Industry Brief  ·  Chemical Formulation

Every formula is a hypothesis.

The federal R&D tax credit pays for the formulation work your company already does on coatings, cleaners, and consumer products. Most formulators never claim it.

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It costs nothing to find out. If there isn't enough credit to be worth claiming, you don't pay a thing.

New to youis enough. A formula your company hasn't made before can count when you had to test your way to it.
4 years of creditin one study: this year, plus past years still open to amend, usually three.
Exam supportcomes with every study. If the IRS asks, we answer.

What counts in your lab

Work you already do
  • New formulasBuilding a coating, cleaner, lubricant, or personal care product to a performance target.
  • ReformulationReplacing a restricted ingredient or a lost supplier without losing performance.
  • Stability and shelf lifeAccelerated aging, freeze-thaw, and compatibility tests on a new formula.
  • Scale-upPilot runs that move a bench formula into a production reactor or mixer.
  • Performance testingTesting adhesion, coverage, cleaning power, or corrosion resistance against a standard.
  • Regulatory changesMeeting a VOC or safety limit while the product still works.
  • Packaging compatibilityFinding out whether a formula attacks its container, valve, or closure.
  • Batch problemsChanging order of addition, mixing, or temperature profile to develop a new process before production.

The four questions, for formulators

§41's four-part test
  1. Did you make a formula new to your company?It doesn't have to be new to the industry.
  2. Did it take real know-how?Your work rests on chemistry. This is the easy one.
  3. Were you unsure at the start?Will it stay stable? Will it scale?
  4. Did you try options to find out?Lab batches, stability tests, and revised formulas are exactly that.

Unsure about any of these? That's what the call is for. The four-part test in plain English

Formulators ask

We make private label products. Do we qualify?

Often. Developing a formula to a customer's spec counts when your company carries the technical risk and keeps the right to use the formula.

We reformulated because of a regulation. Does that count?

Usually. Meeting a new limit without losing performance is a technical problem, and the trials to solve it can qualify.

Does a formula that never launched count?

Usually. A formula that failed stability is strong evidence you experimented. The raw materials used up in bench, pilot, and stability batches can count as supplies.

Do we need a formal R&D department?

No. The credit follows the work, not the job title. A production chemist running trial batches on a new formula can be doing qualifying work.

Filing, how far back, exams, and costs: common questions.

For your CPA: where the credit goes on Form 1120, 1120-S, 1065, or 1040.

Other industry briefs

Where else it lands
Food Manufacturing

Every recipe is a formula.

New formulas, pilot runs, and shelf-life testing can be experimentation the credit rewards.

Read the brief Breweries and Distilleries

Every batch is an experiment.

Recipe trials, pilot batches, and fermentation work can be experimentation the credit rewards.

Read the brief Agriculture

Every season is a trial.

Variety trials, feed changes, and irrigation tests with a real unknown can be experimentation the credit was written for.

Read the brief

Give us thirty minutes.

Bring whoever runs your bench. You'll leave knowing whether your formulas qualify.

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