With tax reform adding to the complexity of the Internal Revenue Code, companies are searching for ways to reduce overall tax liability through various tax incentives. Companies continue to rely on large accounting firms to assist in identifying and quantifying deductions and tax credits to reduce their potential tax liability. However, relying on large accounting firms to assist comes at a cost. Utilizing large accounting firms, namely the “Big 4” (and similar firms), ultimately shrinks a company’s return on investment (“ROI”). The information below will demonstrate why choosing ABGi USA, a firm focused solely on identifying and quantifying complex tax incentives, provides added value and protects a company’s ROI.
Discussion
Big four firms have an established place in the accounting arena from a macro perspective. Depending on the firm, both the services in preparing tax returns and in performing audits are some of the best available. In an effort to increase their footprint in the tax arena and find new revenue streams, the Big 4 have created “specialized tax incentive” departments to assist with deductions and incentives. However, name recognition does not always mean quality and value when evaluating the intricacies of specialized tax incentives within the Internal Revenue Code.
When evaluating which firm to utilize to assist in identifying these specialized tax incentives, a company may ask: “[W]hich firm will provide me with the greatest value?” To determine which firm provides the greatest value with respect to identifying, quantifying, and supporting specialized tax incentives, a company can ask two important questions:
-
- What will be my company’s ROI based on the initial incentives identified?
- If an audit is triggered because of the identified incentives, how much of the incentive will likely be sustained? Further, will the audit defense fees offset the identified incentives?
The answer to all of these questions is simple, but the justification is not as straightforward as reviewing the contractual fee amount of an agreement.
| Big 4 Billing Practices
First, when evaluating which firm to engage in identifying these complex incentives, a company might think that because of the strong name recognition of accounting firms such as the Big 4, whichever firm offers to perform a tax incentive study at the lowest fixed-fee rate is providing the “best value” and the highest ROI. This, however, is not necessarily the case.
To give the appearance that a company is maximizing value by utilizing a Big 4 services firm, a Big 4 firm will typically enter into a fixed-fee type of arrangement for specialized tax services. In this arrangement, Big 4 firms evaluate the approximate number of hours it will take to complete an engagement. In an effort to lower that fixed-fee amount (but maintain hours worked and profitability on the engagement), Big 4 firms almost always shift hours and costs down to the staff level. Further, these firms often outsource some of the work, costs, and your company’s sensitive financial information abroad to lesser developed countries. This deception creates the appearance that significant quality hours are being spent on a project. However, many hours are performed by staff with little to no experience in dealing with specialized tax incentives. For example, if an R&D study takes approximately 600 hours to complete, only a fraction of those hours will be performed by experienced personnel with the necessary specialized knowledge and understanding of the nuances of the R&D tax credit required to properly identify and quantify costs associated with the credit.
| ABGi USA’s Solution to Big 4’s Billing Practices
ABGi USA offers the right solution to enable companies to maximize available specialized tax incentives. ABGi USA offers its clients a billing model that is client-centric and remains unmatched. ABGi USA’s goal with each client is to provide at a minimum a guaranteed 4 to 1 ROI, which is one of the largest ROIs in the industry.
Every member of ABGi USA’s production team has multiple years of experience in identifying and quantifying specialized tax incentives. This means that if your R&D tax credit study requires 600 hours of work to complete, all 600 of those hours will be performed in-house by experienced members of ABGi USA’s production team. Your ABGi USA team will comprise attorneys, engineers, and scientists who have worked on hundreds of R&D studies. No billing hours and none of your company’s sensitive information will be sent overseas to a team with little-to-no experience dealing with the United States Internal Revenue Code and Treasury Regulations.
For further information on ABGi USA’s billing model, when compared to that of the Big 4 firms, please see the side-by-side comparison outlined in Exhibit A and a specific billing example outlined in Exhibit B.
| Big 4 Fails to offer Audit Defense in Tax Incentive Engagements
Next, there is always the unfortunate possibility that identifying and quantifying specialized tax incentives to reduce tax liability may lead to an audit. In the event of an audit, a company needs to protect itself when utilizing a consulting firm. Unfortunately, Big 4 firms nearly always fail to offer such protection in their initial agreements.
Indeed, Big 4 firms offer tax controversy services to assist in audit defense. However, such tax controversy services are nearly always separate and apart from any initial agreement between a company and the Big 4 firm. A separate engagement must be entered into on an hourly fee basis at incredibly high hourly rates for audit defense. This separate engagement generally results in audit fees well beyond $100,000, which significantly shrinks the expected ROI of the tax incentive engagement.
| ABGi USA provides Audit Defence at No Additional Charge
As mentioned previously, ABGi USA strives to provide each client with at least a 4 to 1 ROI. Thus, ABGi USA provides audit defense at no additional charge in its specialized tax incentive contracts. This defense is not limited in scope to only handling the “initial document request” from the IRS (which is the typical audit defense scope from other regional/boutique firms). Instead, ABGi USA will handle any audit being performed on one of its engagements all the way to the final appeal with the IRS. In contrast, for an audit to reach final appeal, a company will certainly spend well beyond $100,000 from a Big 4 tax controversy department.
