Mfg Eng RD Presentation

7/31/2019 Mfg Eng RD Presentation

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Research & DevelopmentTax Credit Training forManufacturing EngineersBrian Harstad, Finance

Lisa Baumann, TaxJennifer Seeley, Finance


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Emerson ConfidentialSlide 2

AgendaAgenda

Why Youre Here Today & Why Its Important Why Do We Need to Track R&D Expenses?

Explanation of Qualifying R&D Projects for

Manufacturing Engineering How to Track R&D Expenses

Next Steps - Flowchart

Questions?


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Why Are We Here Today?Why Are We Here Today? Government uses tax credits to encourage

domestic engineering investments

Emerson has a very active program to capture allqualified project expenses

Tax Savings = Cash Flow!!

Expanding focus each year

1st E&D Groups

2nd Mktg/Mgmt support of E&D projects

3rd Mfg Eng projects


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Why Track R&D Expenses?Why Track R&D Expenses? $ Tax Benefit

FY08 tax benefit - $446,181 federal tax credit$245,167 state tax credit

Approximately 5% of total eligible expenses

Your Involvement

Assist with required IRS documentation needed to support theabove credit

Identify qualified projects

Its Worth Your Time!

Example: $50K Project

Planning 30 min, Complete form 30 min, Tracking 60 min =$200 for your time

$2,500 cash in our bank!


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IRS Definition of R&D that Qualifies forTax CreditIRS Definition of R&D that Qualifies forTax Credit Elimination of Uncertainty

Re: capability, method, or choice of design

Technological in Nature

Principles of hard sciences

New or Improved Business Component

New product, process, software, technique, formulaor significant improvement

Process of Experimentation

Evaluation of one or more alternatives

Trial & error, testing hypotheses


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Four Tests to Determine if Activity QualifiesFour Tests to Determine if Activity Qualifies

Test 1 Eliminating Uncertainty

R&D activities must eliminate uncertainty about either thecapability or method of developing the product.

Test 2 Technological in Nature

Discovering info that is technological (physical or biologicalsciences, engineering, computer science)

Test 3 Qualifying Purpose

New or Improved: Function, Performance, Reliability, Quality

Test 4 Process of Experimentation

Evaluation of more than one alternative, trial and error

* Need to meet all 4 tests to qualify *


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Examples of Qualified R&D ActivitiesExamples of Qualified R&D Activities Development of new products or improvements to existing

products

Prototypes / Pilot models

Developing / Improving production processes

Development of quality control tests

Software used in production / mfg process

Software used to perform qualified research

Automating and/or streamlining internal manufacturingprocesses


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Examples of Non-qualified R&D ActivitiesExamples of Non-qualified R&D Activities Research after commercial production

Adaptation for particular customer

Duplication of existing product or process

Management studies, market research, routine datacollection

Research conducted outside the U.S.


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R&D Eligible CostsR&D Eligible Costs

Labor/Wagestracked to a qualified project Wages for actual hours charged to qualifying projects are

included

Or, if you charge a total of 80% or more of your time annually toqualifying projects, 100% of your annual wage will be included

Supervision qualifies, also, not just direct project engineer time

Supplies @ 100%

Contract Labor @ 65% limitation


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Example of an EDxxxx project MFG Process ImprovementExample of an EDxxxx project MFG Process Improvement


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Ex. of an EDxxxx project contEx. of an EDxxxx project cont


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Example of ED project Software Automation in Testing & MfgExample of ED project Software Automation in Testing & Mfg


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Ex. of ED project Software contEx. of ED project Software cont


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Ex. of ED project Software contEx. of ED project Software cont


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Example of ED project MFG Process DevelopmentExample of ED project MFG Process Development


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Example of ED project MFG Process contExample of ED project MFG Process cont


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Tracking R&D Expenses - Project NumbersTracking R&D Expenses - Project Numbers MRxxxx Initiated by 85000 E&D work units, defined by

project scope form They should inform you if they want you to charge to their project.

EDxxxx Initiated by non-E&D work units (ManufacturingEngineering, Quality, etc)

To request new project number, fill out questionnaire located atIntruder\GEN\Tax E&D Labor\questionnaire (product) or(software).doc. It should not take you more than a half hour to fillit out.

Email to Lisa Baumann.

Project number will be assigned and set up in Oracle & Tax E&DLabor Access DB so you can charge timecards and invoices to it.

Then Tax & Finance take care of gathering the data necessary fortax return process.


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Tracking R&D Expenses Internal LaborTracking R&D Expenses Internal Labor If you normally fill out a timesheet, code to project number

and enter in Oracle. Either MRxxxx project if E&D group has told you to use it

Or EDxxxx project that Lisa Baumann has set up for you

If you dont usually fill out a timesheet, use the Tax E&DLabor Access Database. This is also intended for first-linesupervision, marketing, etc.

Located at Intruder\GEN\Tax E&D Labor\TaxE&DLaborFYXX.mdb

Enter an estimate of your time spent on the appropriate project

numbers Complete entry quarterly

If you would like to be added to the quarterly reminder emaildistribution list, please contact Jennifer Seeley


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Tracking R&D Expenses Internal LaborTracking R&D Expenses Internal Labor Tax E&D Labor Access database


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Tracking R&D Expenses - MaterialsTracking R&D Expenses - Materials Invoices & POs Code with appropriate project

number & your work unit-account number

For example: ED32MR3SIG / 51170-6316


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Tracking R&D Expenses Contract LaborTracking R&D Expenses Contract Labor Invoices & POs Code with appropriate project

number & your work unit-account number

For example: ED32MR3SIG / 51170-6962


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FlowchartFlowchartReview Work Plan for the Quarter /Year and

Identify Potential Qualified R &D Projects

Did E &D Group Give

You a MRXXX Project #

to Charge To ?

Yes No

Fill Out

Questionnaireand Send To Tax

Department

Qualified ?

Yes No

Tax Department

Assigns Project #

EDXXXX

No Further

Action

Needed

Do You

Normally Fill

Out a Time

Sheet ?

Yes No

Code

Project #on Time

Sheet

Use Access

Database

Quarterly to

Estimate Hours

to Project #

ALSO-Charge Supplies &

Contract Labor

InvoicesTo Appropriate

Project #


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Emerson Confidential

Questions?Questions? Tax Department Contacts

Lisa Baumann, x3309

Melissa Hanson, x3918

Finance Contact Jennifer Seeley, x5273

Mfg Eng RD Presentation

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