Blog

Your weekly dose of tech insight for Arizona's builders

How the OBBBA Just Put Real Money Back in the Pockets of Arizona Subcontractors

I sat in an American Subcontractors Association of Arizona webinar last week expecting an informative but fairly painful tax overview, the kind where your eyes glaze over somewhere around “amortization schedule” and you start mentally re-sequencing tomorrow’s pour.

I found this one to be very interesting.

About ten minutes in, Wes Veigle, a CPA and Director at Boyer & Ritter who specializes in construction, started describing everyday jobsite activities that qualify for federal R&D tax credits. Rerouting ductwork around a clash. Redesigning rebar when soil conditions change. Testing a new forming sequence because the original plan doesn’t work in the field.

The gears started turning. Wait… that’s R&D? Yes. It is. And thanks to a major change in the tax code that most contractors haven’t heard about yet, claiming it just became a no-brainer.

The Law That Changed Everything

On July 4, 2025, Congress passed the One Big Beautiful Bill Act (OBBBA, or as Wes calls it, “OB3”). Among its many provisions, this one matters most for subcontractors:

TheThe old rule that forced you to spread R&D expenses over five years? Gone.

Before OB3, if you accumulated costs that qualified for the R&D credit, you had to add them back to your tax return and amortize them over five years. By the time the math worked in your favor, you were in year four or five. The capital outlay for the study didn’t make sense for most contractors. Now? You fully expense those costs in year one. No add-back. No waiting. You pick up the credit for expenses you were already incurring and it hits your bottom line immediately. And if you were already doing R&D studies under the old rules and carrying unamortized costs? Small businesses under $31 million in average gross receipts can elect to expense all of those unamortized costs in 2025. On top of the credit.

That’s a double hit in the good way.

R&D Is Not Just for People in Lab Coats

This is the part that trips people up. When you hear “R&D tax credit,” you picture scientists in sterile rooms. White coats. Beakers. Maybe a robot.

The IRS doesn’t see it that way. Their definition of research is intentionally broad. It’s meant to reward companies that solve technical problems through experimentation and iteration. Sound familiar? It should. Because that’s what your team does every single day.

The credit kicks in when three things are true:

1. Technical Uncertainty: You didn’t know the best way to meet a performance spec, building code, or field condition. You had to figure it out.
2. Evaluation of Alternatives: You tested different materials, assemblies, rerouting options, sequences, controls, or tolerances.
3. Engineering Methods: You used BIM, CAD, calculations, simulations, mockups, or field trials to arrive at a solution.

And here’s the kicker: it doesn’t have to work the first time. Iterations. Failed attempts. Dead ends you learned from. All of those still qualify. The credit rewards the process of solving the problem, not just the perfect outcome.

What This Actually Looks Like in the Field

Let me make this real. If you’re nodding at any of these, congratulations, you’re already doing R&D:

MEP Contractors

• Rerouting ductwork or hydronic lines because steel or fire protection clashed with your layout. That’s not just “making it fit.” That’s identifying constraints, generating alternatives, and choosing the option that preserves code compliance and performance.
• Running calculations to hit airflow targets, adjusting fan curves, refining control sequences, tuning static pressure resets and valve timing, all of that is technical iteration.
• Measure, tweak, reverify. If your commissioning process involves that cycle, the IRS considers it R&D.

Concrete & Steel

• Redesigning rebar layouts when site conditions or load paths change. Evaluating alternatives to maintain cover or development length in congested areas.
• Testing forming and shoring methods under different temperatures and pour rates. Trying different reshoring sequences. Measuring results. Tweaking the plan. Briefing test to get the cycle right.
• Custom fab and welding: mapping fabrication steps, controlling heat between passes, staging welds to keep steel straight. Confirming the approach with sample builds or formal tests.

Site & Civil

• Soil stabilization evaluation: mixing in stabilizers, improving drainage, adding GeoGrid because the ground didn’t behave the way you planned.
• Stormwater and grading adjustments: tweaking slopes, inlets, and basins to move water where it needs to go.
• Material testing and modeling: checking compaction, watching how water drains after a rain, using drones to see how the site behaves.

Every one of those cycles of trying, observing, improving, and problem solving, that’s not just routine work in the IRS’s eyes. When you document it, it turns into significant tax savings.

Alright, Show Me the Money

The federal R&D credit typically returns 6–10% of qualifying expenses as a dollar-for-dollar tax credit. Not a deduction. A credit. Straight off your tax bill. So if you document $1 million in qualifying expenses, you’re looking at $60,000–$100,000 back in your pocket. Every year. Permanently. Wes shared three real client examples from his practice. These are actual numbers:

1. Client 1: Electrical Design & Installation ($13M Revenue)
   Never had an R&D study done. Wes’s team identified $1.7-$2.0 million in qualifying expenses across four years, just by organizing the project documentation they already had. No new system. No fancy paperwork. Just tagging what they were already doing.
   Result: $706,000 in federal tax savings. The four owners took the refund as a bonus. Going forward, they expect $170-$200K annually before state credits.
2. Client 2: Mechanical Contractor ($20M Revenue)
   Walked in skeptical. “We don’t do R&D.” Turns out their everyday problem solving: off-site fab tweaks, controls tuning, field reroutes, dehumidification fixes was textbook R&D.
   Result: $51,000 per year in federal credits. They’re now going back to amend prior years.
3. Client 3: Concrete & Civil ($13M Revenue)
   Modest annual credit ($12–$22K), but the real home run was in 2025. Because they had unamortized R&D costs from prior studies, the new OB3 rules let them expense $614,000 all at once.
   Result: approximately $150–$160K in additional tax savings on top of the annual credit and state credits. For a $13M company still getting on its feet, that’s transformational cash flow.

