10 Questions with Research and Development Technical Tax Consultant - Onosetale Aigbe

  • Corrine Richards, Research and Development Technical Tax Consultant at Tax Consulting Firm

  • 03.11.2023 10:58 am

Onosetale Aigbe is a distinguished Research and Development (R&D) Technical Tax Consultant in the United States. She holds a Senior Technical Tax Consultant Managerial position at ABGI and leverages her technical background in Mechanical Engineering to solidify her status as a leading expert in the industry. Ms. Aigbe specializes in consulting with companies in Science, Technology, Engineering, Software, Manufacturing, and Architecture to claim R&D tax credits. Her innovative tax solutions have been adopted by over 200 technical and engineering firms, enabling the identification of more than $6 million in R&D tax credits for U.S. companies engaged in cutting-edge innovation, research, and development. In a wide-ranging interview with Corrine Richards, Ms. Aigbe discusses the challenges faced by the R&D Tax industry and shares her insights into the future development of the business and its regulations.

1. What inspired you to pursue a career in R&D technical tax consulting, specifically within the field of research and development?

My top three reasons for becoming an R&D technical consultant are curiosity, interest, and challenge. Simply put it, I was curious about learning something new. I come from a STEM (Science, Technology, Engineering, and Mathematics) background, and I was intrigued to see how my technical background, exposure, and experience in the mechanical engineering field would translate in the R&D tax credit consulting role.  As to what spiked my interest, I was informed my technical background would be extremely useful and applicable to my tax consulting career path. My job placed me in a team where my engineering background helped my understanding of specific industries and this gave me an advantage when relating with clients to better understand their processes, methodologies, and the overall technical operations of their business. It was also easier for me to understand the different research and development efforts in STEM-related industries such as Software development, Technology application, Structural design, Civil and Mechanical Engineering practices as well as in Architectural firms. Lastly, I was open to the challenge presented by my career path of R&D Tax Credit consultant. This role required new skill sets and dimensions that I had little to no knowledge and experience. For example, I had to learn details of Section 41 of the Internal Revenue Code, Treasury Regulations 1.41, Section 174- Research and Experimental Expenditures, Treasury Regulations 1.74-2 &1.74-2 and Treasury Decision 9680 as well as several case laws. Having come from an engineering background, it was a challenge to learn the Tax Code, as the Tax Code typically refers to other sections of the Internal Revenue Code. I was required to learn and study case laws to know the details of the application and implementation of the R&D Tax Credit scheme.  Additionally, the role of a consultant requires working in a team and building relationships with not only the clients but with your team of Project Managers, Directors, Quality Control Attorneys, Tax Controversy, and Sales Managers, who work together to ensure quality, validity, and defensibility of the R&D credit values.  My role was a challenge I wholeheartedly embraced since I started on the career path of an R&D Credit Tax Consultant.

2. Can you describe your educational and professional background that led you to become a senior R&D technical tax consultant?

I studied Mechanical Engineering for both my bachelor’s and master’s degrees. During my educational pursuits, I interned in the Oil & Gas industry as a Petroleum Reservoir Engineer Intern and in a Pump Manufacturing company as an Application Engineer Intern. My curiosity led me to research about the R&D technical consultant role and I found it to be a good fit for my educational background and industry working experience. I have come to realize that I made a good choice of a career as my professional and educational background has enabled me to better understand and navigate the qualifications for the R&D tax credit for STEM companies that I consult for.

3. What do you find most fulfilling or exciting about helping businesses navigate R&D tax incentives and regulations?

I find a couple of things fulfilling and exciting about navigating R&D tax incentives for my clients. The education part of my job is exciting. Not only do I get the opportunity to educate my clients about tax credits, but it is also vice versa as they have to explain the details of their work and processes to me. It feels very rewarding to bring awareness of the R&D tax credit and the qualification requirements to my clients. In many cases, I found that many people do not appreciate certain activities, especially activities performed to support R&D endeavors that could earn them tax credits. It’s exciting when people realize that they can claim certain qualified research expenses like cloud hosting expenses or supply costs used in research and development. As for me being educated, I get to learn new discoveries, whether it be the making of new products in a factory or the development of software and robotics to perform extraordinary things. In my everyday life I see things and think, “Oh, I know how that works”, or “Wow, that is what my client was talking about.” I get to be exposed to so many industries and the different intricacies of how they operate.

