The Client
A leading broad-line manufacturer and distributor of filtration products. The company operates several facilities throughout the United States and Canada. The company’s annual sales volume is in excess of $70 million with approximately 900 employees in North America. They design and develop their own products for custom industrial applications as well as enhancing existing designs for standard applications. In addition, they design the processes to produce their filters.
The Opportunity
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 activities and information from their many operations to capture a potential source of cash flow from R&D tax credits. Through a detailed analysis of the design/development of new or modified products, research of alternative materials and the design of manufacturing processes and equipment, 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 $780,000. Provided the R&D activities, costs and revenue continue at its present trend, the client should expect approximately $150,000 in annual federal tax savings in addition to annual state tax savings from several state R&D credits.
Industrial Filter Manufacturer
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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.