Case Study: Metal Fabrication

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The metalworking industry, like other manufacturing industries, is one that is highly qualified for the R&D tax credit. While most metal fabricators may not think their day-to-day activities qualify as research and development, the tax definition of what is included within the scope of R&D is broad and often includes those daily activities. Development or improvement of production processes, including the design and fabrication of custom tooling, casts, jigs, dies, or production equipment can potentially qualify for the R&D credit. Wages associated with the time performing these activities qualify along with the materials utilized to prototype and develop custom tooling. Even the material costs tooling and die casts can be a R&D expense.

Qualified Research Activities for Metal Fabrication

  • Development of preliminary design during feasibility analyses of projects
  • Experimentation to improve forming, cutting, joining, and grinding processes
  • Creation of manufacturing processes to achieve a final part design
  • Design of casting, cutting, folding, forging, extrusion, machining, punching, shearing, stamping and welding processes
  • Development of programs for automated production equipment including CNC machining
  • Experimentation to identify inefficiencies in production to reduce waste and production time
  • Development of unique surface treatment processes to achieve better part performance, reliability, or quality
  • Validation testing to determine final design of components and tooling
  • Experimentation on secondary operations to improve overall part quality
  • Development of strip layouts during feasibility and quoting
  • Development of 3D models and experimentation via simulation
  • Material usage improvements via modifications to machining, die casting or extrusion processes
  • Optimization of geometry to minimize tooling complexity
  • Development of software models to analyze material movement during forming
  • Creation of prototypes and first articles for validation purposes

R&D Tax Credit Case Study: Metal Fabrication

With over 40 years of experience in metal fabrication, this company continues to develop metal fatigue and failure mitigation techniques, serving the aerospace, automotive, biomedical, chemical, defense, energy, fitness, nuclear, oil & gas and rail industries.

R&D Tax Credit Qualification for Metal Fabrication

While the company sometimes participated in product design, the majority of their R&D surrounded the development of manufacturing processes. Research efforts at this company fell within 3 different categories: stamping, molding, and tooling.

Process design entailed extensive research and development beginning with the examination of the component specifications followed by evaluating the various metal fabrication methods. The team included engineering, technicians, prototype assemblers, testers and quality assurance. They addressed form, fit, material, and performance issues. Calculations and computer models were evaluated and modified. Issues with configuration, material composition, and manufacturability were also addressed. The company generally developed four to five different prototypes for testing and analysis. Changes would be made to the tooling, fabrication process or even product design based on information discovered during the prototype construction stage. For example, prototypes may be developed to evaluate various configurations of components and their resistance to environmental conditions such as vibration or heat. Oftentimes, multiple prototypes or samples were constructed and tested to evaluate alternative designs and process applications.

The prototyping process was a collaborative effort between the engineering group and the prototype assemblers. Prototype assemblers were responsible for creating and assembling prototypes based on the design requirements. The primary materials used during the prototyping process include various metals, circuit boards, PC boards, transistors, circuits, wiring, and plastics. The cost of these materials was often a qualified R&D expense.

Next, the prototype designs were tested and validated against the intended product specifications. Design tests often failed, which required the design to be further refined at either the component or prototype level. This testing process was a continual cycle between design and evaluation until the test requirements were met through design and process improvements. Prototypes may be subjected to environmental testing, which normally included vibration and temperature tests. In addition, acceptance testing was performed once all other tests are passed.

To get to full production, the team developed custom fixtures, die casts, and tooling. These were also needed to produce prototypes and samples. The creation of a repeatable testing and quality control process that could scale with production loads would also be designed. The final stage was the production part approval process (PPAP) prior to start of production.

Results Speak For Themselves

This company realizes an annual federal and state R&D tax credit benefits of over $130,000.

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