Over the past few years, the automotive industry has seen massive growth when it comes to manufacturing vehicles, car parts, paints, and the processes used to design them. With the emergence of electric cars, increased safety features in vehicles, added environmentally friendly components, and more, companies within the automotive industry can earn research and development tax credits now more than ever.
How Can Car Companies Earn Money From Research and Development?
Companies who are using their resources (money, time, labor) on advancing products or processes to help improve the quality can earn dollar-for-dollar tax credits that are given to companies by the government. Most of the credits given to businesses are for activities they perform daily, and because of this, it’s very common for companies to miss out on this lucrative tax opportunity.
To determine if your business can qualify for these credits, the activities you are performing must pass what is known as the “4-Part Test.” This test states that the activity you are trying to claim must:
- Improve the quality, function, or reliability of a process or product
- Must identify information to remove the uncertainty of a product or process
- Must involve a systematic process
- Must be technological in nature and rely on physical sciences, biological sciences, computer sciences, or engineering
How Do R&D Tax Credits Apply To The Automotive Industry?
The automotive industry is a hub for research and development. So much so that daily processes and activities can often be overlooked and aren’t claimed as research and development causing companies to miss out on money they are owed.
Some of these qualifying activities include:
- Testing vehicles to meet compliance regulations and safety requirements
- Conducting tests to maintain quality assurance
- Prototyping and three-dimensional modeling
- Developing environmental consideration for overall operations
- Improving environmental safety or worker safety
- Upgrading and maintaining existing features and components on vehicles
- Developing new materials to use in the manufacturing of vehicles such as metal stamping, glass tempering, plastic modeling, rubber production, etc.
- Designing, constructing, and testing new product prototypes for features like vehicle body, brakes, tires, windows, airbags, electrical components, etc.
- New parts design or revisions to improve performance and reliability
- Introducing new or improved efficiencies to a wide range of manufacturing operations, from automated body assembly to crash-testing prototypes, to eliminating material waste
Let Us You Help You Claim Money You Are Owed
If your company is in the automotive industry and performing activities that you think may qualify for research and development tax credits, our team of tax experts can help.
National Tax Group assists companies of all sizes in obtaining R&D credits by providing reliable documentation and looking back at all past and present activities your company has performed. Call us at (561) 257-3436 to speak with our team to set up your free initial assessment with us today.