ABGi USA fully stands behind the work of its professionals. Because of this, ABGi USA includes audit defense protection within its initial engagement. Such audit defense proves invaluable to companies looking to maximize their ROI and eliminate the risk of lowering that ROI because of Big 4 audit fees.
Finally, of special note – in its 32 years of providing R&D Study services, ABGi USA has maintained a 95% sustention rate on every dollar ever claimed.
| ABGi USA has the same advantages as the Big 4 but without disadvantages
ABGi USA absolutely respects the vast breadth of the Big 4. In fact, the ABGi USA team includes numerous former Big 4 employees – including its CEO and Vice President. However, much like you wouldn’t go to a general practitioner for specialized surgery, the Big 4’s breadth is wasted (and expensive) when focused on specialized tax incentives. ABGi USA focuses solely on specialized tax incentives. Because of this, ABGi USA can analyze and maximize all potential tax incentives for your company around the world.
1. ABGi USA is a Global Firm
ABGi USA is a branch of ABGi Group, with additional international headquarters in France, Brazil, and Canada, and satellite offices around the globe. Indeed, it is ABGI Group’s business model to offer local services to its clients. Further, ABGi Group’s clients are some of the biggest companies in the world, and they trust ABGi Group to maximize their tax incentives from a global perspective – no matter where in the world the most beneficial tax savings can be identified.
Thus, like the Big 4, ABGi USA and ABGi Group are truly worldwide – no other non-Big 4 specialized tax incentives provider can honestly state this.
2. ABGi USA’s unique approach maximizes benefits while minimizing company interruptions
In addition to providing global reach to its clients, ABGi USA’s proprietary tools and unique approach to identifying and quantifying research expenses maximize the benefit realized by its clients while minimizing internal company interruptions. Typically, Big 4 firms will use a variation of what is known as a “project-by project” methodology to identify and quantify R&D activities. A “project-by-project” methodology may be accomplished in one of two ways: by reviewing all projects worked on during a study period or by conducting a statistical sampling analysis.
a. Utilizing the first “project-by-project” approach is an arduous, time-consuming task for companies. It requires a company’s personnel to review, in detail, potentially hundreds of projects and provide documentation for each of those projects. While this approach seemingly maximizes the credit, this methodology actually reduces a company’s ROI because of the significant company resources expended in order to quantify the credit.
b. Often, to avoid the burdensome and arduous task of gathering information and documentation via the “project-by-project” approach, Big 4 firms will utilize a statistical sampling analysis. Big 4 firms typically use an in-house statistician to perform a statistical sample from hundreds or thousands of projects. The statistician will randomly select a number of projects—for example, 20 projects to represent anywhere from 100-1000 projects—for a seemingly more thorough and in-depth analysis. Although this is, in theory, legally allowed via Revenue Procedure 2011-42, if the taxpayer is ever audited, the IRS nearly always attacks statistical samples because the samples do not appear to be randomly generated. It is difficult for a taxpayer to overcome the IRS’ presumption that any statistical sample ever done by any provider, including the Big 4, is not the result of a cherry-picked sample. Thus, if audited, this method almost always turns into an entirely new and incredibly arduous examination because the IRS will almost certainly state it cannot rely on the provider’s underlying analysis of the taxpayer’s claimed qualified expenses, resulting in almost an entirely new study being performed in the audit phase.
In contrast, ABGi USA utilizes a specific approach called the “Business Component Approach with an Established Nexus.” This methodology benefits its clients in a number of ways. On average, this approach can save up to 55% of internal company resources when compared to the “Project-by-Project” or “Statistical Sampling” methodology. Saving internal company resources allows that company to focus its efforts elsewhere while ABGi USA handles the intricacies of calculating the R&D tax credit and other valuable tax incentives.
Finally, the proprietary tools developed and utilized by ABGi USA to analyze a company’s research expenses enable ABGi USA to identify and maximize a company’s credit. Based on prior experience, Big 4 firms typically utilize a Microsoft Access database to input information regarding qualified expenses. The database then calculates the credit. This simple, automated calculation does not allow for a manual review to identify potentially qualified expenses. In contrast, ABGi USA’s proprietary tools allow ABGi USA’s experienced personnel to continuously review the expense data and identify additional areas where research expenses may be captured. Thus, ABGi USA’s approach and proprietary tools allow for a complete review of all potential expenses to maximize benefits. This completely custom approach is absolutely unique to ABGi USA.
Conclusion
In choosing to use ABGi USA, your company is getting all of the specialized tax incentives, knowledge, and global benefits of a Big 4 firm, but with substantially higher ROI and substantially less risk. Further, because ABGi USA and ABGi Group only work in the specialized tax incentive space, you are assured the most knowledgeable and senior staff are working to maximize clients’ benefits around the world. Finally, because of ABGi USA’s unique approach to quantifying and supporting its specialized tax incentives, as well as the unparalleled audit protection services provided as a part of every single engagement, clients clearly see how ABGi USA effectively and efficiently maximizes ROI.
ABGi USA is here to help you navigate the complicated nature of the R&D tax credit and other specialized tax incentives.
