MEP engineering firms — companies that design mechanical, electrical, and plumbing systems for buildings — may perform activities that warrant analysis under the federal R&D tax credit. This page explains what technical work may be relevant. It is educational and is not individualized advice. For the foundational framework, see our page on qualified research.
What R&D May Look Like in MEP Engineering
MEP engineering involves mechanical, electrical, and plumbing system development, integration, performance optimization, and controls. Work directed at resolving genuine technical uncertainty in these areas may warrant review. Routine MEP design and standard practice do not, by themselves, constitute qualified research.
Industry-Specific Examples of Technical Development
- Developing MEP system designs to achieve a specified performance, efficiency, or cost target where the appropriate design is uncertain.
- Developing integration approaches for complex building systems where the appropriate method is uncertain.
- Developing control strategies or programming for building automation where the appropriate approach is uncertain.
- Testing alternative equipment or components to meet a performance target where the capability is uncertain.
- Developing approaches for difficult or unusual building requirements where the appropriate method is uncertain.
- Developing analysis or modeling methods to evaluate system performance where the appropriate approach is uncertain.
Technical Uncertainty Examples
- Whether an alternative system design can achieve a specified efficiency or performance target for a specific building.
- Whether a modified integration approach can resolve a technical question about complex building systems.
- Whether an alternative control strategy can achieve a specified performance and efficiency target.
Process-of-Experimentation Examples
A process of experimentation may involve modeling or simulating alternative system designs and measuring performance, testing alternative control strategies and measuring results, or conducting pilot installations and evaluating performance.
Potential Business Components
Potential business components may include a new or improved MEP system design, a new or improved integration method, a new or improved control strategy, or a new or improved analysis method.
Employee and Contractor Work
Employees whose work may warrant analysis include mechanical, electrical, and plumbing engineers, design engineers, controls engineers, and energy analysts. Contractor work may include outside engineering firms or equipment suppliers performing development work on behalf of the firm.
Activities That Generally Require Caution or May Not Qualify
- Routine MEP design following established methods and codes.
- Standard sizing and selection using established methods.
- Ordinary coordination and project management.
- Simple equipment substitutions without a technical development question.
- Routine analysis using established methods.
Documentation That May Help
Records that may help include system design development records, modeling or simulation results, control-strategy development records, and records connecting personnel to specific development projects.
Example Hypothetical Project
The following is a hypothetical example for illustration only.
An MEP engineering firm is developing a system design for a building with complex requirements intended to achieve a specified efficiency and performance target. The technical uncertainty is whether an alternative combination of system architecture, equipment, and control strategy can achieve the specified target. The team models alternative approaches, tests control strategies, and evaluates performance. Professional review is still needed.
Questions to Ask Internally
- What specific system, integration, or control strategy was being developed or improved?
- What technical uncertainty existed at the outset?
- How does this differ from routine MEP design?
Relationship to the Four-Part Test
The four-part test applies the same way as in any industry. The work must satisfy all four elements: permitted purpose, technological in nature, elimination of uncertainty, and process of experimentation. Internal-use software considerations may apply to control-system development; see our page on internal-use software.
Key Takeaway
MEP engineering firms may perform activities that warrant analysis under IRC §41 — particularly work involving mechanical, electrical, and plumbing system development, integration, performance optimization, and controls. Routine MEP design does not automatically qualify. Because these determinations are fact-specific, professional review is appropriate. For related industries, see HVAC contractors and electrical contractors.