Industrial Artisan Fabrication
Charles R. Goulding & Preeti Sulibhavi of R&D Tax Savers examine 3D printing applications in artisanal fabrication.
At our tax consulting firm we tend to categorize our design clients as architects, engineers and as a wide range of other product designers. Our product designer client base includes, but is not limited to, lighting, wood-working, metal shop, cabinet-making, kitchen design, interior design, office furniture, glass, stone workers and sculptors. Increasingly, we are seeing a growing number of what we call Artisian Fabricators.
Historically an artisan was defined as someone who worked with their hands. Artisan fabricators are a team of designers, skilled craftspeople, artisans, and makers. Working with various creative industries, artisan fabricators provide a wide range of services that includes: retail displays, architectural interiors, events, props/sets, and fine art. Becoming more prevalent is a new type of business which is composed of professionally trained designer architects, engineers and designers who are actually fabricating end-use objects. The Artisan class we are seeing not only works with their hands but they use today’s design software, machine tools and 3D printing to actually fabricate a product. Frequently these new designer artisan fabricators are the sons and daughters of trades craftsmen.
Prior generation craftsmen encouraged their children to get formal professional training but after receiving a formal university education, the succeeding generation appears to have retained an affinity for actually making, or crafting, something as their parents did.
Artisan fabricators may be entitled to R&D tax credits for both their innovative design and for innovative fabrication activities including modeling, prototyping and process improvements. Process improvements being defined as a systematic approach to closing of processes or system performance gaps through streamlining and cycle time reductions; and, identification and elimination of causes of below specifications quality, process variation, and non-value-adding activities.
Technological Artisan Fabricator
The Research & Development Tax Credit
Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
Must be technological in nature
Must be a component of the taxpayer’s business
Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
Must eliminate uncertainty through a process of experimentation that considers one or more alternatives
Eligible costs include US employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, US contract research expenses, and certain costs associated with developing a patent.
On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Since 2016, the R&D credit has been used to offset Alternative Minimum Tax (AMT) for companies with revenue below $50MM and, startup businesses can obtain up to $250,000 per year in payroll tax cash rebates for up to five years.
Artisan Welding Fabrication
In our view, artisan fabricators have a very rewarding profession because they can convert their ideas into final products.
Today’s technology, including 3D printing, is replacing some time-consuming and costly handmade work. The R&D tax credit can reward this creative integrated design and help build a successful creative business enterprise.