The Client
An industry leader in the design and manufacture of automotive aftermarket exhaust systems. They are headquartered in North Carolina, with annual sales of $70 million and a workforce of almost 500. By combining forward-thinking product development teams, state-of-the-art exhaust system designs, proprietary manufacturing processes and tool design they have achieved a competitive edge over others in their industry.
The Opportunity
RnD Consulting was asked by management to assist them in identifying a potential source of additional cash flow by evaluating their R&D tax credit position. Through a detailed analysis of their design/development of new exhaust and emission systems, research of alternative materials and the design of manufacturing processes and tooling/fixtures, we successfully identified a significant number of activities and costs qualified for the R&D credit.
The Results
The client claimed their R&D credits and cash flow was enhanced by $622,000. Provided the R&D activities, costs and revenue continue at its present trend, the client should expect approximately $200,000 in annual federal tax savings in addition to annual state tax savings from state R&D credits.
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Automotive Aftermarket Parts Manufacturer
The RnD Consulting Approach:
The RnD Consulting, Inc. research and development consultants, specializing in the application of federal and state research and development tax credit laws, identified qualifying activities and costs. RnD engineering and tax consultants assisted the client in developing a credit methodology by providing the following services:
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Gathered information reviewed from tax returns and financials. Interviewed client personnel. Participated in site visits. Identified areas where expenses potentially qualified for research and development tax credits. Prepared detailed R&D activity questionnaires.
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Identified qualifying R&D expenditures and fixed base percentage. Projected expected R&D benefit for each year of the study.
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Identified and documented R&D issues and activities, process of experimentation and nexus between activities, costs, project files and personnel. Documented qualifying activity narrative and contemporaneous documentation. Applied recent case law to maximize potential benefit. Delivered file to client to support historical R&D credit methodology as well as template for future use.