's qualifying percentage.
→ Read: R&D Tax Credit for A/E Firms: The Complete Guide
Check with your CPA; BaseBuilders is not a tax advisor, does not play one on TV, and tax laws are constantly changing.
The CPA determines what qualifies. The labor report gives them the data to make that determination accurately.
Phase tells them where qualifying work most likely occurred. Activity tells them what kind of work was performed within that phase — and is often the more decisive column. A labor report with both columns gives the CPA what they need to optimize the credit and defend it if audited. A report with phase only gives them an estimate.
Activities That Qualify — the Technical Core of A/E Work
Qualifying activities are those that involve applying engineering or scientific principles to evaluate technical alternatives under genuine uncertainty. In A/E practice, these activities cluster around the core technical work of design — the work that determines what gets built and how it performs.
Structural system evaluation and analysis
Evaluating alternative structural systems — comparing steel moment frames against concrete shear walls, evaluating alternative foundation approaches for a challenging site condition, and analyzing the structural implications of an architectural program change — is qualified research. The evaluation involves engineering principles, genuine technical uncertainty about which approach is optimal, and a process of analysis that eliminates alternatives and converges on a solution.
Structural calculations performed to verify a system that has already been selected are less clearly qualifying — the uncertainty has been resolved, and the calculation is confirming rather than discovering. But structural analysis performed to evaluate whether a proposed system will work, or to compare the performance of alternatives, qualifies.
Energy modeling and performance analysis
Modeling alternative mechanical systems for energy performance, evaluating envelope configurations against energy code requirements, comparing glazing options for thermal and daylighting performance — these are qualified research activities. They involve engineering principles (thermodynamics, heat transfer, daylighting physics), genuine technical uncertainty about which configuration will meet performance targets, and a systematic evaluation process.
Performance analysis done after the system has been selected — to confirm compliance or document the design for permit submission — is less clearly defined. The analysis is confirmatory rather than exploratory. But the modeling done during SD and DD to determine which approach meets performance requirements qualifies.
MEP system design and coordination
Developing and evaluating mechanical, electrical, and plumbing system alternatives — sizing equipment, evaluating distribution configurations, coordinating routing with structural and architectural constraints — is qualified research during SD and DD. The work involves engineering principles, technical uncertainty about which configuration will fit, perform, and coordinate correctly, and an iterative process of evaluation.
MEP coordination that resolves conflicts between a system that has already been designed and the work of other disciplines is potentially qualifying if it requires technical problem-solving to find a new solution, or non-qualifying if it involves routine drawing coordination without engineering judgment.
Site engineering and civil design
Evaluating alternative drainage approaches for a site with complex stormwater constraints, analyzing grading options for a sloped site, and developing alternative utility routing configurations — civil and site engineering work during early design phases qualify. The evaluation involves engineering principles, technical uncertainty, and a systematic process of analysis.
Site engineering work during CA — such as responding to field conditions, verifying grades, and confirming utility installations — is generally non-qualifying. The design has been determined; the CA work is confirming that construction matches it.
Computational design and parametric analysis
Architects and engineers increasingly use computational tools — such as parametric modeling, simulation, and generative design — to systematically evaluate design alternatives. This work is among the most clearly qualifying in A/E practice. It involves technical methods, systematic evaluation of alternatives, and a documented process of experimentation, often directly visible in the computational record.
Code research and performance compliance path evaluation
When a project involves a non-standard code compliance path — performance-based fire engineering, alternative means and methods, energy compliance through a path other than prescriptive requirements — the technical evaluation required to establish the compliance path qualifies. The work involves uncertainty (will this approach satisfy the authority?), engineering principles, and analysis.
Routine code research to confirm prescriptive requirements — looking up the applicable occupancy load factor, confirming the required number of exits — is not qualified research. But the technical work of developing and justifying a non-standard compliance approach is.
The common thread through all qualifying activities is genuine technical uncertainty combined with a systematic evaluation of alternatives using engineering or scientific principles.
When those three elements are present — uncertainty, alternatives, technical method — the activity qualifies. When any one of them is missing, it likely doesn't.
What Doesn't Qualify, What Might, and What Your CPA Needs to Review
The activity table on the hub page organizes A/E firm work into three tiers: Usually Nonqualified, Mixed / Requires Review, and R&D Candidate. This section of this article focuses on the first two tiers — the activities that either clearly don't qualify or that require CPA review to determine whether they do.
Understanding these categories is as important as understanding what qualifies. Non-qualifying activities don't disqualify a phase — they simply don't count within it. A schematic design phase with 60% qualifying technical work and 40% non-qualifying project administration produces a qualifying percentage of 60%, not zero. The activity tracking is what makes that percentage calculable rather than estimated.
Usually Nonqualified — Activities That Clearly Don't Count
Project administration. General project setup, scheduling, billing notes, staffing, budget tracking, and administrative coordination do not involve technical uncertainty or experimentation. These activities support the project without being technical work themselves — and they happen in every phase, including qualifying ones. A principal who spends three hours on schematic design administration and two hours evaluating structural alternatives has two hours of potential R&D candidate time and three hours that don't qualify — regardless of the phase.
