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Manufacturing and high tech companies may be eligible for the research tax credit if they engage in product development research related to the design, prototyping, and development of new or improved products — or if they are experimenting with new or improved manufacturing techniques, processes, and capabilities.
The definition of research and experimentation in the tax sense is broader than the definition scientists and chemists use in a laboratory. Research and experimentation activities that may qualify include:
- Engaging in product design or process improvement activities, as an original equipment manufacturer (OEM) or contract manufacturer
- Utilizing computer-aided design (CAD), computer-aided manufacturing (CAM), or computerized numerical control tools (CNC) to create or improve prototypes, fixtures, and manufacturing processes
- Product development and design relying on systematic trial and error coupled with success or failure testing
- Engineering new or improved products and manufacturing processes to create new revisions to part numbers and/or systems
- Working with new material specifications or enhancing your capabilities by bringing outsourced processes into your facility
Our unique approach
We have helped businesses in many different industries identify and document their qualifying research activities to help optimize their credit potential. Identification of qualifying research activities is not a tax or accounting exercise. It requires an in-depth understanding of manufacturing operations and the involvement of engineering and operations personnel.
R&D tax credit services for the manufacturing and high tech industries
CliftonLarsonAllen’s (CLA) manufacturing and tax professionals can help determine if your organization qualifies for a research and experimentation tax credit — it may reduce your tax liability. Based on our experience, the following industries often generate tax credits:
- Aerospace, automotive and machinery manufacturers
- Automated equipment manufacturing
- Chemical manufacturing
- Contract manufacturing
- Environmental systems
- High technology
- Medical device and tooling manufacturers
- Metal fabricators
- Original equipment manufacturers
- Plastics manufacturing
- Precision machining
- Specialty construction: architectural and engineering
- Software development