Section 41 R&D Tax Credits Can Be Substantial for Manufacturers

R&D tax credits were established in 1981 by Congress to encourage and assist companies to engage in research and development, and thereby become more productive and competitive. As a manufacturer, you may be unaware that many of your efforts to design your products qualify as R&D and may make you eligible for tax credits for expenditures associated with these activities.

Your company may qualify for extensive credits if your research expenditures meet the Federal requirements. These R&D credits may be applied to taxes due or to future tax liability. They may be retroactive for three years in addition to the current year and carry forward for twenty years.

 

Eligible expenditures include:

• the salaries and wages of the engineers working on a project,
• the cost of supplies,
• and third party contractor fees getting SLA or FDM prototype parts made by a rapid prototyping service center.

In addition to expenditures, tasks performed by executive leadership, legal, manufacturing, sales engineers, operations and IT are also evaluated.

Additional R&D activities, that qualify for this credit include:

• Implementing Lean Manufacturing
• ISO 9000 and other standards
• Developing a new business component (product, process, software system, etc.)
• Improving an existing business component

 

Eligible Costs Include:

• Salaries/wages of technical and support staff
• Tooling, materials, scrap consumed in the R&D work
• Subcontractor charges related to the R&D work

For information on R&D Tax Credits, please contact, Jim Cunningham at 607-725-1225