Geosyntec Consultants, Inc. v. United States (2015)

Main Issue:

• Funded Research

Facts:

• Taxpayer claimed the research credit for client projects related to environmental and geological infrastructure consulting and engineering
• Taxpayer claimed research expenses associated with both fixed-price and cost-plus contracts
• The Appellate Court allowed the fixed-price contracts but denied the cost-plus contracts

Conclusion:

• Cost-Plus contracts do not qualify
• Fixed-price contracts may qualify for the credit as long as the taxpayer bears the economic risk for the research (both costs and profit)

Take-Away Point:

• The taxpayer must demonstrate that progress payments under a fixed-price contract are “contingent on the success of the research”
• The Fairchild case is still the seminal case regarding fixed-price contracts and should be referenced when analyzing contract language