Key Takeaways
- Chemical and materials engineering companies often qualify for R&D tax credits through activities like developing new compounds, improving formulas, or experimenting with sustainable materials.
- Efforts to enhance product durability, reduce costs, or improve environmental impact are common examples.
- Both small laboratories and large-scale manufacturers can benefit from significant tax savings.
Chemical and materials engineering companies are at the forefront of innovation, driving advancements in a wide range of industries. If your business is developing new materials or improving existing ones, there’s a strong chance you qualify for the R&D tax credit.
Qualifying Activities in Chemical Engineering and Material Engineering
Here are some common activities in software development that may qualify for R&D tax credits:
- New Compound Development
Creating new chemicals, alloys, or composite materials to meet industry needs or regulatory requirements. - Formula Optimization
Refining chemical formulas to improve performance, cost efficiency, or safety. - Sustainable Material Research
Experimenting with biodegradable, recyclable, or eco-friendly materials. - Process Innovations
Enhancing chemical processes to improve yields, reduce waste, or increase scalability. - Testing and Experimentation
Testing materials under various conditions to ensure durability, functionality, or compliance with standards.
Breaking Down the 4-Part Test for Chemical Engineering & Material Engineering
Software activities can meet the R&D tax credit’s 4-Part Test:
- Business Component Test:
Activities that develop or improve materials, chemicals, or production methods meet this test. - Technological in Nature Test:
Efforts involving chemistry, materials science, or engineering qualify here. - Elimination of Uncertainty Test:
Questions like “How can we improve this material’s strength?” or “What formula will meet regulatory standards?” point to this test. - Process of Experimentation Test:
Trial-and-error, testing different formulas, or optimizing production processes fulfill the experimentation requirement.
Related Content for Claiming the Credit!
Check out Qualified Research Expenses (QREs): Breaking Down the Basics and Common Misconceptions About R&D Tax Credits.
Claim R&D Tax Credits Today
The Research & Development Tax Credit and Software Development go hand in hand. Contact us to get started on claiming the R&D Tax Credit and reducing your tax bill today!
Examples of Qualifying Activity
Polymer Science & Engineering
- Example: Developing high-performance polymer materials for aerospace, automotive, and medical applications.
- 4-Part Test:
- Permitted Purpose: Enhances polymer durability, flexibility, and thermal resistance.
- Technological in Nature: Uses chemistry, material science, and molecular engineering.
- Elimination of Uncertainty: Determines whether new polymer blends can improve strength without increasing weight.
- Process of Experimentation: Conducts tensile testing, heat resistance evaluations, and real-world application trials.
Specialty Chemicals Manufacturing
- Example: Producing industrial coatings, catalysts, and specialty chemicals for use in manufacturing and construction.
- 4-Part Test:
- Permitted Purpose: Improves chemical performance and safety across various industries.
- Technological in Nature: Uses chemical engineering, reaction kinetics, and applied physics.
- Elimination of Uncertainty: Determines whether new chemical formulations enhance adhesion and weather resistance.
- Process of Experimentation: Performs lab-scale synthesis, accelerated aging tests, and application-specific evaluations.
Nanotechnology & Advanced Materials
- Example: Innovating semiconductor nanomaterials for faster and more energy-efficient electronic devices.
- 4-Part Test:
- Permitted Purpose: Develops nanoscale materials that improve chip performance and reduce power consumption.
- Technological in Nature: Uses physics, chemistry, and material science at the atomic level.
- Elimination of Uncertainty: Determines whether modified nanostructures enhance conductivity and heat dissipation.
- Process of Experimentation: Conducts atomic force microscopy, electron beam lithography, and electrical resistance testing.
Paints, Coatings, & Adhesives
- Example: Formulating weather-resistant and environmentally friendly coatings for industrial and consumer use.
- 4-Part Test:
- Permitted Purpose: Improves durability, UV resistance, and environmental safety of coatings.
- Technological in Nature: Uses polymer chemistry, fluid dynamics, and surface engineering.
- Elimination of Uncertainty: Evaluates whether alternative resins improve adhesion and longevity.
- Process of Experimentation: Runs accelerated weathering tests, adhesion trials, and chemical resistance assessments.
Petrochemical & Refining R&D
- Example: Enhancing fuel refining processes to increase efficiency and reduce emissions.
- 4-Part Test:
- Permitted Purpose: Develops cleaner and more efficient fuel production methods.
- Technological in Nature: Uses chemical engineering, thermodynamics, and catalysis science.
- Elimination of Uncertainty: Determines if new refining techniques can reduce sulfur content while maintaining energy output.
- Process of Experimentation: Conducts pilot-scale refining, catalyst testing, and emissions analysis.
Green Chemistry & Sustainable Materials
- Example: Creating bio-based plastics and biodegradable alternatives to petroleum-based materials.
- 4-Part Test:
- Permitted Purpose: Develops sustainable and non-toxic alternatives for consumer and industrial products.
- Technological in Nature: Uses organic chemistry, biopolymers, and renewable material science.
- Elimination of Uncertainty: Assesses whether bio-based materials can match the strength and flexibility of conventional plastics.
- Process of Experimentation: Conducts biodegradability tests, mechanical property evaluations, and industrial-scale manufacturing trials.
Battery & Energy Storage Research
- Example: Improving lithium-ion battery efficiency, longevity, and energy density for electric vehicles and renewable energy storage.
- 4-Part Test:
- Permitted Purpose: Enhances battery performance while reducing environmental impact.
- Technological in Nature: Uses electrochemistry, nanotechnology, and materials science.
- Elimination of Uncertainty: Determines whether alternative anode/cathode materials increase energy storage capacity.
- Process of Experimentation: Runs charge-discharge cycling, thermal stability testing, and real-world performance assessments.
