Most mining and other natural resource industries strive to improve their operations by developing them to be better, faster, cheaper, or more environmentally friendly. R&D is uncommon in the mining industry but when activities are present, the tax claims can be substantial. Unfortunately, the mining industry is among those who fail to fully utilize the lucrative benefit of the R&D Tax Credit.
One of the main reasons mining companies do not claim their R&D tax credit is because of misconceptions regarding which activities are eligible for the credit. They are unaware that many of the daily processes they do may qualify for the R&D tax credit.
What Mining Activities Qualify for the R&D Tax Credit?
If your mining company engages in the following activities, you may be eligible for the R&D Tax Credit:
- Analyzing geotechnical information
- Examining alternate mining strategies
- Developing a mine development strategy
On the other hand, here are some activities that would not qualify:
- Purchasing land
- Research funded by a third party
- Research conducted outside the United States
- Market research for advertising or promotions
Applying the Four-Part Test
- Permitted Purpose – Requires the project to fulfill a qualifying function that is critical to the business. The purpose can be to develop a new or improved product or process.
- Elimination of Uncertainty – The activity must deal with a specific technological uncertainty.
- Process of Experimentation – Implementation of a comprehensive method for identifying and evaluating potential solutions to attain the desired outcome
- Technological in Nature – The process of experimentation must rely on a scientific discipline such as chemistry, biology, computer science, or engineering.
How can KPT Consulting help?
If you think your mining production operation fits any of the above categories, you should look into R&D Tax Credits. It’s vital to note that each industry is different, each project is unique, and the R&D credit will be applied differently to each company. Therefore, it’s advisable to partner with an expert to assist you.
If you’d like to learn more about R&D Tax Credit eligible expenses and activities and how it could help your company save money, contact us today!