The second fulfilling thing is the opportunity to help American businesses in my line of work. The tax benefits I help to identify for my clients can help their businesses in many ways. For instance, some firms use tax benefits to expand their businesses and buy new technology or machinery to expand their service offerings. Others use the tax benefit to employ more technical people and/or increase the salaries of their workers. Some businesses in a bad financial position and use the tax benefits to sustain their business, especially if they have a non-profitable year.  It is fulfilling to know that I am contributing my quota to the sustenance of the American economy through my role as an R&D tax consultant.

4. How do you keep up-to-date with the constantly evolving tax laws and regulations related to research and development?

I stay updated with the latest changes to Section 41 and Treasury Regulations 174 through constant research, studying and monitoring. There is constant check-ins and monitoring of Internal Revenue Service’s releases on changes to tax regulations and tax cases. My team has active links with lawyers, CPA firms, and lawmakers that keep me and my colleagues up-to-date and knowledgeable about new laws and legislation being discussed, debated, or passed by the Congress.  I am constantly looking for materials and cases in R&D tax laws to expand my knowledge and career horizon.

5. Can you share a particularly challenging or complex R&D tax consulting project you've worked on and the strategies you employed to address it successfully?

I worked on an engineering R&D Study which typically should be straightforward since most engineering companies engage in qualified research activity. This engineering client had time-tracking data, but it was not in the format that is required for the study. The time tracking sheet only tracked employee hours to phases but not to specific jobs or projects or tasks. During an R&D Study, it is best practice to establish a nexus between the qualified research expenses (QRE) and the qualified research activities (QRA). Essentially, one should establish a connection between the R&D expenses that are qualified to the people performing the qualified activity. An example of a perfect ‘nexus’ document that connects activities to people is a detailed time tracking or timesheet report. The time tracing report would have employees tracking hours to unique projects or jobs, and then to phases and specific tasks.

So, for this client, I found that although the data was good in terms of having the hours breakdown, however, it did not create a nexus for the Study. I ultimately employed the “Use of Estimates” methodology, in addition to the time tracking data provided by the client to carry out the employee wage analysis for the Study.  This methodology worked well with the R&D analysis and the tax benefit was successfully provided to the client.

6. In your opinion, what are some common misconceptions or misunderstandings that businesses have regarding R&D tax incentives?

A common misunderstanding is the type of tax the R&D incentives can offset. There is a huge misconception that R&D credit is a deduction as opposed to a credit that reduces the dollar-to-dollar amount of the taxes a taxpayer owes as opposed to a deduction which can reduce taxable income. Another common misconception is regarding the calculation of the R&D tax credit. The formal name of IRC Section 41 is called the Credit for Increasing Research Activities. If a client is engaged for a 2022 R&D study year, they believe documentation is only needed from year 2022, but we must establish what is called a “base period.” The base period is a few years prior to the study year to establish a trend in the performance of the research activities throughout the years. Essentially, a company that has invested more in R&D throughout the years will be rewarded better by the mechanics of the calculation as opposed to a company that invested expenses in R&D initially and trailed off or remained stagnant in their investment.

Some other misunderstanding that I see with the R&D tax credit is the concept of Net Operating Loss (NOL). Some companies believe that if they did not have a profitable year and, therefore, not owe taxes for the Study period (the specific years that R&D credit is being calculated for) they cannot utilize the credit. In actuality, the R&D tax credit can be carried back one year and credited forward up to 20 years until the credit is exhausted. Another misunderstanding is that a taxpayer can go as far back into the past to claim the credit. The tax law refers to a period called the statute of limitations, that allows the taxpayer a limited amount of time to amend tax returns since ultimately the Form 6765 – Credit for Increasing Research Activities goes on the tax returns. The statute of limitation for amending return is 3 years from the original filing date.

