How planning a processing system qualifies for a tax credit

When taking a sip of a cold drink during a big game, most fans probably don’t give any thought to all the steps involved with getting the product from tank to can. Part of that magic is in the hands of those who develop the product’s recipe, but the individuals who develop the pathway to product creation are just as necessary. Those are the process engineers and fabricators who create the actual system and infrastructure, complete with tanks, piping, and pumps, that allow the products we know and love to come to fruition.

While these innovators certainly end up creating a seamless process for their clients, the pathway to developing that process isn’t always an easy road. Therein lies the difficulty—which often means doing more with less. That’s the challenge that process engineers and industrial fabricators face on a daily basis.

Cost-effective Solutions, Confined Spaces

Building a customized solution that fits into limited space is an ongoing challenge. How can engineers create a pathway from point A to point B that is energy-efficient, complies with pertinent regulations, and delivers a quality product that meets client expectations?

Whether that product is condiments, toothpaste, beer, chemicals, or fuel, process engineers are consistently working during each stage of the manufacturing process to design innovative processes and equipment to get a satisfactory result.

Revolutionary technologies that help to advance fields like process engineering, such as Industry 4.0, have helped process engineers and fabricators develop these intricate systems for their clients. Although these technologies have certainly helped to make the development and maintenance process more streamlined, there is still a large amount of design iteration, testing, and reconfiguration involved in developing a client solution.

This process of testing and system iteration is exactly the type of innovative process that Congress was trying to incentivize when in 1981 it enacted the Economic Recovery Act—and with it, the Research and Development Tax Credit (R&D Credit).

The R&D Credit, which is a dollar-for-dollar tax incentive, was created to help incentivize U.S. businesses to innovate and compete so our nation would remain a worldwide economic powerhouse. In short, the R&D Credit rewards companies of all sizes for keeping technical labor in the U.S., and it’s a wage-based incentive that gives back to companies that are working to improve their product or processes and resolve technical uncertainties.

One of the best things about the R&D Credit is its applicability across essentially every industry. From agriculture to manufacturing, this tax incentive has helped thousands of U.S. businesses bring capital back into their company to invest in their employees, infrastructure, and innovative practices in order to remain competitive in their field.

In 2013 alone, the IRS reported that U.S. businesses claimed $11.3 billion in R&D Credits. That capital flows back into thousands of businesses, adding to our country’s economic prosperity.

What Qualifies as R&D?

Developing new processes. Improving existing processes. Relieving technical uncertainty. Sound familiar?

This is what makes companies that employ process engineers and fabricators such uniquely qualified candidates to claim the R&D Credit. The very nature of the work done by these professionals on a daily basis is what qualifies businesses year after year for the incentive. To provide some examples, here are a few business activities that may qualify process engineering and fabrication firms for the R&D Credit:

• Specification review and concept

development

• Custom fabrication to meet a code, a client’s specifications, or both

• On-site fabrication and installation of equipment or structures

• System or product design, including dimension and structural determinations, cladding types, and materials science analysis

Process engineers and fabricators understand business challenges because it’s their job to alleviate those challenges for their clients. They constantly need to balance the demanding needs of the business and production requirements with limitations of space, regulation, and process capacity as well.

Navigating through these limitations doesn’t just help the client. It can and should also help the firm that paved the road for the client to use in the first place. That’s why for those firms that employ process engineers or fabricators, claiming the R&D Credit is a must. And those already claiming need to ensure their business is claiming the right amount of credits for optimal growth.

It’s easy to appreciate the end product, but it’s important to recognize the innovators who combine the pumps, valves, tanks, and fittings to create the system needed to create that product—and even more important for them to claim the incentives that lead to further innovations.