Innovators Ought to Think about R&D Tax Benefits

As ACMA members continue to make advancements in manufacturing and recycling composites, the benefits of innovation available under U.S. tax law should not be ignored. Federal tax law provides incentives for innovation that could be applicable for these activities, and ACMA is working to protect and improve those incentives.

Generally referred to as the research and development (R&D) tax incentives, they include expensing R&D costs, as well as R&D tax credits. Manufacturers are historically the largest users of these provisions, and the R&D tax credit is one of the tax provisions most frequently used by all U.S. businesses. According to the Internal Revenue Service, manufacturers account for 60% of all tax credit applications, with chemical manufacturers representing the largest group.

While these programs present important opportunities, there are notable limits to the ability of manufacturers to claim them. ACMA members should keep these incentives in mind as they develop their tax strategy.

The R&D tax credit has historically been a program that required renewal every two years, but a 2018 bill made the program permanent.

Unfortunately, due to congressional inaction, expensing R&D costs must now be amortized, rather than fully claimed in the year the costs are incurred. ACMA is working closely with the National Association of Manufacturers (NAM) and other associations to solve this and revert to full expensing in the relevant tax year.

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