MOLD BUILDERS REDUCE FEDERAL AND STATE TAX LIABILITIES WITH R&D TAX CREDIT By Michael J. Devereux II, CPA, CMP
Tconducted its second micro-survey regarding the R&D tax credit.
his summer, the American Mold Builders Association (AMBA)
The first survey, conducted in 2015, had participation from 39 mold builders, 18 of which were claiming the credit at the time. This year, more than 60 molds shops were surveyed, 28 of which report claiming the R&D tax credit. Of those 28 companies, 60% also are claiming state R&D tax credit. As Chart 1 represents (and the above data indicates), the R&D tax credit – short for the US Credit for Increasing Research Activities – is one of the most underutilized tax savings opportunities for companies in the mold manufacturing industry, regardless of company sales. Because this tax credit rewards companies that invest resources in innovation, product development, mold design, new
materials or resins and process development/improvement, mold builders have many potential opportunities to claim this credit and reduce their federal and state tax liabilities. GENERAL REQUIREMENTS FOR QUALIFYING ACTIVITIES In order to claim the credit, the mold builder must engage in qualified research activities. There are four general requirements for an activity to qualify for the credit, which are listed in Chart 1. As such, the types of activities that may qualify for the R&D tax credit may include, but are not limited to, the following: • Developing new mold designs • Developing tool-specific fixturing • Sampling new tool designs • Improving manufacturing processes through automation
REQUIREMENTS
MOLD BUILDER ACTIVITY
Development or improvement of a business component (i.e., a product, a process, a technique, an invention, a formula or software application)
Mold shops regularly design and develop novel, one-of-a-kind, never-been-built-before injection molds
Activity must be technological in nature, fundamentally relying upon the sciences
Mold builders rely upon engineering disciplines and scientific molding principles
Technological uncertainty related to the capability, method or design exists at the outset of the research activity
In some instances, tolerances and part geometry may result in capability or method uncertainty; design uncertainty also usually exists in the design and development of a new, never-been-builtbefore injection mold
The uncertainty must be eliminated through a process of experimentation, including modeling, simulation, or systematic trial and error
Modeling: Tool shops regularly 3-D model the parts and the tooling components Simulation: Mold shops regularly use mold fill analysis to simulate the processing Systematic Trial & Error: Tool shops regularly sample the tool to test its design
Chart 1 26
the american MOLD BUILDER | Issue 3 2020
