Updated Sunscreen Rules by the FDA Could Bring Great R&D Opportunities for the Industry

Updated Sunscreen Rules by the FDA Could Bring Great R&D Opportunities for the Industry

Posted by William Mehi on 05.21.19

Summer is just around the corner, which means sunscreen lotions and oils will be a standard product in more than 90% of the U.S. consumers’ homes. Earlier this year, the FDA announced a proposed rule updating regulation requirements for most sunscreen products sold in the United States. Currently at least 9 of the world’s top sun lotion manufacturers are U.S. based companies that will now have to step up their development of lotions and oils to follow suit with guidelines that haven’t been changed or even reviewed in several decades. The FDA wants to update these rules to ensure the most effective methods of skin products are on the market. Some parts of the proposal include; the maximum sun protection factor (SPF) level be increased from 50+ to 60+, as well as sunscreens that have a SPF of 15 or higher be required to have broad spectrum protection. It’s also suggested in the proposal that product labels be improved and clearer for consumers. Identifying information, active ingredients, and including notifications of skin cancer risks, or reef safe warnings are going to be a standard for new labels. This highly competitive industry is driven by constantly evolving needs and ever-rising standards and therefore must be built on innovation. With any innovation comes quite a lot of experimentation and development. Many manufacturers do not realize there are R&D tax credits that can help with these advancements and they can save significant money simply by applying for credit for activities related to the R&D they already are doing on a daily basis.

R&D Tax Credits

Federal research and development (R&D) tax credits can deliver an immediate and significant benefit to a company as a result of innovative activities. While the tax credit originally pertained to basic research expenses, such as those occurring in a laboratory setting, subsequent modifications have simplified the credit and made it available to a wider variety of businesses including manufacturers of cosmetics and sunscreen lotions.  Efforts made to design and develop new products and manufacturing processes for improved performance and efficiency in the sunscreen industry can qualify for R&D tax credits.

R&D tax credits can immediately benefit a company in several ways:

  • A source of cash for reinvestment or other needs
  • Significant reduction to current and future tax liabilities
  • Credits may carry forward up to 20 years
  • Offset Payroll Liability (http://taxpointadvisors.com/blog/view/rd-tax-credits-can-offset-payroll-liability-for-your-small-business-or-star)

To learn more about the benefits of R&D credits, read some of our success stories.

How does a company qualify?

To assess qualification for any given project, the experts at Tax Point Advisorsmay ask about a four part test that embodies the definition of qualified research for the R&D tax credit:

  1. Are you trying to make improvements to your products or processes?
  2. Does the project or activity involve aspects of the hard sciences, engineering or computer sciences?
  3. Was there any uncertainty in regards to developments during this project?
  4. Did you have to analyze your results or develop prototypes?

In recent months, scientific studies have been trending in news and social media platforms regarding sunscreens’ environmental effects to Ocean Reefs worldwide, as well as the recent studies on the side effects of sunscreens remaining in bloodstreams.  The R&D tax credit is a perfect opportunity for businesses in the sun protection industry to cash in on their daily efforts of staying competitive, current and tackling these issues arising throughout the industry. The market is driven by the continual challenge of offering the best products for consumers as well as the environment. In the fast-moving world of cosmetics and lotions, success is dependent on how well a company can create new and improved products, and R&D takes front and center when innovation is involved. The functional role of sunscreen has progressed from merely preventing sunburn to reducing skin cancers and slowing skin aging. The sunscreen industry continues to develop and test novel UV filters and to provide superior UV protection. With additional R&D work, there will be a better understanding of the potential dangers of UV radiation and environmental issues, making the scientific communities and sunscreen industry continue to develop safer and more effective sunscreens well into our future.

Qualifying Activities

Qualifying activities are far more wide-ranging than most business owners think. While research labs and scientists might come to mind when thinking of R&D, it’s better to think in terms of activities that improve processes or products, or result in alternatives to current processes. That can include innovation, designimprovements and greener ways of doing things.

Which Activities Qualify?

The following are examples of qualifying sunscreen industry activities:

  • More effective and improved sun protection (Higher SPF and UVA protection)
  • Long-term sun protection, reduced frequency of sunscreen re-application in the day
  • A lighter, less-greasy sensory experience
  • Development of Multi-functional sunscreen products(anti-pollution, moisturizing and anti-aging)
  • Improving UV absorption
  • Exploring the use of organic and bio-based ingredients
  • Develop alternatives to animal testing
  • Developing new lines of nontoxic products
  • Develop new or improved chemical product formulations
  • Develop and test new or improved packaging and packaging equipment
  • Generate prototypes and samples of new products for testing and validation
  • Develop new or improved distribution methods
  • Create new applicators
  • Affordability and sustainability
  • Exploring new tests and evaluations
  • Developing new ingredients
  • Consumer studies
  • Creating new automated processes or systems

For more information, read our e-book:  The Manufacturer’s Guide to R&D Tax Credits.

Now that the federal R&D tax credit has been made permanent, many companies – including small and midsize firms – can plan ahead with even more inventive ways to strategically plan, qualify and report their R&D expenses to qualify for the credit.

Find Out if Your Activities Qualify

The proper identification, quantification, and documentation for qualifying research activities and associated expenditures towards the R&D tax credit requires a thorough review of a company’s personnel and projects undertaken.  Given the significant funds available in the form of R&D tax credits, it is worth exploring if your sun lotion manufacturing business qualifies. 

Does Your Business Qualify for R&D Tax Credits?

Tax Point Advisors understands your business and the regulations to confirm if your process or product improvements qualify. For more information, call us at (800) 260-4138, or please leave us a message below.


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