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Businesses sometimes fail to claim the Research & Development (R&D) Tax Credit due to confusion as to what activities and expenses qualify. These companies aren’t aware that their daily activities meet the four requirements that fulfill the IRS Four-Part test. Such is the case with the food manufacturing industry.

Companies within the food manufacturing industry conduct daily activities which may qualify for the R&D Tax Credit. The development of new products associated to food safety, nutrition guidelines, cost efficiency, recipe experiments and packaging methods are considered qualifying research activities (QRAs) when claiming this valuable tax incentive. Failures within the product creation phase can also be categorized as QRAs, regardless of it being considered a “failed project”. The IRS’ “failed project” provision is essential for companies in the food manufacturing industry because they constantly test products and some of them don’t meet the safety or nutritional guideline threshold.

The following activities are examples of QRAs performed by businesses within the food manufacturing industry:

• Developing recipe formulations for new products
• Testing prototype samples
• Designing new packaging to improve shelf life
• Producing new or improved agricultural and chemical materials.
• Improving production process to increase cost and time efficiency.
• Developing or improving new or existing formulations to enhance flavor, appearance, viscosity, texture, etc.

Additionally, food manufacturing companies hire technical personnel such as scientists, dietitians, engineers and nutritionists who conduct the QRAs mentioned above. These employees’ wages can be taken into account when calculating the tax credit, as their wages are considered qualifying research expenses (QREs).

If your company performs any of the activities or incurs in any expenses listed above, then they are strong contenders to claim the R&D Tax Credit. Send us an email at info@kuhler.com or visit the Kuhler Tax Credits website www.kuhler.com for more information on how we can increase your company’s market value and boost its bottom line through the Research and Development Tax Credit.

The Research and Development (R&D) Tax Credit is frequently overlooked by the retail and apparel industry. These companies aren’t aware of the several advantages this strategic financial planning tool can offer their business. They are also unaware about the new IRS regulations which have broaden the spectrum as to what qualifies as R&D which makes it easier and more beneficial to claim. Retail and apparel companies need to recognize that they continuously perform qualifying research activities (QRA) that meet the IRS Four Part Test.

Most of the activities that occur within the product’s design and development stage are considered QRAs. Developing or improving the construction or integrity of fabrics, embroidery techniques, weather resistant clothing and footwear, dye formulas, manufacturing processes, and comfort and shoe fit techniques are a few of the activities that would certainly qualify for the R&D tax incentive. It is important to notice that aesthetic changes to clothing or footwear don’t, unless it is technical in nature, qualify for the tax credit.

Moreover, a company’s software development may also be considered a qualified research expense (QRE). The internal use software won’t be considered a QRE if it’s commercially sold or allows the taxpayer to communicate with third parties or have third parties revise their files or documents on the taxpayer’s platform system. Apparel and retail companies constantly develop software to create process and product efficiency. Customer-facing channels like e-commerce platforms and point of sale solutions and internal process like supply chain management systems are examples of qualifying internal use software.

If your company designs and develops clothing or footwear, there is a strong chance that you can benefit from the R&D Tax Credit. To learn more about the Research and Development Tax Credit visit the Kuhler Tax Credits website www.kuhler.com or email us at info@kuhler.com.

Companies in the telecommunications industry make strong candidates to claim the Research and Development (R&D) Tax Credit. Businesses within this industry create prototypes and conduct process developments on a daily basis. The tax incentive eligibility broadens when companies acknowledge that not only do their development efforts qualify, but also their activities and operations can be claimed as part of the R&D Tax Credit. Employees spend a considerable amount of their time developing, designing and improving products. These activities fulfill the IRS Four-Part Test and are considered qualifying research activities (QRAs) for purposes of the tax incentive. Therefore, they can be claimed under the Research and Development Tax Credit.

Another indication which shows that they are strong contenders for the R&D Tax Credit is that they hire employees that have technical backgrounds like industrial, mechanical, electrical and process engineering. These academic achievements allow them to conduct highly technical activities, meeting one of the four requirements to fulfill the IRS Four-Part Test. The QRAs below are examples of eligible activities for the R&D Tax Credit:

• Development of integration system for mobiles, media and networks.
• Improving product safety, quality and durability.
• Implementation of safety standards and quality assurance processes.
• Testing materials to increase product performances.
• Innovate existing products.
• Develop processes and software to improve data management.

