By Kate LaFosse JD, Industry Expert of Marketing and Media for alliantgroup
To be successful in digital marketing and advertising, companies use software development to create platforms, online databases and management systems. They also create digital content such as websites and custom applications. Agencies use increasingly technical methods to discover effective strategies that drive customers to businesses (or drive businesses to suppliers and professional services).
This increased reliance on technology brings new tax credit opportunities for digital media and marketing firms. One such opportunity is the Research and Development Tax Credit. Congress created this incentive to deter businesses from offshoring their operations and to reward the technical work performed by these companies. The work does not need to be new or revolutionary, just new to the business itself. Therefore, if a company is developing and improving software, platforms or applications, its work could be eligible for the credit.
Digital advertising companies can qualify for the R&D Tax Credit if they employ workers who perform activities in the United States such as:
- Developing software that is tracking, monitoring or optimizing clients’ marketing and advertising campaigns
- UX/UI design
- Developing technological solutions to meet client demands
- Designing databases to provide improvements in efficiency, speed and user functionality
- Designing algorithms and improving the data collection process associated with advertisements
- Developing Client Relationship Management (CRM) software
- Creating platforms and integrating CRMs and other technological components with marketing software or databases
- Applying business intelligence algorithms to improve functionality and reliability
A digital media firm received $315,987 from the R&D credit for designing and upgrading client websites, database structures and reporting tools. Since every client had unique specifications, this firm was able to capture the wage costs involved in each project. A marketing analytics firm earned a credit of $111,000 by developing a software that enabled the client to review campaign trends. The software improved how the client’s data was retrieved, processed and presented with quicker response times for the end user.
The technology solutions and applications involved in internet marketing means that these businesses are great candidates for the R&D Tax Credit. Analytics is key to understanding why campaigns succeed or fail and how to best target your resources to the most appropriate audience. These types of activities provide a valuable opportunity to digital advertising and media companies. At alliantgroup, we help educate companies on the R&D Tax Credit and other powerful tax incentives available for their benefit. Contact alliantgroup today for a free consultation.