Since the early 1980’s many manufacturing companies have not taken advantage of the Research and Development (R&D) tax credit, because they think they don’t qualify for the credit. However, manufacturers can take advantage of R&D Tax credit for their research and development activities.
Tax payers who are developing new processes and products or are making improvements to their processes and products are eligible for the R&D credit. There are certain development efforts that most companies have for both manufacturing and product processes. When a company develops new products or improves existing products, this determines whether a manufacturer can remain competitive in the marketplace.
For a manufacturer to know if they can take advantage of the R&D tax credit, there is a four-part test to take.
Manufacturers Benefit from the R&D Tax Credit if They:
- Develop a new or improved process or product that relates to performance, reliability, function, quality, or for significant cost reduction purposes
- Utilize hard science, such as computer science or industrial engineering
- Have technical uncertainty
- Implement a process of experimentation
The R&D tax credit can provide a hidden but immediate source of cash for manufacturers – not only from previous years, but also a significant reduction to current
and future years’ federal and state tax liabilities.
Qualifying Activities for Manufacturers
- Develop a product via computer aided designing
- 3D modeling and prototyping
- Design and manufacturing equipment
- Alternative material testing
- Improve production and manufacturing
- Develop new or improved processes or products
- Develop tooling and assembly design solutions
- Design and develop cost-effective business tasks or activities
- Value engineering
- Improve manufacturing practices and product performance
- Evaluate material or substance flows
- Design and evaluate process alternatives
- Product design processes – prototype design, development, and testing
The Engineered Tax Services R&D tax credit team consists of engineers, CPAs, and attorneys who have extensive experience conducting studies at both the state and federal levels. The process begins with a free assessment to ensure that the company qualifies for the credit and would be able to utilize its benefits. Each study includes a site visit to help facilitate the process. This is a conservative federal and state incentive that was made permanent by Congress as part of the 2015 PATH Act. Contact Engineered Tax Services for more information at (800) 236-6519 or go to our home page: EngineeredTaxServices.com.