R&D Tax Credit for Manufacturer

The Research and Development (R&D) tax credit, first introduced in 1981, is a government-sponsored tax incentive that rewards companies for conducting R&D activities in the United States.  This credit was implemented to incentivize innovation throughout the economy and to keep technical jobs here in the United States.

R&D tax credit is not just for large technology, medical device or drug companies.  It also applies to manufacturers of all sizes.  If a company, in the manufacturing industry, recently introduced new or improved products or manufacturing lines, there may be a good chance that the company would be entitled to the benefit of R&D tax credit.

Some of the R&D credit qualifying activities that relate to manufacturers include, but not limited to, designing and developing cost-effective and innovative operational processes; improving product performance and manufacturing processes; evaluating and determining the efficient flow of material; designing and evaluating process alternatives; developing process to meet regulatory requirements or to reduce labor costs; developing and implementing new or improved safety enhancements; increasing operating and economic efficiencies; designing tools, molds, certification testing, environmental testing and automated manufacturing processes and so on.

The benefit of the R&D tax credit could range from 14% to 20% of qualifying expenditures that could be used to offset the company’s tax liabilities.  In addition, many states have their own means of incentivizing in-state R&D activities.