Automotive & Original Equipment Manufacturers (OEMs) Tax Credits

Manufacturers are the most significant R&D investors in the US, accounting for nearly three-fifths of private-sector R&D investments in 2019. In fact, automobile manufacturers and their suppliers are the world’s third largest R&D investors, having spent more than $134 billion on research in 2020. That is because automotive and original equipment manufacturers (OEMs for short) are consistently working with new technologies to make new products that integrate novel features and adhere to customers’ wishes.

If your firm is a part of the OEMs industry and is investing in similar R&D activities, you will be glad to hear that there are certain federal and state tax incentives you can benefit from. For instance, the Automotive & Original Equipment Manufacturers (OEMs) research and development tax credit can help offset some of your expenses. The incentive can be as high as 22% of total qualifying research expenses. However, the exact amount is subject to change according to the state you conduct research in.

Qualifying Costs and Activities

QREs for the Automotive & Original Equipment Manufacturers (OEMs) R&D tax credit include expenditures for raw materials, subcontractors, and supplies. You should also be able to use it to offset wages for software engineers and developers, mechanical and industrial engineers, C-suite, senior project managers, precision machinists, electrical engineers, and CAD personnel.

Furthermore, to claim this credit, you should invest in these or similar activities:

• Designing new tools and fixtures for precise manufacturing;

• Producing technologies to improve engine efficiency or to make use of other energy sources;

• Creating new audio systems or integrating additional features into existing ones;

• Incorporating automation into the current production processes;

• Developing innovative software or modifying current code;

• Testing and making changes to meet regulatory and emission standards;

• Producing and testing systems that improve safety or cost-effectiveness;

• Constructing and evaluating first articles and prototypes.

That said, calculating how much your company can get from the R&D tax credit in the Automotive & Original Equipment Manufacturers (OEMs) industry can be difficult. For this reason, our team offers you a gratis estimate and professional help when applying for the incentive.

FAQs

What kind of companies can apply?

Automotive and original equipment manufacturers that conduct qualifying research activities.

What data do I need to calculate credit?

Claim period gross receipts.

What information do I need to provide?

General ledger expense detail, payroll records, project notes, project lists, emails, purchase orders, and other documents regarding QREs for the claiming period.

Is credit carryforward an option?

Yes, up to twenty years.