A leading developer and manufacturer of heating systems for high-precision manufacturing clients. Headquartered in Illinois, the company has annual sales of $35 million. Its workforce of over 100 includes a staff of mechanical engineers, electrical engineers, manufacturing engineers and tooling engineers expert in the development of proprietary heating systems used by the food, pharmaceutical and semiconductor industries.
Although the client had historically deducted some R&D costs, they had not claimed any R&D tax credits. 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 or modified product designs, research of alternative materials and the design of manufacturing processes and tooling, we successfully identified a significant number of activities and costs qualified for the R&D credit.
The client claimed their R&D credits and cash flow was enhanced by $390,000. Provided the R&D activities, costs and revenue continue at its present trend, the client should expect approximately $90,000 in annual federal tax savings in addition to annual state tax savings from state R&D credits.
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Electronic Products (Heaters) 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:
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.
Identified qualifying R&D expenditures and fixed base percentage. Projected expected R&D benefit for each year of the study.
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.