According to the American Auto Council, automakers and their suppliers are the world's third largest investor in research and development (R&D). In fact, in 2018, automakers spent more than $125 billion globally on R&D. OEMs are constantly innovating: creating new products that satisfy consumer interests, integrate the required functionality, and work in tandem with existing technologies. The costs of these substantial investments can be recouped, in part, through the R&D Tax Credit.
Employee wages, raw materials and supplies, cloud computing, and third-party contractor costs associated with R&D activities are considered qualified research expenses (QREs). Companies can receive refunds of up to 22% of total QREs through federal and state tax credits, depending on the state in which your business (or third-party contractor) operates.
Examples of qualifying activities:
- Designing new audio systems or integrating new functionality into existing systems
- Creating technology to increase engine efficiency or to utilize alternative energy sources
- Designing and developing fixtures and tooling for precision manufacturing
- Developing new software or improving on existing code
- Integrating automation into existing manufacturing processes
- Building and testing prototypes and first articles
- Testing and implementing revisions to conform to regulatory and/or emissions requirements
- Developing and testing systems that increase cost efficiency or safety
Do you have these job titles on your payroll, or do you hire third-party contractors to do these jobs?
- Computer-aided Design (CAD) Personnel
- Electrical Engineers
- Industrial Engineers
- Mechanical Engineers
- Precision Machinists
- Senior Project Managers
- Software Developers / Engineers