Client and owner meetings. Most owner meetings address requirements, preferences, budgets, schedules, and approvals. They may inform the technical work, but they are not the technical work itself. A meeting where the client approves a design direction is not qualified research. The design development that produced the direction being approved may be.
Production drafting and documentation. Routine drawing production, BIM updates, sheet setup, annotation, cleanup, and documentation generally record decisions already made rather than resolve technical uncertainty. This is among the most commonly misunderstood boundaries in A/E R&D qualification — the CD phase contains both qualifying technical detailing and non-qualifying production work, often on the same day from the same person. The activity is what distinguishes them, not the phase.
Permitting and agency response. Permit processing and ordinary responses to plan-check comments are compliance work. Submitting the application, tracking its progress, and responding to standard comments do not involve qualified research. The exception — technical problem-solving required to satisfy unusual or competing regulatory requirements — sits in the Mixed / Requires Review tier below.
Bidding and procurement support. Bid support, addenda, pricing assistance, substitution requests, and procurement questions are commercial or administrative in nature. The exception is technical redesign triggered during the bidding phase — which may qualify but requires review.
Routine construction administration. Site observations, meeting minutes, pay applications, punch lists, and general construction support occur after design uncertainty has been resolved. The CA phase is generally not where qualified research happens — but it is not categorically excluded, which is why the activity table treats several CA-related activities as Mixed / Requires Review.
Project closeout. Record drawings, warranties, manuals, final punch items, and administrative closeout do not involve technical experimentation. Closeout is non-qualifying.
Mixed / Requires Review — Activities Where the CPA Makes the Call
These are the activities where the answer depends on what specifically was happening, and where the Activity column in the labor report gives the CPA the information they need to make the determination accurately rather than estimating.
Project management and coordination. General coordination is usually non-qualified. Time may be reviewed if the person was directly supervising or coordinating technical experimentation, evaluating alternatives, overseeing modeling, or managing technical problem-solving. The key question is whether the coordination was administrative in nature or whether it was directing qualified research activity.
Existing conditions and field verification. Routine measuring, documenting, and confirming existing conditions usually does not qualify. Technical investigation of unknown or uncertain constraints — where the firm is trying to determine whether a proposed approach can work given what exists in the field — may be a candidate.
Code and regulatory technical analysis. Routine code lookup and standard compliance documentation usually do not qualify. The activity may be a candidate when technical uncertainty exists around how to satisfy competing or unusual requirements — a performance-based fire engineering approach, an alternative means and methods path, or a situation where the standard prescriptive approach cannot be applied and the firm must develop and justify an alternative.
Interdisciplinary coordination. Ordinary coordination between architecture, structural, MEP, civil, and consultants is usually not enough on its own. It may be a candidate when coordination requires resolving technical conflicts, testing alternatives, or working through a problem that has no established solution, as opposed to scheduling, communication, and document exchange.
Technical detailing. Standard details generally do not qualify — they apply established methods to documented conditions. Non-standard details may be candidates when the team is solving a performance, constructability, envelope, code, structural, or material problem that has not been resolved by prior practice.
Quality control and internal review. Routine redlines and checking are usually non-qualified. Review may be a candidate if it directly supervises or evaluates technical experimentation or unresolved design alternatives — a principal reviewing a structural analysis to determine which approach to pursue is doing something different from a project manager checking a drawing set for completeness.
RFI and submittal review. Routine RFIs and submittals usually do not qualify. They may be candidates if they require analysis of alternatives, technical redesign, or resolution of unexpected field conditions — which is why the Field Issue / Technical Redesign activity is in the R&D Candidate tier while routine RFI response is in Mixed / Requires Review.
What this means for activity configuration
The Mixed / Requires Review tier is where the activity list configuration matters most. When a staff member logs time to "Project Management / Coordination" or "Interdisciplinary Coordination," the CPA has a starting point for analysis but needs more context. When that same time is logged to "Technical Conflict Resolution" or "Alternative Evaluation — MEP Coordination," the CPA has the specificity needed to make a determination without a separate inquiry.
The goal of activity configuration is not to pre-qualify time — the CPA does that. It is to give the CPA entries specific enough to analyze accurately, rather than entries broad enough that the analysis requires reconstructing what the work actually involved.
→ Read: Does Your A/E Firm Qualify for the R&D Tax Credit?
Why Specific Activity Tracking Is More Than Good Practice — The Court Record
Two 2024 court cases involving architecture and engineering firms illustrate exactly what happens when time tracking is too vague to support an R&D Tax Credit claim — and why the Activity and Comments fields in the labor report matter more than most firms realize.
In Meyer, Borgman & Johnson, Inc. and Phoenix Design Group, Inc., both decided in 2024, the courts examined whether the firms' design and engineering activities met the IRS four-part test. In both cases, the documentation was found insufficient to substantiate the claims. The courts specifically cited sparse time records and vague activity descriptions — entries that said "design" or "engineering" without connecting the hours to specific technical uncertainty, specific alternatives evaluated, or a specific process of experimentation.
