R&D Tax Credit for Manufacturers
April 5, 2017 | NVIE
NEVADA Industry Excellence (NVIE) specializes in providing the most robust and defensible application of federal and state research and development tax credit laws, identified qualifying activities and costs. Our engineering and tax consultants assist our clients in developing a credit methodology. Manufacturers often make large investments in new products, processes and packaging. They are often unaware that these efforts can yield a significant Federal R&D tax credit.
Below are some of the common activities that qualify for the research tax credit.
- Beta testing, CAD or 3D Modeling & compiling research data.
- Improving processes or the manufacturability of a product.
- Supervising technical personnel who are engaged in research.
- Creating more efficient and environmentally friendly designs.
- Testing an experimental product, process, formula, or software.
- Evaluating the feasibility of a product, process, formula, or software.
- Participating in technical meetings & documenting the results of research.
- Developing or engineering a new or improved product, process, formula, or software.
- Experimenting with new technologies & developing experimental models & prototypes.
- Technical design reviews, maintaining research equipment & fabricating experimental models.
The benefit of performing an R&D tax credit study on a "go forward basis" is that the amount of effort required by the client is much less than a "look back study".
- More than 90% of the work is completed off-site.
- The past three year’s business activities & expenses are reviewed.
- Two 1-2 page reports are completed during the initial site visit.
- These reports serve as a template for future reports (2 per year).
- The requested information is readily available in pdf format.
How much time should a client expect to spend during the first year of the tax study?
- A company with 50 or less employees: 15 hours
- A company with 200 employees: 25-30 hours
- A company with 200 or more employees: 30+ hours
In subsequent years, the time required to perform the tax study is as follows.
- Employees involved in R&D activities (15 min/employee)
- Report writing (2-3 hours)
A company operating at a 20% profit margin must manufacture and sell $500K worth of merchandise in order to receive the same bottom line benefit as a $100K tax credit.
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