Dec. 20, 2012
-- “We’re a manufacturer, not an engineering firm. I’m not sure we really do R&D.” “We’re not a Fortune 500 company; I’m not sure we have enough R&D to file for a credit.” We hear it all the time from prospects. When it comes to the Credit for Increasing Research Activities (I.R.C. §41, “the R&D credit”), there is a common misconception that, if you don’t have a laboratory, a dedicated R&D division, or an engineer on staff, you won’t qualify for the R&D credit. While those things can certainly be evidence of R&D, they are far from being the only factors.
In reality, manufacturing companies actually benefit from the R&D credit more than any other group. Since 2005, manufacturers have consistently claimed approximately 70% of the total amount of R&D credits given out by the federal government. The term “R&D” conjures the idea of laboratories, engineering firms, and other organizations that focus solely on scientific research. However, as the first chart demonstrates, “professional, scientific, and technical services” companies make up a very small percentage of the credit when compared with manufacturers.[
ii] Manufacturers have consistently claimed around 70% of the R&D Tax Credits since 2005.
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