Neil Beeman CPA presents a webinar on making R&D Tax Credits work for your organization.

1. MANN, URRUTIA, NELSON, CPAS
& ASSOCIATES, LLP

2.  Manufacturing products
 Developing new products, processes, or formulas
 Developing prototypes, models, and samples
 Designing tools, jigs, molds, & dies
 Adding new equipment
 Performing certification testing
 Conducting testing of new concepts
 Developing new technology
 Attempting the use of new materials & compounds
 Performing environmental testing
 Developing, implementing or upgrading systems
 Developing or improving production processes
 Automating or streamlining internal process
 Improving or building new manufacturing facilities
 Contracting on outside consultants for any of the above.

3.  Federal and State Tax Credits are designed to encourage U.S. businesses to invest
in improvements which increase their competitive position in the market
 First enacted in 1981 by the Reagan Administration in a “Temporary Status”
 Intent was to provide incentives to develop innovative products and
processes new to the world
 Typically patentable concepts & activities
 Quickly adopted by the most technologically sophisticated companies
 Extended 14 times since 1981- extend until 12/31/13
 33 countries offer R&D incentive (including:
Canada, Mexico, France, Spain, and others)
 As an economic stimulus incentive significant changes were made in 2001 and
finalized in 2003
 Discovery Test & Documentation Requirements were removed
 Opened the program to small to medium size businesses

4.  Engineering efforts
 Laboratory testing
 New product designs
 Certification testing
 Patent efforts
 Creation and testing of prototypes
 Product enhancements  Technical discussions
 Computer modeling
 Quality and efficiency improvements
 Formula development
 “Unsuccessful” qualifying projects
 Experimentation efforts

5.  Research conducted outside the United States
 Reverse engineering
 Market research
 Research related to style of consumer taste
 Non-retention of substantial rights
 Research related to management techniques

6. Permitted Purpose – The activity must relate to a
new or improved product or process indented to
improve:
 Function
 Performance
 Reliability
 Quality

7. Technological in Nature – The activity performed
must fundamentally rely on principles of:
 Biological science
 Chemical science
 Engineering
 Physical science

8. Elimination of Uncertainty – The activity must be
intended to discover information to eliminate
uncertainty related to:
 Capability of a product or process
 Method of a product or process
 Appropriateness of a product design

9. Process of Experimentation – Substantially all of the
activities must relate to a process of
experimentation involving:
 Evaluation of alternatives
 Confirmation of hypotheses through trial and
error, testing and/or modeling
 Refining or discarding of the hypotheses

10. Salaries & Wages
 Typically largest component
 Calculate & estimate % of employees’ qualifying time
 Multiply % by annual wages
Supply cost
 Consumed or destroyed during the qualifying activates
Contractor Costs
 Same pro-rata rules as with salaries and wages
 65% of qualifying costs eligible

11.  Direct Supervision
 R&D Activity
 VP of Manufacturing
 Engineers
 VP of Engineering
 Scientists
 Plant Manager
 New Product Group
 Mentor
 Software Developers
 Direct Support
 CNC Programmers
 Production Employees Sales
 Tool/ Jig Makers
 Force
 Draftsmen
 Fabrication Personnel
 Lab Technicians
 Support Functions
 Certain QA Activities
 Admin Assistants
 Technicians
 Certain Maintenance
 Personnel
NON-QUALIFYING SUPPORT ACTIVITES
 Executive Management (if not directly
supervising or participating)
 General Support Professional

12.  Patents (strong indicators)
 Project time records
 Schematics, diagrams, or charts
 Advanced testing documents or images
 Engineering notes or sketches
 Lists of logs detailing innovation/new products
 Meeting minutes
 Process improvement discussions
 New product development
 Contract review

13. 1
2
3
4
5
Concept
Development
Applied
Research
Design – Prototype –
First Run & Testing
Customer
Deliverable
Life Cycle
Maintenance
Stages 1-3 Qualify, Stages 4-5 Do Not Qualify

14. Questions?
MUN CPAs will do a preliminary
consultation at no cost.

15. PRESENTER
INFORMATION
NEIL BEEMAN, CPA, PARTNER
MANN, URRUTIA, NELSON, CPAS & ASSOCIATES, LLP
2901 DOUGLAS BOULEVARD, SUITE 290
T. 916.774.4208 F. 916.774.4230
E. NJB@MUNCPAS.COM
WWW.MUNCPAS.COM