7. What are some of the key benefits that businesses can gain from maximizing their R&D tax credits?

While maximizing their R&D tax credits will result in the Company paying less taxes, I believe the real intention of giving R&D tax credit is to encourage companies to invest in innovation and research which will ultimately benefit the company and the nation.  Also, since the R&D credit can be carried forward for up to 20 years, the credit can be seen as an asset to the company in a situation, for instance, where the company is looking to be sold or acquired.  Another benefit can come for an S-Corporation, where the shareholders are liable for paying the taxes, which is different from a C-Corporation where the entity itself is responsible for paying the tax liability. As such, the owners of businesses, which sometimes drive the R&D efforts and/or create an environment to allow for innovative work to be done, can directly reap the benefits of reducing their tax liability with R&D tax credits. Additionally, the R&D tax credit can be used to offset payroll tax if the Company in question meets the eligibility of a Qualified Small Business (QSB). The company may offset payroll tax with R&D tax credits if it is a ‘startup’ company or has no income tax liability.

8. How do you approach building strong client relationships and ensuring that you understand their unique R&D needs?

The best approach to maintaining strong and good relationships with clients is to have an engagement structure that thoroughly understands their unique situation and needs. I usually structure my studies to properly introduce the history and purpose of the R&D credit scheme and then walk my clients through the qualifications criteria to set expectations of the kind of activities that we will be focused on in the study. Structuring my studies this way allows me to tailor the documents required for the client’s specific company needs.  Once, I receive the documentations from my clients, I maintain weekly to bi-weekly check-ins via email or teleconference to address all questions or concerns my clients may have. I continuously realign expectations as needed and communicate deadlines regarding how the R&D study is progressing.  By following adequate communication, setting priorities, and realigning expectations, I have been able to provide efficient R&D Studies that engendered respect and trust between me and my clients.

9. What advice would you give to individuals looking to enter the field of R&D technical tax consulting and achieve a senior level position?

I would say be open-minded and confident. There are so many things to learn in R&D tax consulting regardless of one’s educational or professional background.  The Research and Development Tax Credit is such a niche field that you will need to be adaptable and willing to learn new things like the Section 41, case laws, and Treasure Regulations 1.41,1.74-2 &1.74-4. Additionally, the consulting aspect of the job is quite prominent, especially at a senior managerial level as it gives a person a lot of exposure.  Asides from developing the technical knowledge and know-how of qualifying, quantifying, and calculating the credit, the career gives you the chance to create and deliver presentations to C-Level executives and technical directors or managers of various companies. You will be drafting correspondences to CPAs and clients, managing deadlines, and dealing with dissatisfied clients. You will have the opportunity to develop beneficial soft skills as a tax consultant. Above all, the career comes with its unique set of exciting challenges and fulfillments. I will certainly advocate for people to give this career a chance.

10. How do you envision the future of R&D tax consulting, and what trends or developments do you see on the horizon that businesses should be aware of?

The R&D tax consulting market is currently a peculiar or small market compared to the general consulting industry in the United States. I expect to see a phenomenal growth in this industry soon driven by awareness. Many companies are still not aware of the R&D tax credit, so there is a lot of opportunity for small to big size businesses that engage in R&D endeavors in the United States that could benefit from the R&D tax credit.

While it may be difficult to predict what new trends or developments might happen in the future in the R&D tax space, the changes to other tax laws or business job act such as the American Innovation R&D Competitiveness Small Business Act, American Innovation and Job Act and Small Business Jobs Act could have impact on R&D tax credit. However, clients should be rest assured that their R&D tax credit provider will keep them abreast of these changes and the impact they could have on their businesses.

Ms. Aigbe is widely acknowledged as an outstanding consultant in her field, committed to educating and raising awareness among U.S. companies eligible for the R&D Tax incentive. These tax credits have significantly bolstered the U.S. economy, empowering businesses to create jobs domestically, provide educational benefits to employees, invest in cutting-edge technology, and uphold best practices that foster continuous innovation. Ms. Aigbe’s efforts drives continuous innovation and the creation of groundbreaking initiatives and ideas that benefit not only the U.S. but also the global community.

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