This article appeared in the Jan/Feb 2024 issue of MiMfg Magazine. Read the full issue and find past issues online.

Remaining competitive in a highly dynamic industry such as manufacturing can come at a high cost for many Michigan companies. This is where the federal Research and Experimentation Tax Credit, otherwise known as the R&D Tax Credit, can play a pivotal role in offsetting costs for manufacturers that thrive on innovation.

The R&D Tax Credit is a federal program aimed at promoting innovation and economic growth. It rewards companies, including manufacturers, for investing in research that leads to technological advancements, new products or process improvements.

Dan Osterland, Senior Manager – Business Development for Acena Consulting, works with manufacturers to lower tax bills and increase cash flow. The R&D Tax Credit can be a valuable tool to accomplish those goals, he says.

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“A lot of manufacturers we talk to don’t realize some of the things they do would, in fact, qualify for an R&D Tax Credit,” says Osterland. “So, it’s also educating them on what does and does not qualify.”

Acena Consulting is a multi-dimensional tax and accounting services company that specializes in the R&D Tax Credit while supporting clients from a number of different industries. Acena is a national firm but Osterland is based in Michigan and has been working in the corporate tax world for more than a decade.

Cost segregation is another vehicle that allows manufacturers to offset their tax bill by accelerating depreciation of building property such as flooring, windows, fencing and sidewalks.

“Manufacturers can use different tax advantages within their building such as things located within the property that have a faster depreciation schedule than the building itself,” says Osterland. “They can write that off earlier than they would normally. Buildings can depreciate over 30 years but items within the building can depreciate at a much faster pace.”

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Manufacturers have saved millions of dollars in tax liability through these programs. Osterland says the results can vary based on the amount of qualified activities and expenditures they’re able to capture.

“We’ve had manufacturers who have received credits in the millions of dollars and we’ve had clients who have received credits in the $25,000 to $30,000 range,” he says.

Acena Consulting is an MMA Premium Associate Member and has been an MMA member company since May 2023. Visit online: acenaconsulting.com.