Benefits and Elegibility: R&D Tax Incentives for Aviation/Aerospace

In this #MemberInsights blog, gain insight form Bruce Kletsky, Managing Director of the FI-Group, on the R&D Tax Incentives eligibilities in the Aviation & Aerospace industries. 

The FI Group is an International tax consultancy that specializes in the implementation of state and federal tax incentives and the re- search and development (R&D) tax credits for corporations. The FI Group team consists of CPA’s, engineers, IT, legal, and business opera- tion specialists. With over 13,500 clients in 13 countries, our client’s benefits exceed more than $1.5 B in tax savings annually.

Worldwide, the in-service commercial airline fleet forecasted to grow from nearly 25,000 aircraft at the be- ginning of 2017 to over 35,000 by 2027. The accelerated rate of new aircraft deliveries will result in a massive technology shift over the period. By 2027, 58% of the fleet will be new-generation aircraft.

To prepare for the large, forecasted growth in aircraft production, all OEM Aircraft Manufacturer and Mainte- nance, Repair, Operation companies (MRO) will be looking to increase efficiency through process improve- ments and new software.

However, very high cost constraints and already tight margins could make it difficult for companies to align themselves with the types of development and innovation required to accommodate the elevated demand. Once production and transport costs are factored in, the remaining profit margin is quite low.

Therefore, to encourage companies to grow in accordance with the rest of their industry, the U.S. government offers R&D tax credits at both state and federal levels. However, many companies eligible for these tax incen- tives are not currently claiming them.

In fact, it is safe to say that most aerospace companies are performing activities in their daily operations that will qualify. This means they could be claiming funding for many activities they are currently performing, as well as for their planned projects.

When claims are prepared according to government requirements, the tax credit can become a reliable source of funding for companies performing the following activities such as:

• Information Technologies / Internal use software (ERP, SCM, CRM integration/development)
• Communication systems
• Customized repair and maintenance programs / Efficiency and safety systems

Processes

• Metal forming, welding, and machining techniques
• Surface treatment and coating methods / Heat treatment profiles and procedures
• Satisfaction of regulatory requirements
• Automated processes and robotics / Manufacturing and tooling processes

Products

• Composite materials / Alloys and powered metallurgies
• Optimization of strength and minimization of weight
• Increase product yield and decrease cycle times
• Commercial prototypes and first articles for testing and validation

The FI-Group is providing complimentary consultation and qualifying assessments for FACC-NY members, and their clients. Contact Bruce today to get started!