Research and development (R&D) tax credits are federal (and many state) tax incentives rewarded for the development or improvement to product or process related activities. As the manufacturing industry continues to evolve, there are many opportunities for manufacturers particularly as it relates to technology and process improvement. Disruption can be unsettling, but the companies that embrace the disruption and adapt will position themselves to thrive now and in the future. R&D tax credits can be related to:
- Modeling, simulation, visualization and immersion – technologies used in the design, analysis, verification and validation on a product to improve quality, processes, training techniques and situational preparedness.
- Robotics – mechanical or electrical engineering coupled with computer science used to design, construct, operate and apply robots.
- Cybersecurity – developing protections for computer systems.
- Cloud computing, blockchain – software development.
- Computer aided design (CAD) - the use of a wide range of computer-based tools that assist engineers, architects and other design professionals in design activities.
- Additive manufacturing - the construction of complex three-dimensional parts from 3D digital model data by depositing successive layers of material.
- Advanced manufacturing - the use of innovative technologies to create existing products and the creation of new products. Advanced manufacturing can include production activities that depend on information, automation, computation, software, sensing, and networking.
- Agile manufacturing - tools, techniques, and initiatives (such as lean and flexible manufacturing) to help a plant and/or organization rapidly respond to their customers, the market, and innovations. It can also incorporate “mass customization” concepts to meet unique customer needs as well as “quick response manufacturing” to reduce lead times across an enterprise.
- Automation - using control systems to operate an apparatus, process, or system with minimal or reduced direct human intervention.
- Computer-aided manufacturing - in general, computer-aided manufacturing (CAM) refers to the use of computer systems to plan, manage, and control the operations of a manufacturing plant through either direct or indirect computer interface with the plant’s production resources. CAM often refers to software that takes the geometric design authored with CAD software as input and outputs manufacturing instructions that are downloaded to automated equipment such as a computer numerically controlled (CNC) machine tool is also referred to as computer-assisted manufacturing.
- Digital manufacturing - aims to improve product design and manufacturing processes across the board with seamless integration of information technology systems across the supply chain. Digital manufacturing focuses on reducing the time and cost of manufacturing by integrating and using data from design, production, and product use; digitizing manufacturing operations to improve product, process, and enterprise performance, and tools for modeling and advanced analytics, throughout the product life cycle.
- Kaizen, Just in Time (JIT) and lean initiatives – to reduce wasted time, effort or other resources in the production process.
Eligible expenses can include a percentage of payroll for engineers, production, component costs for
custom engineered products, first articles and materials consumed in production improvements.