The “This Sounds Burdensome” Myth

This is the objection I heard most in the webinar chat. And Wes addressed it head-on:
You already have 90% of what you need. Think about it. You’ve got job cost codes. Labor classifications. Time cards. Daily reports. Photos. Change orders. QC logs. Prefab trackers. BIM model versions. Test logs.

That’s your paper trail. The R&D study professionals, it’s their job to interpret your existing paperwork and map it to the credit rules. They pull the story out of what you already track and package it up. You don’t need to rewrite anything in IRS-speak. The total lift for most companies? A short kickoff meeting, sending some standard reports, and a few hours of interviews. That’s it.

What You Can Do Right Now to Capture Bigger Credits

Here’s where this goes from interesting to actionable. A few small changes make a big difference:

1. Set up an R&D job code for trial work and testing in your cost system. Let people book time to it.
2. Have supervisors jot down what they tried and why. A quick note, a photo, a short summary. It doesn’t need to be fancy, just clear enough to show real problem-solving.
3. Mark outside invoices tied to testing or specialist consultants with “R&D Support” and file them separately.
4. Save before-and-after photos and model snapshots when you make field changes.
5. Talk to your CPA this month. Seriously. The window for amending 2022–2024 returns closes July 4, 2026. If you’re under $31M in average gross receipts, you could be sitting on a six-figure refund.

Bonus Round: The 179D Deduction (For Those Doing Energy-Efficient Work)

Wes also covered Section 179D, a per-square-foot tax deduction for energy-efficient commercial building work. This won’t apply to everyone, but when it does, the numbers are significant. The deduction covers three systems: interior lighting, HVAC and hot water, and the building envelope. If your project meets prevailing wage and apprenticeship requirements, the deduction jumps to $2.50–$5.81 per square foot. On a 100,000 square foot school or hospital, that’s a $250,000–$581,000 deduction.

The key: you have to be the “designer” under the IRS definition, meaning your company created the technical specifications, not just installed them. If you’re a design-build MEP or specialty sub who authored the specs, selected equipment, or produced the lighting layout, you’re in the conversation.

Critical deadline: The OBBBA sunsets 179D for projects that begin construction after June 30, 2026. If you have qualifying projects in the pipeline, move now.

Other OB3 Wins for Contractors

A few more provisions from the OBBBA that your CPA should be talking to you about:

• 100% Bonus Depreciation (Permanent): Buy qualifying equipment after January 20, 2025, deduct the full cost in year one. Huge for capital-heavy trades: civil, site work, fabrication shops.
• Section 179 Expense Limit Increased: Cap raised to $2.5M with the phase-out starting at $4M. Choose which specific assets to fully expense.
• Business Interest Deduction Improvement: The limit is now based on EBITDA instead of EBIT. If you finance a lot of heavy equipment, your interest deduction just got easier.
• Completed Contract Method Expanded: Now includes apartments, assisted living, and other residential projects (not just “home construction”). Three-year completion test instead of two. This means you can defer taxable income longer on multi-year residential jobs.

What The Heck Does This Have to Do with IT?

I know what you’re thinking. “Jack, you’re an IT guy. Why are you writing about tax credits?”

Fair question. Here’s why: Documentation is the difference between a $20K credit and a $200K credit. And documentation lives in your systems.

Your project management platforms, your job cost systems, your cloud storage with field photos and BIM models, your time tracking tools, all of that is your R&D paper trail. The better your systems capture what your people are doing, the bigger the credit.

We’ve spent 20+ years helping Arizona builders get the most out of their technology. If your systems make it easy to tag field documentation, track problem-solving time, and organize project data, you’re already building the foundation for a repeatable tax credit that puts real money back in your business.

That’s not just good IT. That’s good business.

There is money sitting on the table for work you’re already doing. The credit is permanent. It’s not a loophole. And if you’re solving real problems in the field  (which you are), you’re leaving money on the table every year you don’t claim it. Go back and grab prior year amounts too. The clock is ticking on those amendments.

And if you want to talk about how your tech stack can make R&D documentation easier or if you’re just curious what other Arizona builders are doing to capture these credits, reach out. Sometimes the best conversations start with “I had no idea we qualified for this.”

Book a Free Consultation Review with Computer Dimensions.

For over 20 years, Computer Dimensions has been the trusted IT partner for Arizona's architecture, engineering, and construction industry. We help AEC firms communicate better, collaborate smarter, and actually use the technology they've invested in. Because in construction, the tools only work if your team does.

IT Built For Builders.

P.S. If your CPA hasn’t brought up R&D credits or the OB3 changes, bring this article to your next meeting. And if you don’t have a CPA who specializes in construction then get one. The difference between a generalist and a construction-focused tax advisor on this topic alone could be worth six figures.