Research and Development Tax Credits
Refunds are available for companies performing research within the manufacturing and distribution industry. The research credit provides dollar-for-dollar cash savings each year for companies performing activities related to the development of new or improved products and processes. These benefits could provide much needed cash to hire additional employees, increase R&D, expand production facilities, etc.
Many manufacturing and distribution companies are unaware that their efforts within designing and developing their products can yield a large amount of research credits. Examples of R&D activities related to the industry as well as potentially qualifying job titles are listed below.
Examples of Qualifying R&D Activities
- Determining tooling requirements and optimal placement of equipment
- Developing new or improved quality assurance testing processes
- Developing processes that meet stringent regulatory requirements
- Developing prototypes using computer-aided design (CAD) and computer-aided manufacturing processes
- Developing robotics and automated technology
- Experimenting with new or improved filling and packaging techniques
- Improving strength, durability, and service life
- Maximizing feeds/speeds while ensuring quality and integrity of the part
- Improving processes including filling and sealing of products, packaging, die design/techniques, minimizing environmental impact (waste control and recycling), and flexibility and agility due to increased product volume and diversity
Potentially Qualifying R&D Job Titles
- Computer Numerically Controlled (CNC) Operator
- Computer-Aided Design (CAD) Technician
- Design Engineer
- Director of Operations
- Manufacturing Engineer Packaging Engineer
- Plant Operator
- Process Engineer
- Production Manager
- Quality Assurance (QA) Manager
- Reliability Engineer
- Test Engineer
AMT Offset up to $250,000 in Payroll Tax
For tax years beginning after December 31, 2015, eligible small businesses (those with $50 million or less of gross receipts) may claim the research credit against AMT liability. In addition, qualified start-up companies may elect to use up to $250,000 of the research credit against payroll taxes.
Treasury Regulations have substantially broadened the range of taxpayers who are eligible for the credit. Start-ups to publicly traded businesses who were previously unable to realize a benefit from this lucrative tax credit should reassess their eligibilities.