Emergency Personal Protective Equipment Manufacturing
In response to the shortage of Personal Protective Equipment (PPE) and other hygiene products such as hand sanitizer caused by the coronavirus pandemic, many companies are pivoting resources toward the manufacture of these much needed products. For companies that have made this change, there may be an opportunity for some of the related expenses to qualify for the Research and Experimentation Tax Credit (R&E Tax Credit).
The R&E Tax Credit is available to companies that are developing new or improved products or processes. In the case of manufacturing medical or non-medical PPE, companies may be investing resources in developing new manufacturing processes in order to produce a product that they have not made previously. This could include programming production machines, developing new tooling and fixtures, developing new formulations, or otherwise developing a new process.
Many of the designs for these products are being distributed by federal agencies or other open-source resources, including 3D printing or other manufacturing processes. In order for a company to claim expenses towards the R&E Tax Credit, there must be technical uncertainty at the onset of the project. This means that if a company uses the design and process provided by another party, the associated expenses would not qualify. However, if a company needs to develop or improve a process in order to match its capabilities to a design, there is an opportunity to claim the R&E Tax Credit.
If this is a one-time change for a company and is limited in scope, the related expenses may not be significant enough to generate meaningful credits. But companies that regularly develop new processes or design new products and components should seriously investigate its potential for R&E Tax Credit savings.
As companies adjust to changing market needs in uncertain times, being aware of all potential benefits is critical to the decision making process. McGuire Sponsel is committed to providing first-class service to help partner firms bring value to their clients. If you have further questions, or are interested in pursuing specialty tax credits and funding, please reach out to your McGuire Sponsel representative.