Because R&D Tax Credits are meant for activities and costs related with developing or improving a product and/or a process, any company that designs, develops or improves products, processes, techniques, formulas, inventions or software may qualify.

A History of Tax Credits

The Research & Development (Section 41) Tax Credit began as a federal program to encourage American innovation. However, in 2004, the law made these tax credits accessible to many small and medium sized companies, too. This meant that the tax credits were suddenly available to far more companies than ever before.

Who Qualifies for R&D Tax Credits?

The definition of “research and development” (R&D) is actually much broader than most businesses realize. Because of this, activities and costs related with developing or improving a product and/or process may qualify for R&D tax credits. Additionally, activities like engineering, designing, testing, and programming are now included as Qualified Research Activities (QRE).

The industries that commonly qualify for R&D Tax Credits are:

  • Manufacturing
  • Fabrication
  • Engineering
  • Software Developers
  • Chemical
  • Tool & Die
  • Machine Shops
  • Plastics Manufacturers
  • Pharmaceutical
  • Biotechnology
  • Food Sciences/Manufacturers

Why? Because they commonly haveQualified Research Expenditures” (“QRE”) as defined by the IRS.

QREs mean any eligible expense for research and development activities. For instance, for most companies the salaries of full-time product development engineers are obvious QREs. However, there are likely additional wages, supplies or contract research that also count. In this case, it means there are tax credits being left on the table.

For example, here are some organizational tasks that may qualify for R&D Tax Credits:

  • Manufacturing
  • Fabrication
  • Engineering
  • New Product & Process Development
  • Developing New Concepts or Technologies
  • Design – Layout, Schematics, AutoCAD
  • Prototyping or Modeling
  • Testing / Quality Assurance: 
ISA 900X, UL, Sigma Six, etc.
  • Integration of new machinery (CNC, SLA, SLE, etc) into existing process
  • Software Development or Improvement
  • Automating /Streamlining Internal Processes
  • Developing Tools, Molds, Dies
  • Developing or Applying for Patents

What are the Benefits of a Tax Credit Study?

There are many benefits of an R&D Tax Credit study, including:

  • Identification of dollar-for-dollar credits against taxes owed and previously paid
  • Identification of credits that can be used in the future
  • Because average credits exceed $25,000 per $1 million in total payroll, this study can create immediate increases in cash flow

Our team of specialists adheres to the Comprehensive Project by Project Approach methodology as required by the IRS. By following this methodology, we qualify every possible employee, activity, hour spent and corresponding wages paid to maximize the incentive for you. We also strictly adhere to the code and provide best-in-class documentation to substantiate our findings.

And because we work on a contingency basis, if we cannot find you savings, you don’t owe us for the effort.

R&D Tax Credit studies begin with a phone call. So, request a phone call today:

Expense Reduction Partners