Posted by on 04.10.24

Less than a century ago if someone were to tell you about a printer that could create three dimensional products, you may have been a bit skeptical to say the least. In the last few years, 3D printing technology— also known as additive manufacturing or AM has been evolving extremely fast, and people as well as businesses are taking notice. 3D printing refers to processes in which material is joined or solidified under computer control to create a three-dimensional object.  Although many different forms of 3D printing or AM have been used since the 1980’s, it was not used for industrial manufacturing until 2010, when technology improved tremendously and metal materials became an option.

3D printing has been used to create intricate, custom on demand products, from bionic limbs and airplane parts, to food and clothing. 3D printing has the potential of bringing manufacturing jobs back to the United Sates, which in turn will help our economy grow. The Federal Research and Development (R&D) tax credit enacted in 1981, was created to help businesses become more successful while creating new and improved products and processes. Aerospace, architecture, automotive, defense and medical are just a few of the many industries embracing 3D printing. R&D tax credits are available for businesses that are currently producing new or improved products or services, including the materials and software associated with 3D printing.

The Research and Development Tax Credit

If your company is conducting 3D printing research and development activities, you may qualify for and benefit from R&D tax credits. Potentially eligible costs for R&D tax credits include wages, cost of supplies, cost of testing, and contract research expenses. The activities and associated expenditures of any company can qualify for the R&D tax credit if the activities meet the following four-part test established by the IRS:

1. Qualified Purpose - The purpose of the research must be to create a new or improved product, process, or formulation, resulting in increased performance, function, reliability or quality.
2. Technological in Nature – The research must rely on the hard sciences, such as engineering, physics, chemistry, biology or computer science.
3. Elimination of Uncertainty – Activities must overcome some unknowns, such as uncertainty as to capability, optimal design, or optimal methodology. 
4. Process of Experimentation – Experimentation can be demonstrated through prototypes, simulations, systematic trial and error, or other methods of evaluating alternatives to achieve a desired result.

Here are some R&D activities that companies often perform that may qualify for tax credits:

• Developing a patent
• Researching new concepts for future products
• Designing and developing prototypes for new products
• Experimental coding for new or improved software
• Developing a new manufacturing process for new products
• Performing beta testing on experimental products
• Outsourcing to third-party software engineers to create new software

Download our e-book: The Manufacturer’s Guide to R&D Tax Credits here.

The potential of 3D printing and on-demand manufacturing can change manufacturing as we know it. The R&D tax credit is a valuable proven means to generate additional value for your company in a number of ways. Tax Point Advisors can conduct a thorough R&D tax credit study to determine which activities meet the IRS’ qualification for the credits. Tax Point Advisors, a firm with expertise in working with small and mid size 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.