alliantgroup advises that manufacturers may be overlooking a significant source of revenue for hiring additional workers and expanding operations: the Research and Development tax credit.
Large companies have banked on the credits for years; feeding a misperception that the credit is limited to cutting-edge research companies or Fortune 500 firms. However, when the credit was enacted by Congress, one of the important goals was to fuel innovation and hiring in the area which produces the most jobs in America: small and mid-sized companies. alliantgroup has helped thousands of companies take advantage of recent changes to the credit.
Today’s manufacturer may not realize that their activities often entitle them to generous R&D tax incentives, and even if they do, the traditional notions of R&D may cause manufacturers to limit their calculations to activities associated with new product developments. However, alliantgroup has seen first-hand in many cases, manufacturers spend a considerable amount of time and effort, both in the engineering department and on the production floor, developing product designs that achieve optimized manufacturing process performance.
Manufacturers with qualifying R&D activities are entitled to tax credits potentially equaling hundreds of thousands of dollars. The credit is much more powerful than a standard deduction because it offsets taxes owed or paid, as opposed to reducing a company’s taxable income. Further, a business can obtain the credit for all open tax years — generally the last three or four years plus the current year. The R&D credit may also be carried forward for 20 years.
The following alliantgroup examples illustrate how more businesses are taking advantage of this important tax incentive program, resulting in a new stream of income.
An alliantgroup client who is a contract manufacturer with $20 million in revenues realized a credit in excess of $400,000 due to changes in law that enable the costs related to plastic injection molds and tools sold to customers to be claimed.
Similarly, an alliantgroup automotive manufacturer and assembly client with $500 million in revenues realized a credit in excess of $1.5 million.
The R&D tax credit is one of the most complex areas of the tax code and businesses need a group of experts with scientific and engineering experience to help qualify, quantify, and substantiate the credit. alliantgroup provides businesses with a no-obligation assessment.
In addition to manufacturing, Brian Aumueller, Director for alliantgroup, has seen a variety of industries that are benefiting from the credit, including architecture, engineering, and contracting. He notes, “The broadened applicability of the credit has enhanced the opportunity for companies in various industries. In 2011, alliantgroup saw companies from one state alone, capture $16 million in credits and we expect that pace to increase in the coming years.”
The U.S. Congress and many state governments realize how critical innovation is to the future of America’s competitiveness in the world. They also know that the companies engaging in these activities are supporting millions of highly skilled, well-paying jobs.
For these and other reasons, the R&D credit will be around for a long time and any company with relevant products or services would be smart to seize its benefits. By taking a strategic approach to R&D tax credits, alliantgroup helps businesses realize significant cost savings benefiting the company, its employees, and the economy as a whole.
