Understanding R&E Tax Credits



By: Stephen Smith, CPA, CGMA, MBA, CVA, H&M Principa


Research and Experimentation (R&E) Tax Credits (sometimes referred to as Research and Development or R&D) are Federal tax credits that many businesses, across many industries need to know about.  A company that is improving processes, investing in innovation and working on fixing design uncertainties as they relate to certain business components could be eligible for this tax benefit.

Frequently, manufacturers qualify for R&E credits- whether it’s tools, medical devices, chemicals, boats, food, or goods of a custom nature (note: that was just a quick, partial list of items I just shared), manufacturers should be discussing what R&E credits could mean for their business with their accountant.

Other routine industries that qualify for R&E Tax Credits include, but are not limited to:

  • Software Developers
  • Dental Laboratories
  • Automotive
  • Packaging
  • Health & Beauty
  • Furniture & Household Goods
  • Oil & Gas
  • Biotechnology
  • Plastics and Rubber Processors
  • Plastic Resin Compounders
  • Aerospace/Defense
  • Metal Rolling or Forming Operations
  • Engineering Firms
  • Design/Build Contractors
  • Metallurgy/Die Casters/Foundry
  • Mining
  • Pharmaceuticals
  • Prosthetics
  • Proprietary Products

Your industry sector is just one facet of the eligibility process.  Your business must be performing qualifying activities on a regular basis to earn R&E credits.  Qualifying activities might include developing new technology;  improving manufacturing processes; experimenting with new materials; testing new products; designing tools, jigs, molds and dies; conduct testing of new concepts and technology; automate / streamline production; and developing new prototypes (you guessed it, just to name a few).  If you should have another similar type activity that you think may quality, let’s please discuss it further.

Contact us today to see if your business might be entitled to one of these often unclaimed credits.  We can evaluate your qualifying activities and help you make that determination quickly.