R&D credit for architecture and engineering firms: funded research and who owns the work

How do funded research and substantial rights apply to engineering firms?

For architecture and engineering firms, credit eligibility often turns on two contract questions: who funds the work, and who keeps substantial rights in the result. Those are the same questions a data licensing review asks about a firm's records: whose work product is it, and can the firm license it.

This guide is for CPA and advisory teams that handle credit studies for A/E and engineering-services clients. It shows how one contract review can separate firm-owned methods from client-owned designs, which is useful for the credit engagement and also tells you early whether a licensing introduction could make sense. Eligibility for any credit remains a tax determination for the engagement team.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Why do contracts decide the outcome for A/E clients?

Most A/E work is performed under a services agreement, and that agreement allocates risk, payment and ownership. A fixed-fee contract where the firm carries the risk of not succeeding reads differently from a cost-plus or time-and-materials contract where the client pays regardless of result. Ownership clauses matter too: many owner-architect and owner-engineer agreements say that drawings, specifications and models belong to the client or are licensed back to the firm.

A credit study reads those clauses to decide whose research it is. A licensing review reads them to decide whose records they are. The reading overlaps heavily, so do it once and record the result in your workpapers.

Which contract terms to pull, and what each tells you

State rules differ on many of these points, so treat the table as a prompt for questions, not a conclusion.

What does a firm own that a client does not?

Firms often hold more of their own intellectual output than they realize. Typical firm-owned material:

• Internal design standards, details libraries and specification templates the firm wrote before any project started.
• Calculation spreadsheets, scripts and Revit or CAD families the firm built as tools.
• Quality review checklists, markups of its own drafts and lessons-learned notes.
• Proposal libraries, staffing and scheduling records, and time and billing history.
• Internal email, chat and meeting records about how decisions were reached, subject to confidentiality duties to clients.

Client-owned material typically includes the final instruments of service, client-supplied data and anything marked confidential under the project agreement.

A contract-review screen you can run in one pass

Add these items to the credit scoping checklist and keep the answers on file.

• The firm has 50+ full-time employees at peak (contractors excluded) and several years of documented operations.
• Project records live across multiple systems, such as project management, document control, CAD or BIM vault, email, time and billing.
• A standard agreement is used, so one review covers most projects.
• Internal standards and tools are documented as firm-owned.
• A named principal, owner, CEO, CFO or authorized representative can approve a license.
• That sponsor would consider an exclusive AI-training license for an agreed term.

Firms that fail the second item often have well-documented research but thin systems history. Firms that fail the fourth need a closer look before anything else happens. The company fit checker offers a quick non-binding screen, and who qualifies lists the baseline in full.

Illustrative scenario

Illustrative, fictional: a 140-person structural engineering firm completes a credit study. The contract review shows that final drawings belong to clients, but the firm owns its calculation templates, internal peer-review notes and a decade of project coordination email and issue trackers. The adviser notes that the second category might support a conversation, and that most client-facing files would stay out. After the credit engagement closes, the adviser asks the managing principal whether she would like an introduction. That is the whole of the adviser's role.

How do you raise the introduction?

1. Keep it apart from the credit engagement, in time and in the engagement letter.
2. Ask permission to raise a different topic.
3. Describe it factually: companies license records they created, keep ownership, and sign nothing until price and terms are agreed.
4. Offer your referral link or submit basic company details through the referral form, so the firm works directly with SourceX on the inventory and rights review.

For adjacent referral thinking, see the referral opportunities for accountants, the CAS growth guide and the companion pieces on manufacturers and interview questions.

How do partner rewards work, and what about professional rules?

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 cumulative per referred company. The reward is payable only after the buyer pays and SourceX receives its fee; no reward is guaranteed, and it is never deducted from what the company receives.

Accountancy rules on commissions and referral fees differ by state. A New Jersey Society of CPAs resource on commissions and contingent fees shows how a state can go beyond the national code, so check your own board's rule and your firm's independence policy first. Read the program terms before you register.

When to leave it alone

• Nearly all of the firm's records sit under client confidentiality with no consent path.
• The firm's work is mainly government contract work with data-rights restrictions you have not reviewed.
• Project files are scattered across personal drives with no one able to export them.
• The firm already licensed its records for AI training.

Next step

Take the next A/E credit study and log the contract-review answers above. If the screen looks promising and the principal agrees, register as a partner and introduce the firm.