The Research & Experimentation (R&E) Tax Credit is capable of producing significant tax savings for the research, development and improvement initiatives a company is already undertaking.
Simply defined, the R&E Tax Credit is a federal incentive that rewards taxpayers for the development and/or improvement of a product, process, formula, invention, technique, or software.
The credit has been in existence since the early 1980s and was created to incentivize companies to invest in technologies that facilitate increased product and process development, leading to growth in productivity, profitability and job creation.
In addition to the federal credit, around 30 states have a state credit as well.
Although originally intended for companies within industries that fit the more traditional definition of research such as pharmaceutical and defense, recent changes in the regulations have opened up the credit to companies in a wider variety of manufacturing, engineering and professional services fields.
The credit may be claimed for the current tax year, as well as retroactively for all open tax years.
Therefore, for taxpayers that have not previously taken advantage of the credit, the analysis typically involves a one to four year engagement, or even longer.
The R&E Tax Credit is utilized in a wide variety of industries. Examples in the manufacturing space include:
-
Automotive
-
Food & beverage
-
Energy
-
Chemical
-
Biotechnology and agricultural
-
Plastics
-
Metals
- Life sciences
-
Tool & die and machine building
-
Computer hardware and software
-
Electronics
-
Medical devices
-
Pharmaceutical
-
Transportation
The R&E Tax Credit is also utilized in the contracting and professional services fields including:
-
Electrical and mechanical contractors
-
Construction and architectural firms
-
Engineering companies in the civil, environmental and structural fields
RubinBrown’s Research & Experimentation Tax Credit Service Group specializes in helping companies take advantage of R&E Tax Credits and developing the processes to continue doing so in the future.