Who Qualifies

Taxpayers who manufacture products are the largest benefactors of the research tax credit. Indeed, 47 percent of taxpayers who claimed research tax credits in 2006 were in the manufacturing industry. Of the 47 percent in the manufacturing industry, 93 percent were in ten fields. These fields include:

  1. Computer and electronic product manufacturing (24%);
  2. Miscellaneous manufacturing (14%);
  3. Chemical manufacturing (13%);
  4. Electrical equipment, appliance, and component manufacturing (12%);
  5. Machinery manufacturing (10%);
  6. Fabricated metal product manufacturing (7%);
  7. Transportation equipment manufacturing (5%);
  8. Plastics and rubber manufacturing (4%);
  9. Food manufacturing (3%); and
  10. Primary metal manufacturing (2%).

Taxpayers in a handful of other key industries also reap significant benefits from the research tax credit. Other than the 47 percent of taxpayers in the manufacturing industry, 48 percent of taxpayers who claimed research tax credits in 2006 were in one of the following industries:

  1. Professional, scientific, and technical services (27%),
  2. Information (10%), and
  3. Wholesale and retail trade (8%).

The remaining 5 percent of taxpayers are in the following industries:

  1. Administrative/support and waste management service;
  2. Finance and insurance;
  3. Various service;
  4. Management of company (holding companies);
  5. Agriculture, forestry, fishing, and hunting;
  6. Utility;
  7. Transportation and warehousing;
  8. Construction;
  9. Mining; and
  10. Real estate, rental, and leasing industry.

For tax years 2001 through 2006, taxpayers of all sizes, based on the amount of their annual gross receipts, filed tax returns to claim research tax credits. Mid-sized taxpayers were the largest group to claim research tax credits.

For the same period, the largest taxpayers obtained the largest benefit from the research tax credit. Smaller taxpayers obtained the smallest benefit, which makes sense given that the research tax credit is based on the amount the taxpayer spends. Viewed from a different frame of reference, smaller taxpayers obtained the biggest tax benefit from the research tax credit given the size of the credit in comparison to their annual gross receipts.

source: SOI Tax Stats - Corporation Research Credit