R&D Tax Credits for the Package Design Industry

R&D Tax Credits for the Package Design Industry

Posted by Jeffrey Feingold on 06.07.17

In previous blogs we have written about a number of industries primed with opportunity for tapping research and development (R&D) tax credits, some of which include manufacturing, construction, poultry and aerospace. Given that fewer than one out of every three eligible businesses take advantage of the now permanent federal tax credit, it is well worth examining every industry rich with eligible activities, and that includes the package design industry.

In fact, federal and state tax credits can be used to offset income tax liabilities on a dollar-for-dollar basis, with certain limits, thereby lowering a company’s effective tax rate and increasing cash flow toward research and future design initiatives.

Less than 33% of companies that qualify for the federal R&D tax credit actually utilize it.

When you think about it, packaging is essential for any product being sold. From storage to transport to the end user, package designers seek ways to advance the quality, functionality and safety of their products—all within compliance of regulatory guidelines. Many package designers would be surprised to discover that many of the activities they already are conducting qualify for valuable tax credits.

Let’s take a look at examples of eligible activities in the industry.

  • Developing new materials to meet environmental requirements
  • Improving the efficiency of product packaging
  • Reducing the amount of waste for raw materials during production
  • Enhancing the speed of packaging operations
  • Improving existing packaging processes to increase automation and streamline operations
  • Improving processes to reduce pollution and greenhouse gas emissions
  • Developing new package designs that extend the shelf life of a product
  • Developing new package designs that incorporate greater recycled and recyclable materials
  • Refining quality assurance procedures

For example, Tax Point Advisors worked with a client that designed functional packaging for a beverage company. The company wanted the bottle’s label to show through the packaging. Our client designed a package with a cellophane panel to display the label, something they had never done before. This custom project presented challenges in the automation of the manufacturing of this new package, including cutting the rectangular hole in the package and gluing the cellophane panel from the inside. To overcome these challenges, our client went through nearly 20 iterations to arrive at the optimal design.

Tax Point Advisors helped this client claim more than $1 million in federal R&D credits along with substantial state R&D credits for its R&D efforts to overcome challenges like these in its various projects. Today, our client continues to be widely recognized for creativity and innovation in the packaging industry by reinvesting the credits that we helped the company claim.

If your company works on new or improved products or processes, you will want to make sure you are not leaving R&D tax credits on the table. Tax Point Advisors encourages all business owners to examine activities that you are already engaged in to determine eligibility for R&D tax credits.

Please read our e-book The Business Owner's Guide to R&D Tax Credits for a closer look at qualifying activities and industries, the four-part qualification test, how to work with an R&D tax expert, and much more.

Find Out if Your Activities Qualify

The R&D tax credit can be a lucrative incentive for businesses in the package design industry. Given the new permanent nature of the federal tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving tax credit opportunities.

A qualified R&D credit professional can conduct a thorough R&D tax credit study to assess which activities meet the IRS’ four-part test to qualify for the credits.

Request a free assessment to determine qualifying R&D tax credit eligibility.

Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, call us at 800-260-4138 or please leave us a message below.


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