Page 49 - MetalForming May 2017

tecting Americans from Tax Hikes) Act became law. That legislation, in addi- tion to making the federal tax credit permanent for the first time in the credit’s 35-yr. history, significantly enhanced how small and midsized manufacturers (SMMs) can benefit from the research tax credits they gen- erate, utilizing the following significant provisions:
• Eligible SMMs may now claim the credit against the Alternative Minimum Tax (AMT) to offset AMT for tax years beginning after December 31, 2015.
• Some start-up companies may offset payroll taxes with the credit— in tax years beginning after December 31, 2015, certain start-up companies can use the research credit to offset the employer’s payroll-tax (i.e., FICA) liabilities.
How are these changes significant? In years past, a large number of eligible SMMs (especially S Corporations and other flow-through entities) did not pursue the tax credit because the AMT prevented them from using the credits they could generate. In addition, young companies typically didn’t have a need for tax credits because their expendi- tures were higher than their sales, thus creating operating losses. Both new changes will allow a higher number of companies to immediately monetize the credits they generate.
Tax-Credit Successes Abound
A number of metalforming and fab- ricating companies have benefitted from the R&D tax credit and recent passage of the PATH Act.
• A precision stamping and manu- facturing company earned more than $170,000 in cumulative credits, includ- ing more than $48,000 state and $44,000-plus federal tax credits. It sought to design specialty-sized align- ment pins using a noncontact machin- ing method (EDM) on a rotating work- piece while maintaining a customer’s surface-finish specifications. The com- pany tried various combinations of EDM parameter testing and finishing methodologies—all of it eligible for credits.
• A stamping and machining con- tract manufacturer obtained more than $150,000 in cumulative federal tax cred- its in its efforts at cost-cutting solutions, continuous improvements and cre- ation of diverse products for its cus- tomers. The company evaluated options for manufacture and developed process improvements. Specifically, it tested several laser-cutting options to determine which to use in a flexible environment, and redesigned its man- ufacturing processes to effectively and efficiently implement new laser-cutting technology.
• A tool and die manufacturer earned in excess of $192,000 federal and state tax credits as it designed and built a new carbide tool. The goal: develop a stronger tool that wouldn’t
mark the workpiece. To do that, the company evaluated various tool-work- piece connection-point designs, car- bide thicknesses, surface finishes, glues and mounting techniques.
• A metalformer sought to design and build an automotive component using dual-phase steel, earning it more than $114,500 in state and federal tax credits. Springback, a tricky issue when stamping dual-phase steel, had to be accommodated in the tool design to keep the part within tolerance. Design, testing and manufacture all con- tributed to tax-credit success.
Do any of these real-world examples apply to your company? If so, consider pursuing the R&D tax credit—one of the most generous incentives available to help businesses reinvest. MF
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