Did you know that the manufacturing industry as a whole is responsible for more than half of the R&D Credits claimed throughout the country each year? In fact, Companies investing in the development or improvement of products and processes are performing the exact activities that the credit is designed to incentivize. Often, these efforts require companies to perform extensive design and testing related to a product or a system that is crucial to the commercial objectives of the company. Let’s take a look at some of the activities that qualify within the manufacturing industry:
• Designing components and systems to create a new product
• Designing plant production processes and technologies needed to support the production of a new product
• Improvement of products and processes outside of routine production activities
• 3-D printing of new products or product components
• Production meetings aimed at continuous improvement
• Design of internal software that performs tasks specific to the workflow of a manufacturing process
• Design of software to interface with customer orders and backend workflows
• Evaluation of alternative plant workflows
• Time trials
• Development of new testing techniques
• CNC machining or fabrication of new product components
• Development of PLC or other automation logic
• Efforts to improve throughput and reduce waste
As with any other industry, the key to a successful R&D Credit claim for a manufacturing company is documenting R&D projects and ensuring that they meet the four-part criteria of the Revenue Code. This could allow a manufacturing company to claim toward the credit all wages and contract expenses associated with direct R&D, supervision of R&D, and support of R&D, as well as any materials consumed in testing. In general, a company can realize roughly ten cents in tax credits for every dollar of research expense.
If you would like to analyze your company’s R&D Tax Credit potential, please utilize our R&D Tax Credit Calculator or call one of our professionals for a no-cost, no-obligation review. Our team will help identify qualified expenses, complete all necessary tax forms, and develop all of the documentation needed to support your R&D Credit claim.
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