The R&D Credit has been part of the Internal Revenue Code since 1981; however, a large number of companies have not taken advantage of this provision. In the past, the rules were very confusing. It was hard to determine who qualified, let alone which products or processes might qualify.
Many activities can qualify for the R&D Tax Credit:
- Developing new or improved products
- Developing new or improved manufacturing processes
- Increasing automation
- Developing prototypes or models
- Developing or applying for patents
- Environmental testing
- Developing and fabricating tools and dies
- Developing new production equipment
- Developing new or improved software applications
Businesses should ask themselves the following questions to determine if activity might qualify for the R&D Tax Credit:
- Have you developed or designed new production equipment, tools or dies, so that you have improved your ability to manufacture existing or new products?
- Have you automated any manual processes that have improved performance, reliability, quality, or functionality of your manufacturing process or products?
- Have you implemented any new software systems to improve the efficiency of your manufacturing process or products?
- Have you redesigned your shop floor so as to implement “lean manufacturing” efforts to improve efficiency?
- Have you done any of the above in the past years and failed to claim the R&D Credit for those years?
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