The document discusses tax planning strategies for marine manufacturers, focusing on the research and development (R&D) tax credit. It explains that the R&D credit allows companies to receive tax credits for qualified research expenses and can offset up to 20% of expenses. It outlines the four-part test to qualify research as well as examples of qualified and excluded research activities. The document also discusses state R&D credits, how to conduct an R&D study to claim the credit, and other tax considerations like the Section 199A deduction and sales and use tax planning.

1. Tax Planning for Marine Manufacturers
How To Identify, Obtain & Sustain a Successful Tax Credit
Ronald G. Wainwright, Jr., CPA MST
National Leader, Credits & Accounting Methods
rwainwright@cbh.com | @ronwainwright_cbh
Michael C. Laur, CPA MTx
Manager, Credits & Accounting Methods
mlaur@cbh.com | @therealmikelaur
guiding the marine industry forward

2. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
1. The R&D Credit is your company’s
engine for innovation
2. Rapid market & industry change
3. Know which questions to ask to
ensure your business is maximizing
its tax benefits
So What?
2
95% of all boats
sold in the United
States are built in
the United States
- National Marine Manufacturers Association

3. What is the
R&D Credit?
“In 2015, the United
States spent $495
billion on R&D”
The R&D Credit is a Federal tax incentive
(also available in approximately 40+ states)
designed to promote innovation. Allows
companies to receive tax credits for expenses
incurred for research and development.
Primarily a labor-based incentive, the R&D
Credit applies to activities to develop new,
improved and more reliable products,
processes and techniques.

4. How Much is
the Credit?
 Dollar-for-dollar offset against taxes
owed or paid.
 A business can receive a credit equal
to 6.5-20% of total qualifying
research expenditures (QRE).
 If your company has been engaged in
qualifying activities for the last
several years, it may be eligible to
retroactively claim R&D tax credits.
“In 2015, the United
States spent $495
billion on R&D”

5. Four-Part Test
business
component
| one |
technical
uncertainty
| two |
process of
experimentation
| three |
scientific
principles
| four |

6. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
Do I Qualify?
6
“Recreational Boating
supports more than
691,000 jobs across the
United States”
-National Marine Manufacturers Association
(“NMMA”)
If your company engaged in qualified
research activities for the last several
years, you may be eligible to claim
R&D tax credits. Your tax advisor can
help you gain cash refunds from
previously unclaimed credit.

7. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
Excluded Activities
 Research conducted after the beginning of commercial production
 Adaptation of an existing business component to a particular customer’s needs
 Market research, efficiency surveys, development of advertising, quality control
and marketing studies
 Aesthetic changes to style, taste, cosmetic or seasonal designs
 Foreign research
 Funded research
 Reverse engineering

8. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
Qualified Research Expenditures
Costs Gathered to Calculate the Credit
Supplies
 Account Detail
Wages
 W-2 Box 1 Wages
 Wage Survey
 Time Tracking Report
 Activity Time Analysis
Contract Research
at 65%
 Invoices
 Account Detail
Rental or Lease of
Computers
 Amazon Web Services
 Can’t be on client
property

9. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
Wages
 Direct - Engineering Department
 New Models & CFD Studies
 Supervision – C Suite or Managers
 Supervision of New Model Development
 Support – Factory
 Lamination, Rigging, Mechanical, etc.
Expense Examples for Marine Manufacturers
Supplies
 Plugs & Molds
 In House, Marine Concepts & Vectorworks
 Consumables
 Fiberglass cloth, resin, foam
 Prototypes
 Includes cost of the first model
Contract Research
 Naval Architects (U.S. Only)
 Contract employees
 Outsourced CFD studies
 Testing & Certifications
Rental or Lease of Computers
 Usually not applicable to marine
manufacturers
 Amazon Web Services or similar

10. double your credit
 Florida
 Credit available to C Corporations in Target
Industries
 March 26th deadline
 Georgia
 Available to all entity types
 Carries forward 10 years
 South Carolina
 5% credit against either franchise or
income tax
State R&D Credits

11. How Does an R&D Study Work?
Identify
We interview subject
matter experts to
understand the projects
that may have generated
R&D activities
1|
Qualify
We make sure the activity
passes the 4 part test and
is not subject to any
excluded activities2|
Quantify
Using various tools we
analyze employee time
spent on R&D, as well as
supplies, third party
contractors, and computer
hosting costs related to
R&D
3|
Deliver
We compile all relevant
documentation in a
cohesive format to the
client4|
11

12. The motivation for the new
deduction is clear: to allow
these owners of pass-through
entities to keep pace with the
significant corporate tax cut
also provided by the TCJA.
§199A allows taxpayers (other than
corporations) a deduction up to 20%
of qualified business income earned
in a qualified trade or business,
subject to certain limitations.
What is the §199A
Deduction?

13. Calculating
199A
1|
2|
3|
QBI amount for
each separate trade
or business
Taxable income over
net capital gains
Taxpayer’s share of
W-2 wages and
UBIA*
*related to QBI

14. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
Other
Tax Planning
Considerations
14
Nexus for Sales and Use Tax
 South Dakota v. Wayfair drastically changed the definition of nexus for sales and use tax.
 One sale might trigger a filing requirement in certain states
 Consider having a reverse sales and use tax audit performed to gauge exposure
Market Consolidation
 Large amount of Private Equity activity in the marine market
 Companies looking to sell should consider working with a CPA who is knowledgeable about
transaction advisory services

15. Presenter: Ronald Wainwright
© Copyright 2016 Cherry Bekaert. All Rights Reserved.
Maximize Tax Benefits
Next Steps
As your marine manufacturing company
continues to grow, it is important to partner
with an advisor that has the depth and breath
of services to maximize your tax savings
R&D Credit
 Most CPA firms estimate any benefit free of
charge
Section 199A
 Consult your CPA to make sure your deduction
is being maximized
Other tax planning considerations
15

16. If you have
questions…1|
2|
3|
reach out to
us via email
or LinkedIn
Visit us at
cbh.com
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IBEX