Does your company perform any of these telecommunication activities? Visit the Kuhler Tax Credits website www.kuhler.com or email us at info@kuhler.com to learn more about the Research and Development Tax Credit.

In 1981, President Reagan enacted the Research and Development (R&D) Tax Credit as a way to reboot the American automotive industry. Approximately 30% of the United States’ research and development is conducted by companies in the automotive industry and heavy-duty manufacturers who create parts and components for vehicles. The continuous designs, developments and improvements conducted by automotive companies make manufacturers within this industry strong contenders for the R&D Tax Credit.

For activities to be considered qualifying research activities (QRAs) they need to fulfill the IRS Four-Part Test. The IRS Four-Part Test requires a new or improved business component (product, process, technique, invention, formula or software), the business component to be technological in nature, some kind of elimination of uncertainty, and a process of experimentation. The activities stated below fulfill the IRS Four Part Test and thus are considered QRAs for purposes of claiming the R&D Tax Credit.

The following activities are examples of the QRAs conducted by companies within the automotive industry:

• Improving efficiency in manufacturing operations.
• Designing, developing and improving automotive parts.
• Conducting tests to maintain quality assurance.
• Testing to meet compliance regulations and safety requirements.
• Developing environmental consideration for overall operations.

If your company designs, develops or improves parts or components for motor vehicles, there is a strong chance that you can benefit from the R&D Tax Credit. To learn more about the Research and Development Tax Credit visit the Kuhler Tax Credits website www.kuhler.com or email us at info@kuhler.com

 

 

 

Brewing companies perform daily research, not as a separate task, but as everyday improvement activity for their products. Thus, making this industry a strong contender for the Research and Development (R&D) Tax Credit.  Many companies are unware of this government incentive since there is a misconception that employees need to have a PhD or the research needs to be conducted in a state-of-the-art laboratory. Great news though, most of the products’ developments, improvements and testing are considered qualified research activities (QRAs) and thus fulfill the IRS Four-Part Test requirements which allows a company to claim the incentive.

The following activities conducted by brewing companies such as developing fermentation processes, filtration methodologies, bottling and canning processes, ingredient processing techniques, brewing and bottling equipment, and preservative chemicals are considered qualified research activities. Testing products to ensure consistency and shelf life are other brewery innovations that a company can claim for the R&D Tax Credit. Failures in the design, development or testing phase can also be considered QRAs, regardless of being catalogued as “failed projects”.  The IRS “failed project” provision is essential for companies in the brewery industry who constantly test products and some of them don’t meet the quality assurance threshold.

If your company conducts the activities explained above there is a strong likelihood that your company can take advantage of the R&D tax incentive. Visit the Kuhler Tax Credits website http://www.kuhler.com or email us at info@kuhler.com for more information on how we can increase your company’s market value and boost its bottom line through the Research and Development Tax Credit.

Many of the activities related to the agriculture and farming industry qualify for the Research and Development Tax Credit. Yet, business owners are unaware of this strategic financial planning tool given that, historically, the credit has been claimed mostly by manufacturing, pharmaceutical and software companies. Agricultural and farming companies continuously conduct qualified research activities (QRAs) and spend on qualified research expenses (QREs) such as identifying, testing and implementing new or improved agricultural and farming innovative solutions, which makes them a strong candidate for the Research and Development Tax Credit.

Given the nature of the agricultural and farming industry, businesses have the opportunity to constantly experiment with new products and processes. These opportunities present themselves on a daily basis, such as pest control, product development, cost efficient harvesting, water saving techniques, and specialty soil development. Other activities that can also qualify as QRAs are pesticide testing and evaluation, irrigation efficiency, and lighting improvement techniques.

Below you’ll find other farming and agricultural activities that will fulfill the IRS Four-Part Test and qualify for the Research and Development Tax Credit:

• Packaging development
• Reduce waste processes
• Spoilage elimination processes
• Increase in shelf life techniques
• Feeding, breeding and crossbreeding techniques
• Improved transportation methods

Does your company perform any of these activities? Drop us a line! To learn more about the Research and Development Tax Credit visit the Kuhler Tax Credits website www.kuhler.com or email us at info@kuhler.com

Engineering firms are strong candidates for the Research and Development Tax Credit. Most of the activities they perform create new or improve existing business components (products, processes, techniques, inventions, formulas or software), the business components are technological in nature, they eliminate some kind of uncertainty, and they go through a process of experimentation. Engineering firm owners or their financial departments are unaware that expenses related to designing and testing may allow them to claim the valuable Research and Development (R&D) Tax Credit. These firms continue to underutilize this tax incentive due to the misconception that R&D can only be completed within a laboratory by an employee wearing a white coat.

