The Client
The client is a leading developer and manufacturer of state-of-the-art point of purchase displays. Headquartered in Illinois with a branch office in Arizona, the company has annual sales of $18 million. Its workforce of 45 includes a staff of designers, engineers and program managers expert in the development of leading edge and next generation display units, as is evident by their numerous patents.
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 a potential source of additional cash flow by evaluating their R&D tax credit position. Through a detailed analysis of the design, engineering, material research, design of tooling and design of manufacturing processes and assembly cells, 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 $390,000. Provided the R&D activities, costs and revenue continue at its present trend, the client should expect approximately $80,000 in annual federal tax savings in addition to annual state tax savings from state R&D credits.
Point of Purchase Display 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.