Consumer Packaged Goods R&D Tax Credits

The fourth industrial revolution has brought many changes and novelties to every stage of the manufacturing process, from the supply chain to production, packaging, and distribution. As a result, many industrial companies now qualify for federal and state R&D tax credits, including consumer packaged goods businesses. This category covers technology, clothing, children’s toys, cleaning products, furniture, baggage, and sporting gear, among other things.

Therefore, if your CPG company invests in innovation or is trying to improve process efficiency, design, and delivery, there’s a big chance you can claim certain tax incentives. For example, you can utilize the R&D tax credit in the Consumer Packaged Goods industry to offset some research expenses. This credit can cover as much as 22% of QREs, but that percentage can change because every state has a different set of rules regarding the incentive.

Qualifying Costs and Activities

In most cases, you can utilize Consumer Packaged Goods research and development tax credit to offset costs for cloud computing services, subcontractors, supplies, and raw materials. Other QREs include wages for mechanical and software engineers, C-suite, system analysts, research and material scientists, QA and QC personnel, product managers, and CAD modelers.

Moreover, to claim this lucrative incentive, your company also has to conduct specific qualifying activities. These include but are not limited to:

• Creating new AI platforms or software;

• Automating production line;

• Experimenting to improve process capabilities;

• Introducing new manufacturing execution systems (MES);

• Modifying equipment to accommodate new packaging materials;

• Establishing better safety procedures;

• Exploring alternative processes to increase output or efficiency.

Contact our professionals if you want help computing the amount you can get. We provide a quote free of charge and can assist you in applying for the Consumer Packaged Goods R&D tax credit.

FAQs

What kind of companies can apply?

Consumer packaged goods companies 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.