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Expert insights on tax credits, compliance, and innovation incentives
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Your Tool Shop and the R&D Tax Credit: What Counts as Research on Your Shop Floor?
If your shop designs and builds dies, molds, fixtures, or custom tooling, some of that work may qualify for the federal R&D tax credit – and potentially state credits if applicable. Many tool shop owners assume the credit belongs to labs or software companies, but the credit was built to reward innovation regardless of industry. As long as your activities meet the requirements of the four-part test, you may qualify.
Kentucky’s Research Facility Tax Credit: The Credit for Building the Lab, Not Running It
If your company builds, remodels, equips, or expands a research facility in Kentucky, you may qualify for a state credit that is often overlooked. Kentucky’s Qualified Research Facility Tax Credit (KRS 141.395) rewards what you spend on the physical space and equipment for research, rather than what you spend on wages, supplies, or contract research.
R&D Tax Credits for Additive Manufacturing
A company that has printed the same bracket the same way for multiple years in a row might not feel like it’s doing any research in the same way that a traditional manufacturer that added one metal printer to build a single part in-house may not, but both may be wrong in their assumptions.
Your Project Failed. What Does That Mean For Your R&D Tax Credit?
A failed project may still qualify for the R&D tax credit. The Treasury regulations state that the ultimate success or failure does not automatically qualify or disqualify whether its development costs count as research expenditures. Before you write off a shelved prototype, a scrapped software build, or a formulation that was never launched, find out whether the work behind it qualifies.
R&D Tax Credits for Timberland and Forest Management Companies
Timberland owners and forest management companies often don’t recognize that they may qualify for R&D tax credits, but many of them are already performing research and development activities when improving operations.
R&D Tax Credits for Postharvest Processors
Many agricultural operations don’t think that they’d qualify for R&D tax credits, and that’s not just reserved for farmers. It applies to other essential agriculture operations, such as grain elevator managers and postharvest processors.
How R&D Tax Credits Fit into a Bigger Ag Tax Strategy
Farmers and ranchers lean on tools like §179 expensing, bonus depreciation, and the restored research deduction under §174 to manage their tax liability. The R&D tax credit under IRC §41 sometimes gets left out of that conversation despite its natural fit alongside those provisions.
