Claiming R&D Tax Credit for Plastics Industry

Wage and contract labor expenses, as well as expenditures for raw materials and consumable supplies required in the conduct of research, are all considered qualified costs.

The plastics, as well as injection molding industries, are unusual in their eligibility for the R&D tax credit. R&D operations span the plastics industry, from injection molding to packaging. Research and development begin with concept development. Following that, time spent examining alternative designs, process approaches, 3D modeling, CNC programming, and simulations is included in the experimentation phase. Even after an item is made, process improvement initiatives and the development of better testing processes may be tax-deductible. Wage and contract labor expenses, as well as expenditures for raw materials and consumable supplies required in the conduct of research, are all considered qualified costs.

Plastics Manufacturing & Injection Molders Qualified Research Activities
Initial design during feasibility studies for projects
Creation of castings and molds for customized components
Programming of CNC and automated manufacturing equipment
Automation of operations to increase production output
Experimentation to find inefficiencies in manufacturing to save waste and increase productivity
Design of alternate molds to test cavity shape, core size, and gate position
Manufacturability assessment of the final part design
Tool design and development, including the creation of molds, fixtures, and jigs
Process optimization to minimize and/or recycle waste
Creation of novel surface treatment procedures to improve the dependability, performance, or quality of parts
Conducting simulations to anticipate the flow of plastic material into a mold, the pace at which it shrinks, and identifying locations prone to flaws and distortions
Experimentation to optimize the operations of forming, cutting, joining, and grinding
Initial production at a low rate and the first article runs on freshly created or modified molds and castings
Process optimization to eliminate the requirement for secondary procedures such as flash removal
Validation testing to ascertain the final component and/or tooling design
Validating castings and molds for manufacturing reasons through design testing
Experimentation with secondary procedures to increase part quality overall
Case Study

Plastics R&D Tax Credit Case Study

This plastics firm has been a pioneer in the application of industrial plastics in novel applications, with its origins in the identification of items that may be manufactured using plastics. Urethane casting, thermoforming, machining, and plastic injection molding are some of the services provided by the organization. The firm is continually evolving to broaden its product and service offerings to include new sectors and applications.

Qualifying for R&D Tax Credits

in Plastics & Injection Molding

The R&D effort at this firm got its start as a result of consumer demand. It was necessary to hold meetings between the customer and their point of contact, whether it was a sales representative or the company's owner, to determine the product's design as well as the features, performance, and functionality criteria that the product must fulfill. Sometimes, for more hard projects, the heads of several departments, such as CNC, Fabrication, Injection Molding, Casting, and Design Engineers would also become involved to undertake more in-depth initial engineering calculations, such as those for a new product introduction.

Although customers may develop as well as provide a prototype of the product they wish to have mass-produced, technical sales and engineering must conduct a comprehensive design for manufacturability review and, in many cases, must redesign the customer's provided design drawings as well as prototypes to ensure that they are manufacturable on a large scale. This frequently included the design and construction of molds, castings, and customized tooling that was required for production-level operations.

It was necessary to do a preliminary engineering analysis to identify whether or not the product should be injection-molded, machined, or molded using urethane. Following this, experiments were conducted using molds and castings to establish if flow and cure rates were constant, with the goal of developing a repeatable process. As part of the qualification process, the design engineers created CAD/CAM design papers that were used as the foundation for developing the CNC programming. Design engineers were also responsible for building specialized tooling and fixtures to assist the manufacturing process, in addition to providing part and process designs for the company's products.

The team began creating prototypes for validation after they had completed the part and process designs. Molds, castings, and the components themselves were all subjected to a validation procedure in order to evaluate whether or not quality, regulatory, and performance criteria were reached. This technique was very iterative and necessitated a large number of trials in order to resolve all of the technical challenges that were a common occurrence throughout any development phase.

Following the completion of the procedure, the firm was required to make initial items and conduct validation in order to evaluate whether or not the part and the manufacturing process were functioning properly, which was also a qualifying activity in this case. It was uncommon that the initial article sample generated a part that was completely compliant with all of their standards. To build a product that satisfied their customer's criteria, the team went through an iterative process of improving the code, doing another trial run, evaluating the samples, and refining the process several times. Once this step was completed, additional units were made, and the corporation continued to scale up manufacturing while maintaining a close eye on the end product's quality and consistency.

Results Speak For Themselves

Because of the intricacy of its manufacturing process, as well as the large investment in technology and man-hours, this firm is reliant on research and development to maintain its position as a leader in the plastic injection molding sector. In the first survey, the qualified research expenditures reached approximately $900,000, which was considered a significant amount at the time. Research and development expenditures at the firm have increased to more than $1.4 million, resulting in an annual tax credit of more than $105,000 for R&D.


Research and development expenditures at the firm


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Hire US-based engineers, developers, or scientists.
Designs and develops product prototypes and/or software.
Performs experimentation and validation on products, manufacturing processes, and/or software.
None of the above.

This calculator has been developed utilizing data from a variety of studies conducted in the industries listed. This is only an approximation based on a variety of assumptions and should be treated as such.

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