A precision manufacturing company developing new composite materials for aerospace applications was unaware their innovative work qualified for R&D tax credits. Our team identified eligible activities across multiple departments, documented their experimental processes, and secured $1.2 million in tax credits over three years.
The Challenge
This precision manufacturing company was at the forefront of developing advanced composite materials for aerospace applications. Despite significant investment in research and development activities, they were completely unaware that their innovative work qualified for R&D tax credits.
The company had R&D activities happening across multiple departments—engineering, materials science, testing, and production—but lacked the documentation and understanding needed to claim these valuable tax credits.
Our Approach
Our manufacturing CPA team conducted a comprehensive review of all company activities to identify qualifying R&D work. We examined:
- Engineering department's experimental processes and material testing
- Materials science team's development of new composite formulations
- Testing procedures and quality control processes
- Production department's process improvements and optimization efforts
We then implemented a comprehensive documentation system that captured all eligible R&D activities, including:
- Detailed records of experimental processes and iterations
- Documentation of technical challenges and solutions
- Time tracking for R&D activities across all departments
- Cost allocation for qualifying expenses
Key Outcomes
$1.2 million in R&D tax credits claimed: Over three years, we successfully identified and documented qualifying activities that resulted in $1.2 million in tax credits.
Improved documentation processes: We established ongoing documentation systems that ensure the company can continue to claim R&D credits for future innovation work.
Reinvestment in new testing equipment: The tax savings enabled the company to invest in advanced testing equipment that further accelerated their R&D capabilities.
Additional engineering staff: The financial benefits allowed the company to expand their engineering team, increasing their innovation capacity.
Accelerated development timeline: With better documentation and additional resources, the company was able to accelerate the development timeline for their next-generation materials.
Why R&D Tax Credits Matter for Manufacturers
Many manufacturing companies are unaware that their day-to-day innovation activities qualify for R&D tax credits. These credits can provide significant financial benefits that can be reinvested in:
- New equipment and technology
- Additional research and development staff
- Advanced testing and quality control systems
- Process improvements and optimization
Conclusion
This case study demonstrates how proper identification and documentation of R&D activities can unlock significant tax savings for manufacturing companies. The $1.2 million in credits not only provided immediate financial benefits but also enabled the company to accelerate their innovation pipeline and strengthen their competitive position in the aerospace market.
If your manufacturing company is engaged in developing new products, processes, or materials, you may be eligible for R&D tax credits. Our team can help identify qualifying activities and establish the documentation systems needed to maximize your tax savings.