In the civil engineering field, engineering and design activities related to road design, bridges, water and wastewater treatment facilities, foundation and earthwork, retaining walls and structures, site development and infrastructure often qualify for the Research and Development Tax Credit. These activities are strong contenders to claim the tax incentive since they are technological in nature and create new or improve existing processes and designs. Services relating to surveying, soil and material testing, traffic engineering, subsurface evaluation and landscape architecture typically will not qualify for the beneficial tax incentive. A simple change in the aesthetics of a landscape won’t fulfill the criterion of the IRS Four-Part test.

For example, in the environmental engineering realm, remediation design, solid waste system design, drainage system design and flare station design will qualify for the R&D tax credit given that they go through a process of experimentation and eliminate some kind of uncertainty. Furthermore, services relating to site assessment and investigation, permitting and regulatory compliance don’t qualify for the R&D tax incentive. The activities stated above do not identify and evaluate alternatives, perform trial and error experiments or test results, thus they aren’t considered as having a process of experimentation.

Does your company perform any of these activities? Drop us a line! To learn more about the Research and Development Tax Credit visit the Kuhler Tax Credits website www.kuhler.com or email us at info@kuhler.com

Several stages and activities are involved in the research and development of a product, process or service to create them. Some of these stages generally qualify as qualified research activities (QRAS), but others don’t meet the IRS Four-Part Test threshold.

As a recap, to meet the IRS Four-Part Test, an activity must meet all four items of the “Four-Part Test”. The IRS Four-Part Test requires a new or improved business component (product, process, technique, invention, formula or software), the business component to be technological in nature, some kind of elimination of uncertainty, and a process of experimentation.

As mentioned above, some activities within the research and development process are considered QRAs and qualify for the Research and Development Tax Credit and others don’t pass the threshold. The following production activities generally qualify as QRAs: concept development, applied research, design, prototype and first run tests. These activities can apply to a variety of industries such as: engineering, software and tech, environmental and life sciences, and manufacturing and design. The following production activities generally are considered non-qualifying: full production, life cycle management, sales and marketing.

The following industry examples will illustrate the QRA explanation made above. In the manufacturing industry, improvements to processes and quality and reduction of defects in a product are considered QRAs, whereas the management of these processes or products won’t surpass the IRS Four-Part Test threshold. Moreover, in the food industry, improvements to flavor emulations and testing ingredient replacements are considered a “process of experimentation”. On the other hand, the marketing and selling activities to promote this new product won’t be recognized as “technological in nature”.

Think your company’s expenses conducts qualified research activities? Send us an email at info@kuhler.com or visit the Kuhler Tax Credits website www.kuhler.com to learn more about the Research and Development Tax Credit.

Tax season is quickly coming to an end and here at Kuhler Tax Credits we are wrapping up all of our Research and Development Tax Credit studies that need to be filed before the April 15 deadline. That is why the Kuhler team wants to remind you the importance of claiming the R&D Tax Credit. The purpose of this incentive is to encourage U.S. businesses to develop new products, services and systems as well as to stimulate the economy and provide jobs. It is the government’s way of rewarding businesses with a federal and state (most of them) reduction in current and future company tax liabilities.

The R&D Tax Credit allows a company to recapture a percentage of the dollars spent on R&D. The recapturing of these dollars assist companies in reinvesting the money back into the core business operations and remain competitive in their market field. The R&D Tax Credit is one of the most valuable tax incentives available to companies performing qualified research activities (QRAs) and qualified research expenses (QREs) in the U.S.

The R&D Tax Credit isn’t an income tax deduction but an actual dollar-for-dollar reduction against the taxes currently owed and taxes previously paid by a company. Companies can claim the R&D Tax Credit for all open tax years. A company can potentially receive a refund check for taxes paid for QRA in previous years from the IRS and state tax authorities. More importantly, the federal R&D Tax Credit can be carried forward for 20 years.

President Obama signed the Tax Extender bill into law in December 2015 making the Research and Development Tax Credit permanent. Given the new set of regulations, we project that the R&D Tax Credit benefit will nearly double for our clients in 2016!