Research pays your taxes: research investments can deliver a return more quickly than most metalcasters expect

Modern Casting, Jan, 2008 by Adam Herman, Michael Devereaux, II, Richard L. Wile

4. The company must utilize a process of experimentation to eliminate the uncertainty associated with the function, performance, reliability or quality of a business component. Metalcasters typically engage in a process of experimentation when developing or improving their products or processes. For instance, they may engage in systematic trial and error in determining gate locations or runner sizes, produce casting prototypes or utilize solidification simulation software to model the casting process, all of which satisfy the process of experimentation criteria.

Research Party

Most companies claiming the R&E tax credit are in the field of manufacturing, with professional and technical services making up the majority of the remainder (Fig. 1).

A sample of projects (Table 1) indicates that companies as small as a tool and die shop with $4 million in annual sales can obtain meaningful boosts to company cash flow through the use of the R&E tax credit.

Although the R&E tax credit has been in existence since 1981, it has expired 13 times since its inception. The latest renewal is due to expire at the end of 2007, although a bill was introduced in the House of Representatives in May proposing to make the R&E credit permanent.

This Could Be You

The following is a fictional example of what a research Band experinaentation study might look like for a medium-sized metalcasting operation.

From 2003-2006, the following hypothetical qualified projects took place at ABC Metalcasting (ABC's owner had postponed the improvement of his operation for several years):

1. New melting system design and installation project.

2. Molding line upgrade, including new equipment and layout.

3. Cleaning room design with new equipment and layout.

4. Upgraded pollution controls, including a new baghouse in anticipation of MACT requirements.

5. Automated furnace charging system.

6. Furnace refractory lining improvement project.

7. Welding process improvement project.

8. Testing and experimentation for the production of a casting type never before produced by the metalcasting facility.

9. Implementation of a solidification simulation program used for testing various gating and risering system designs.

10. Testing conducted for new materials, such as refractory core and mold coatings, charge materials and deoxidizing compounds.

11. Experimentation and testing for the conversion to a new coldbox coremaking binder system.

12. Heat treatment process development and testing to obtain special customer-required mechanical properties and microstructures.

Several members of the ABC Metalcasting staff participated in these projects in various capacities. The owner was involved in the process development and improvement projects, working with his key personnel, including his plant engineer and metalcasting manager, on process and equipment design. Because the R&E credit is a wage-based credit, the time spent by the ABC staff working on these and other similar projects would be considered research time. The same analysis would apply to other ABC employees, including metalcasting and process engineers, metallurgists, plant engineers, CAD designers, etc.