The Tax Adviser, in its September 2025 analysis of these cases, noted that time-tracking systems "must evolve beyond vague entries like 'design'" and that firms should "allocate hours to specific experimental tasks" with enough specificity that a court or IRS examiner can link the hours to qualifying activity without relying on after-the-fact reconstruction.
BaseBuilders supports this directly through two fields on every time slip: the Activity field, which categorizes the type of work performed, and the Comments field, where the staff member can describe in plain language what specific technical work was happening and why it may qualify for R&D consideration. A time entry logged as "Structural System Evaluation" in the Activity field with a comment that reads "Evaluated three alternative bay configurations against seismic and program requirements — eliminated moment frame option due to column placement conflict" is precisely the kind of contemporaneous, specific record the court record says is necessary.
Both fields are exportable columns in the BaseBuilders labor report. The Activity column indicates the type of work performed. The Comments column tells them what specifically was happening — in the words of the person who did the work, recorded at the time it occurred. Together, they convert the labor report from a financial summary into an audit trail.
Encourage staff to use the Comments field whenever they are logging time to an activity that may qualify for R&D consideration. The entry does not need to be long — a sentence or two describing the specific technical problem, the alternatives being evaluated, or the uncertainty being addressed is sufficient. That sentence, written at the time of the time slip, is worth more to the CPA and to audit defense than any amount of reconstruction done at tax time.
The cases do not mean A/E firms cannot claim the credit. They mean the firms that claim it successfully are the ones with documentation specific enough to survive scrutiny — and that documentation is far easier to produce as work happens than to reconstruct after the fact.
One additional note from the case analysis worth carrying into your CPA conversation: courts have scrutinized whether A/E work performed under standard owner-architect agreements constitutes "funded research" — research funded by a third party that disqualifies the performing firm from claiming the credit. The analysis turns on who bears the economic risk of the research. Firms working under fixed-fee agreements, where the firm bears the cost risk of overruns, are generally in a stronger position than firms working under cost-plus arrangements, where the client reimburses all costs. This is worth confirming with your CPA for any project where the contract structure is unusual.
Case Summary: Meyer, Borgman & Johnson, Inc. v. Commissioner
Case Summary: Phoenix Design Group, Inc. v. Commissioner
Non-qualifying activities don't disqualify a phase — they just don't count within it.
A schematic design phase with 60% qualifying technical work and 40% non-qualifying project management produces a qualifying percentage of 60%, not zero.
Activity tracking makes that percentage calculable rather than estimated.
Setting Up Activity Tracking for R&D Credit Purposes
The practical challenge is not understanding which activities qualify — the categories above are clear enough to apply in most cases. The challenge is to capture the distinction in the time-tracking system in a way that produces a usable labor report without imposing an onerous tracking burden on technical staff.
The activity field in BaseBuilders
BaseBuilders ships with default activity types — Design, Drafting, Field Work, and similar standard categories. These defaults reflect the most common activities in A/E practice and provide a starting point for activity tracking.
For R&D credit purposes, the activity list should be reviewed and configured to clearly distinguish qualifying technical activities from non-qualifying administrative and management activities, so that the distinction is visible in the labor report. The goal is not to create an exhaustive taxonomy — it is to make the qualifying/non-qualifying split identifiable without requiring staff to make complex judgment calls when logging time.
A practical activity configuration for R&D purposes might include:
Qualifying technical activities: Design / Analysis, Structural Analysis, Energy Modeling, MEP Design, Site Engineering, Code Research, Coordination (technical), Computational Analysis.
Non-qualifying activities: Project Management, Client Communication, Staff Scheduling, Permit Administration, Meeting Facilitation, Document Production (routine).
Staff log time against the activity that best describes what they were doing. The labor report organizes the export by activity and phase, so the CPA receives a report that already separates qualifying from non-qualifying labor within each phase, rather than requiring a percentage-allocation judgment.
The one-time configuration investment
Configuring the activity list for R&D purposes is a one-time setup — not an ongoing burden. Once the activity types are defined and staff understand which category their work falls into, the tracking happens as part of the normal daily time entry process. The incremental effort per time entry is minimal — choosing "Design / Analysis" versus "Project Management" when logging a time entry takes seconds.
The return on that one-time setup is measured in CPA hours saved annually and in a more defensible, more accurate credit calculation every year the credit is claimed. Firms that have been claiming the credit without activity-level tracking are leaving qualifying percentage accuracy on the table — and paying their CPA to estimate what the tracking would have measured directly.
Saving the report configuration
Once the activity configuration is in place and the R&D labor report column set has been defined in BaseBuilders, the report setup is saved as a named template. Every subsequent year, the same template runs for the prior tax year's date range — generating the same format the CPA has been working with, with no reconfiguration required. The annual labor report production is a query, a column set selection, and an export. Minutes, not hours.
→ Read: The R&D Tax Credit Labor Report: What Your CPA Actually Needs from Your A/E Firm
→ Read: Time Tracking for Architecture and Engineering Firms
→ Read: A/E Accounting for Architecture and Engineering Firms
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