Engineered Tax Services Helps Defense Industry Manufacturers Fund Operations with R&D Tax Credits

Julio Gonzalez, CEO and founder of Engineered Tax Services (ETS), as well as company leaders, know that manufacturers for the defense industry are often very good candidates for the federal research and development (R&D) tax credit. ETS works with manufacturers and CPA firms across the country helping them to fully benefit from this powerful incentive. This credit is meant to bolster the development of new or improved products, processes, techniques, inventions, formulas and software within the United States. The federal R&D credit will typically result in a 5 to 7 percent dollar-for-dollar return on qualifying dollars (wages, supplies and contractor costs) spent on R&D activities.

As one of the few tax credits that have bi-partisan support in Washington, the R&D credit was made a permanent tax credit as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015. Most states also provide an R&D tax credit for qualifying activities within the state. ETS is typically able to go back to all open tax years (3 or 4 years) to capture these credits for companies. In addition, for companies coming out of losses, there can be an opportunity to carry forward these credits from closed tax years as well – the federal R&D credit carries forward for 20 years.

A defense manufacturer that is conducting any of the following activities within the U.S. will likely qualify for the R&D credit: developing new or improved products or manufacturing processes, prototyping and 3D modeling, value engineering, tooling and equipment fixture design and development, product development using computer aided design tools, designing manufacturing equipment, alternative materials testing, and quality assurance.