Case Study: Metal Forming Equipment Manufacturing R&D Tax Credit Study

Narrative

In 2023, a metal forming equipment manufacturing company based in the United States, founded in 1979, partnered with Engineered Tax Services (ETS) to identify federal R&D tax credit opportunities. The company specializes in manufacturing quality Metal Forming and Fabricating Equipment, Roll Forming, Coil Processing Systems, and Automated Production Systems. Their work involves experimental projects to improve roll forming and coil processing systems machinery through innovative techniques and designs.

The company's R&D activities focus on overcoming technical challenges in custom machining, tool and die design, and fabrication services. Their team develops complex integrated computer-controlled production and inventory management systems. These efforts align with the IRS's definition of qualified research under Section 41, making them eligible for R&D tax credits.

Objective

The goal was to identify and document qualifying research activities and associated expenses to maximize federal R&D tax credits. ETS aimed to:

• Calculate Qualified Research Expenditures (QREs) for wages and related expenses
• Optimize credits under the Alternative Simplified Credit (ASC) method
• Apply the Four-Part Test to validate eligible projects

Methodology

ETS employed a detailed, engineering-based approach, which included:

1. Initial communication with company leadership to understand operating structure
2. Review of available records and documentation
3. Employee interviews to analyze R&D activities
4. Activity Time Analysis (ATA) worksheet implementation
5. Verification of U.S.-based research activities
6. Assessment of funded research compliance

Qualified Research Expenditure Allocation