President Obama in his recent State of the Union speech laid out a number of tax proposals that would hopefully encourage manufacturing to stay or return to the United States. The President proposed expanding the current Domestic Production Deduction doubling it for advanced manufacturing technologies (from 9% to 18%). Particularly relevant was the President’s call for making the Research and Development (R&D) tax credit permanent and continuing the 100% expensing for qualified purchases of business property for another year.

During the past two years, we have begun to see positive signs in American manufacturing- with the manufacturing sector adding more than 300,000 jobs since December 2009. This is also an emerging trend of “in sourcing” by bringing jobs back to and making additional investments in the United States. Manufacturing jobs are growing for the first time since the late 1990s.

As mentioned above, the President has proposed to make the R&D Tax Credit permanent, while enhancing and simplifying the credit. About 70% of the R&D Tax Credit benefit directly supports jobs in the United States. Every qualifying dollar spent encourages U.S. based investment, as only research and experimentation performed in the United States is eligible.

Thousands of small and medium size manufacturers continue to overlook the R&D tax credit as a key benefit for them (it is the biggest business tax credit in the code – approaching $9 billion a year). Manufacturers still think the R&D tax credit is only for highly technological companies. This misconception is costing eligible businesses millions! Need help claiming your R&D tax credit? Email me Rdandrea@kahnlitwin.com.

KLR’s tax professionals are CPAs and attorneys who have specialized training and experience in the Boston market place in all matter of Federal, State and Local Tax Issues. They have expertise in compliance reviews, nexus studies, voluntary disclosure issues, transfer pricing, M&A assistance, cost segregation studies and research & development tax credits.