Bring a tax credit to the table
As an engineer, you're always on the lookout for ways to reduce costs associated with your company's products and processes. But what if you could help deliver a significant tax credit that might positively impact your company's bottom line as much as a new source of revenue, just for doing what you already do? Virtually any manufacturer has the potential to qualify for federal research and dev...
As an engineer, you’re always on the lookout for ways to reduce costs associated with your company’s products and processes. But what if you could help deliver a significant tax credit that might positively impact your company’s bottom line as much as a new source of revenue, just for doing what you already do?
Virtually any manufacturer has the potential to qualify for federal research and development tax credits, explained Randy Eickhoff, regional managing director with alliantgroup, at the Profibus Trade Organization (PTO) annual general assembly in August 2005. According to Eickhoff, the U.S. government currently distributes more than $5 billion in federal R&D tax credits each year. About 80% of this money goes to a few of the nation’s largest companies because most companies are unaware of the tax credit or that they could qualify.
Many companies believe this credit is just for biotech, high tech, and pharmaceutical-type companies, Eickhoff says. However, qualified R&D expenditures extend into manufacturing, engineering, quality assurance, marketing, purchasing, and information technology.
According to Eickhoff, your company could qualify for the R&D tax credit if it manufactures products; develops or applies for patents; develops prototypes or models; designs tools, jigs, models, and dies; develops new technology; develops or improves production/manufacturing processes; or automates/streamlines internal processes.
This tax credit became more widely accessible in December 2003 when the Bush administration finalized an IRS regulation that allows the credit to apply retroactively and make qualification for the credit easier. Eickhoff says the administration made these moves to help keep U.S. manufacturing companies in the country and maintain U.S. manufacturing competitiveness.
Eickhoff cites several cases where alliantgroup has successfully helped companies move through the process of obtaining the credit. Some examples include: a paint manufacturer with $20 million in annual revenue received $600,000 in credits; an injection molding company with $100 million in revenue received $5.5 million in credits; a job shop with $15 million in revenue received $400,000 in credits; and a chemical manufacturer with $40 million in revenue received $2.6 million in credits.
The R&D tax credit is an actual dollar-for-dollar credit against taxes owed or paid, and the credits may be carried forward for 20 years, says Eickhoff.
With all the directives to focus engineering on bottom-line improvements, this credit could be one more creative solution you bring to the table to help improve your company’s financial status. You can learn more about the R&D tax credit by visiting www.alliantgroup.com .
David Greenfield, Editorial Director