Project Summary
The analysis identified $1,995,371 in Qualifying Research Expenses (QREs) for the tax year, drawn from two categories: $796,707 in qualifying employee wages (of $1,541,397 in total payroll) and $1,198,664 in supply costs from tool steel, die components, and stamping trial materials. No contractor expenses were included. The study produced a federal R&D Tax Credit of $174,392 and a state R&D Tax Credit of $58,341, for a total tax credit benefit of $232,733.
Project Overview
To qualify for the R&D Tax Credit, each activity must satisfy the IRS four-part test. CSSI’s analysis confirmed that the qualifying activities identified for this company met all four criteria:
- Business Component: Developing an improved progressive die capable of producing dimensionally compliant UHSS stampings at acceptable scrap and tool life rates.
- Elimination of Uncertainty: It was unclear whether modified draw radii, variable blank holder force profiles, and ceramic-coated tool steel could suppress fracture at critical form features while achieving target tool life at production speeds.
- Process of Experimentation: The team ran FEA forming simulations and instrumented stamping trials, analyzed fracture modes, and refined die geometry and coating selection through successive trial cycles until scrap and tool life targets were met.
- Technological in Nature: Grounded in mechanical engineering, metallurgy, and tribology.
| Employee Wages | $1,541,397 |
| Supply and Contractor Costs | $1,198,664 |
| Total QRE’s | $1,995,371 |
| Total State Credit | $58,341 |
| Total Federal Credit | $174,392 |
Study Results
The analysis identified a total of $1,995,371 in Qualifying Research Expenses (QREs) across the tax year. Employee wages accounted for a significant portion of the QRE figure, with $796,707 of $1,541,397 in total payroll attributable to qualifying research activities. Supply costs contributed an additional $1,198,664 in qualifying costs, primarily from tool steel, die components, and UHSS stamping trial materials used in prototype build and validation. No contractor expenses were identified for this engagement. Based on those qualifying expenses, the study produced a federal R&D Tax Credit of $174,392 and a state R&D Tax Credit of $58,341, bringing the company’s total tax credit benefit to $232,733.
Key Takeaways
- Tool and die shops are strong candidates for the R&D Tax Credit. Custom die development, FEA simulation, instrumented trials, and iterative failure analysis map directly to the four-part test’s requirements for technical uncertainty and experimentation.
- Small headcount does not limit the credit. With just 29 employees, this company captured nearly $2 million in QREs, proof that specialized engineering work, not company size, drives the value of an R&D study.
- Supply costs can be the largest QRE category in tool and die work. This engagement captured $1,198,664 in qualifying supply costs, primarily tool steel, die components, and UHSS trial materials, outweighing qualifying wages of $796,707 and underscoring how material-intensive prototype build and validation work can be.
- Pushing into advanced materials creates qualifying activity. Stamping ultra-high-strength steel introduced uncertainty around fracture behavior, tool wear, and process control that standard die configurations could not resolve, generating exactly the kind of technical work the credit was designed to incentivize.
- State credits add meaningful value, even at this scale. Here, the state credit added $58,341 on top of $174,392 federal, bringing the total to $232,733, a 33% increase over a federal-only analysis.
Ready to Discover Your R&D Tax Credits Potential?
If your company is developing or improving products, formulas, or processes, you may be leaving significant tax credits on the table. CSSI’s engineering-based approach ensures every qualifying activity is identified, documented, and defensible, so you capture the full value of the work your team is already doing.
Request a Free Analysis today and find out what your business could qualify for.
