Most developers and building owners focus on the big numbers: acquisition cost, construction cost, financing terms. The line items that can make or break a deal’s economics.

But there’s a category of value that routinely gets left uncaptured: R&D tax credits. And a recent change in federal tax law has made these more accessible, and more retroactively valuable, than most owners realize.

What changed and why it matters

Section 174 of the tax code governs how companies deduct research and development expenses. Until recently, most businesses could deduct these immediately. A 2017 tax change required that R&D expenses be amortized over five years (15 for foreign research), beginning in 2022.

The effect on AEC firms and real estate developers was significant. Work that had previously provided immediate tax relief (engineering analysis, design iterations, testing of new building systems, custom fabrication development) suddenly had to be spread over years. Cash flow hit hard.

The good news: legislative changes are moving to reverse this, and there are retroactive opportunities to claim credits that may have been missed. For firms that do significant technical work (custom engineering, innovative construction methods, energy systems design, building performance analysis) the numbers can be substantial. Hundreds of thousands of dollars for mid-size firms. More for larger ones.

What qualifies as R&D in construction?

This is where many owners and their advisors leave money behind. R&D credits aren’t just for pharmaceutical companies running clinical trials. In construction and real estate development, qualifying activities include:

Custom structural engineering solutions for non-standard building configurations. Energy systems design that goes beyond code minimum: new HVAC approaches, building envelope optimization, integrated renewable systems. Development of proprietary construction methods or materials applications. Software development for project management or building operations. Feasibility studies for technically uncertain approaches.

The test isn’t whether something is novel to the world. It’s whether it required experimentation and iteration: trying approaches, evaluating results, and refining based on what you learned. Most custom building projects involve significant amounts of exactly this kind of technical work.

The M&A dimension

If you’re thinking about buying or selling an AEC firm or a development portfolio, these credits have a specific relevance.

Unclaimed retroactive R&D credits are a balance sheet asset that may not be priced into a transaction. A buyer who identifies this opportunity before closing can capture value that the seller didn’t realize existed. A seller who documents their credits properly can command a higher price.

Due diligence processes that omit a thorough review of R&D credit opportunity are leaving money on the table, sometimes significant money.

What to do

This isn’t something to evaluate yourself. The rules are specific enough that it requires specialized tax expertise to identify what qualifies and document it properly.

What you should do is have the conversation with a firm that specializes in this area, not your general tax accountant, who may not have deep experience in R&D credits for construction and real estate specifically. The qualifying work needs to be properly documented in a way that supports the credit claim.

The window for retroactive claims isn’t unlimited. If there’s money here for your organization, the time to capture it is now, not after the legislative picture shifts again.

The building you designed and built was probably more technically innovative than you gave yourself credit for. It may be time to claim that credit, literally.