Shipbuilding & Marine R&D Tax Credits

Innovate in shipbuilding and marine technology. Shipyards and marine‑systems companies in the U.S. are advancing hull designs, propulsion systems, autonomous marine vessels, corrosion‑resistant materials and maritime automation. Many of these activities qualify for the federal R&D Tax Credit under IRC §41, with state incentives also available.

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Examples of qualifying activities in shipbuilding & marine manufacturing

Advanced Hull & Propulsion Design Testing new hull‑form geometries for drag reduction, alternative fuel propulsion (LNG, hydrogen), or new propeller/foil configurations.
Materials Innovation & Corrosion Mitigation Developing new alloys, coatings or composites to resist saltwater corrosion, biofouling, fatigue and extend vessel lifespan.
Autonomous & Marine Automation Systems Developing navigation algorithms, autonomous vessel control systems, sensor integration for unmanned craft, or remote monitoring systems.
Marine Systems & Sub‑systems Development Creating new cargo‑handling systems, ballast‑water treatment innovation, energy‑efficient HVAC for vessels, or modular ship‑block manufacturing techniques.
Sustainability & Efficiency Projects Trialing hull‑surface treatments, energy‑recovery systems, hybrid‑diesel/electric propulsion, or integrating alternative fuels into marine systems.

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What qualifies as R&D in Shipbuilding & Marine?

To qualify, activities must:

Pursue a permitted purpose such as developing a new hull form, marine propulsion system, corrosion‑resistant alloy, autonomous marine craft or ship‑automation system
Address technical uncertainty about capability, method or design in naval architecture, marine engineering, materials science, or control systems
Follow a process of experimentation through prototype hull tests, propulsion system trials, material fatigue testing or autonomy validation
Be technological in nature, grounded in marine engineering, structural engineering, materials engineering or software/automation systems

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Qualified Research Expenses (QREs)

Expense Type

Examples in Shipbuilding/Marine

Eligibility Notes

Wages

Naval architects, marine engineers, materials scientists, software/automation engineers

Direct, supervisory or support roles tied to experimentation

Supplies

Prototype hull panels, marine‑grade alloys, composite test coupons, sensors, consumable materials

Must be consumed in experimentation

Software / Cloud

CFD simulation tools, autonomy algorithms, digital twin marine simulation platforms

Eligible when used for experimental modelling, validation, control‑system development

Contract Research

Naval‑engineering labs, materials labs, marine‑automation integrators

Typically ~65% of subcontract cost may qualify when research‑dedicated

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Roles commonly involved in qualifying activities

Naval architects and marine structural engineers
Materials scientists focused on corrosion, fatigue, composites
Software engineers and automation experts for marine systems
Mechanical/electrical engineers working on propulsion, sensor integration, energy systems
Research partners, labs, prototype ship‑block fabrication facilities

What does not qualify

Routine shipbuilding or vessel manufacturing without experimental research
Applying standard vessel designs without modification or testing
General management, marketing or administrative tasks
Capital‑asset purchases not tied to research experimentation

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Compliance and Documentation

§174 Update

Following the One Big Beautiful Bill Act (OBBBA) signed July 4, 2025, §174 now allows immediate expensing of domestic research expenses for tax years beginning on or after January 1, 2025. Taxpayers may also elect optional amortization under new §174A. Foreign research expenses must still be amortized over 15 years. This is separate from the §41 credit but impacts overall tax planning.

Project briefs with marine‑innovation goals, test plans, simulation runs
Hull‑test logs, propulsion‑trial data, sensor/automation validation results
Comparative metrics vs baseline, design iteration logs
Employee time records, role descriptions, time allocation to research
Demonstration of the four‑part test under §41

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Frequently Asked Questions

Do shipbuilding and marine companies qualify for the R&D Tax Credit?

Yes — if they are engaged in development of new hull forms, marine propulsion, materials, autonomy or other technical systems rather than only production.

What expenses can be claimed?

Wages of engineers and scientists, test materials, simulation software, contract research in labs or marine‑test facilities.

Which operations are eligible?

Shipyards, marine‑systems manufacturers, autonomous vessel developers, propulsion‑innovation firms and marine‑materials suppliers can qualify when actively innovating.

What activities do not qualify?

Routine production of vessels or standard upgrades without technical uncertainty or experimentation, non‑technical roles, standard equipment purchases.

How much might be saved?

Savings depend on project scope; companies can claim a meaningful fraction of qualified research expenses if properly documented.

How should marine companies document research?

Keep logs of prototype hull trials, sensor integration trials, automation runs, material‑testing data, simulation outputs, and employee‑time records tied to experimentation.