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Could Your R&D Projects Save You Some Dough?

Fri, 10/18/2013 - 1:51pm
Adam Beckerman, partner-in-charge of manufacturing and distribution group at Habif, Arogeti & Wynne, LLP

$90,844,000. That’s the total value of the federal Research and Development (R&D) Tax Credit awarded to food manufacturers in 2010. Are you missing out on some dough?

Eighty-two percent of Georgia manufacturers are not taking advantage of the R&D Tax Credit, according to the 2012 Georgia Manufacturing Survey, conducted by Habif, Arogeti & Wynne, LLP, the Georgia Institute of Technology and Kennesaw State University. And while that isn’t necessarily the trend across the country, many food manufacturers don’t know about this valuable credit or don’t recognize that the activities they perform within their plant are eligible for the savings. Food manufacturers are missing out on millions of dollars that they could put directly into their pocket.

The Federal R&D Tax Credit was enacted in 1981 as a tax program to encourage American innovation, and while the Credit has never been made a permanent part of the U.S. tax code, it has been extended 15 times in the last 30 years. Today, the Credit is providing food manufacturers with additional capital that can be used to hire new employees, buy new equipment or re-invested into additional research and development projects.

At the Federal level, the R&D Tax Credit provides companies with an immediate source of cash as a dollar-for-dollar offset against taxes owed or paid. The credit is effective in reducing past, current and future year tax liability. Unused credits can be carried forward 20 years.

In addition to the federal R&D Tax Credit, 40 states across the U.S. offer a tax credit or incentive to companies that perform qualified R&D within their state. In Georgia, the R&D Tax Credit can be more beneficial than the federal credit for younger companies. The Georgia R&D Tax Credit can offset 50 percent of net Georgia income tax liability after all other tax credits are applied, or it can be used to offset Georgia payroll tax withholding, an automatic savings for companies.

 

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