Research and Development Tax Credit: Automotive Industry

By November 27, 2017 April 20th, 2018 R&D Tax Credits
In 1981, President Reagan enacted the Research and Development (R&D) Tax Credit as a way to reboot the American automotive industry. Approximately 30% of the United States’ research and development is conducted by companies in the automotive industry and heavy-duty manufacturers who create parts and components for vehicles. The continuous designs, developments and improvements conducted by automotive companies make manufacturers within this industry strong contenders for the R&D Tax Credit.

For activities to be considered qualifying research activities (QRAs) they need to fulfill the IRS Four-Part Test. The IRS Four-Part Test requires a new or improved business component (product, process, technique, invention, formula or software), the business component to be technological in nature, some kind of elimination of uncertainty, and a process of experimentation. The activities stated below fulfill the IRS Four Part Test and thus are considered QRAs for purposes of claiming the R&D Tax Credit.

The following activities are examples of the QRAs conducted by companies within the automotive industry:

  • Improving efficiency in manufacturing operations.
  • Designing, developing and improving automotive parts.
  • Conducting tests to maintain quality assurance.
  • Testing to meet compliance regulations and safety requirements.
  • Developing environmental consideration for overall operations.
If your company designs, develops or improves parts or components for motor vehicles, there is a strong chance that you can benefit from the Research and Development Tax Credit. To learn more about the Research and Development Tax Credit visit the Indago website or email us at