Companies can achieve significant results from innovation driven by solid research and development (R&D). From the proof of concepts to the actual commercialization of ideas, the R&D process can spark new innovations, lead to new efficiencies and develop your workforce. It also helps organizations enhance or create products and diversify offerings.
Tax Credits for R&D
Tax Credits for R&D
A significant R&D-related benefit for manufacturers is the ability to apply for tax credits. Since 1981, R&D tax credits have been available to manufacturers to help design products, refine processes and save money.
Clearing Up Misconceptions
In manufacturing, topics such as continuous improvement and workforce development are often discussed as ways to improve profitability, while R&D is commonly overlooked. This may be attributed to some of the misconceptions surrounding the definition of R&D, especially as they relate to tax credits.
- “It’s too hard to prioritize R&D.” If your company is developing new products or improving procedures and/or processes, your efforts may qualify as R&D. Processes involving making a prototype or adding a new part to improve a product can count as R&D. Efforts from other improvement initiatives may cross over into the R&D realm. This includes the adoption of ISO 9000 and other quality management standards, as well as developing new business components, processes or software. You’re probably halfway to truly focusing on R&D and don’t even realize it!
- “It’s not worth the time or money.” It doesn’t matter if you’re a small, medium or large manufacturer, there are many opportunities for earning out there if you apply. Receiving up to thousands of dollars in money can make all of the difference in today’s competitive climate.
- “It’s getting taken care of.” Don’t assume your accountant has thought of and is taking care of it all. The various tax credits available are not always promoted and advertised. Securing R&D tax credits in the manufacturing industry often requires a specific understanding of regulations and the submission process. Research who’s experienced with identifying, quantifying and qualifying your expenses.
Simply put, having a formal R&D program will help you become more competitive and profitable. This opportunity to earn back tax credits is important for your company. As you strategically plan your priorities for the remainder of 2015, remember that 2016 is right around the corner. Consider adopting a formal R&D plan.
Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.