R&D Presentation 1 28 09

Federally Funded
Research & Development
Best Bottom Lines, LLC

Tax Credits

These Underutilized Wage Based Tax
Credits for Businesses through out
the United States & Canada Create an
Increase in Cash Flow

This document and/or electronic file contains information that (a) is or may be
LEGALLY PRIVILEGED, CONFIDENTIAL, PROPRIETARY IN NATURE, OR
OTHERWISE PROTECTED BY LAW FROM DISCLOSURE, and (b) is intended
only for the use of Best Bottom Lines, LLC. You must have written authorization
from Best Bottom Line, LLC to use, copy, or distribute any part of this document
as it is strictly prohibited.


R&D Tax Credit – IRC §41
In December 2001, new tax regulations enabled small to mid-size
companies to be eligible to take the R&D (wage-based) Tax Credits.

Documentation and Discovery requirements were relaxed.

The goal was to keep innovation and creativity in the U.S. and
encourage economic growth.

Clients can now receive cash back and/or tax credit benefits for
conducting technical activities and meeting the tax regulation
requirements.


About Best Bottom Lines, LLC

Represents a National Tax Recovery Consulting Firm based out of
Troy, MI
Specializing in Engineering-Based Tax Studies such as: R&D,
Cost Segregation and Energy Efficiency Studies
Unique staff made up of legal, tax and engineers made up of:
mechanical, chemical, electrical & structural needed to fully
maximize tax benefits.
All of our work will withstand IRS scrutiny and is backed by an
unlimited audit defense guarantee

New or Improved Business

Component
A business component can be a product or a process, and can include the
following:
• Performing environmental testing
Manufacturing products
• Developing, implementing, or
• Developing new, improved, or more reliable
upgrading systems and/or software
products / processes / formulas
• Automating and/or streamlining
• Developing prototypes or models (including
internal processes
computer generated models)
• Expending resources on outside
• Designing tools, jigs, molds, and dies
consultants/contractors to do any of
• Developing or applying for patents
the above-stated activities
• Performing certification testing
• Attempting the use of new materials
• Conducting testing of new concepts &
and compounds
technology
• Developing and introducing new
technology
• Developing or improving
production/manufacturing processes


Technological in Nature
The taxpayer is seeking information that is
technological in nature:

• Nature component is based on the process of
experimentation used in the research relying on the
principles of hard sciences, such as physical or
biological sciences, engineering, or computer
science.


Elimination of Uncertainty
The research and development activities
must eliminate uncertainty either about the
capability or method of developing the
product.

In addition, the elimination of certainty of
the improvement of the product or its
appropriate design is also sufficient to meet
this requirement.


Process of Experimentation
The Process of Experimentation involves
the evaluation of one or more alternatives
where there exists uncertainty at the outset
as to the appropriate design of the
business component.

The Taxpayer may conduct a process of
evaluating the alternatives through
systematic trial and error, developing one
or more hypotheses, designing and
conducting experiments to test the
hypotheses, among other things.


Eligible Costs
Wages
- Form W-2, Partnership Earnings subject to Self Employment
Tax, Schedule C, bonuses paid to employee excludes 401(k)
& fringe benefits

Supplies
- Cost to fabricate prototypes / items consumed in R&D process Any
tangible property used in the conduct of qualified research other than
land or improvements to land, and property subject to depreciation

65% of Contract Research
- Fees paid to non-employees, outside
consultants / engineers / software developers


The Process
Preliminary
Analysis

Project
Identification

Data Projects &
Financials
Collection Activities

Employee R&D Qualified
Interviews
Allocations Projects

Credit
Calculations

Reporting


Qualifying Clients

Manufacturing
Fabrication
Engineering
Chemical
Tool and Die
Machine Shops
Software Development
Electronics
Biotechnology
Pharmaceutical

Ex: Manufacturing Co. #1

Automotive Prototyping
Sampling of activities:
– Plastic part manufacturing,
– Rapid prototype modeling,
– Design – AutoCAD,
– Aluminum prototype tooling,
– Silicone tooling,
– Injection, Blow, Compression molding,
– Vacuum forming

Annual Payroll
2003 – $2MM
2004 – $3MM
2005 – $4MM
2006 – $5MM

Net Credit Benefit for 2003 thru 2006 tax years:
$200,000


Ex: #2 Manufacturing Co. Metal Product
Fabrication

– Grinding
– CAD Drawings
– Electro Mechanics
– Vibratory Deburring
– Hardware Insertion
– Laser Technology
– Machining

Annual Payroll

2003 – $6MM
–
2004 – $7MM
–
2005 – $8MM
–
2006 – $9MM
–

Net Credit Benefit for 2003 thru 2006tax years:
$500,000


Ex: Software Co
• Designing software
• Coding
• Programming
• Improving application features
• Functionality improvements
• Alpha, beta testing
• Improving Modules

Annual Payroll
2003 – $5MM
2004 – $6MM
2005 – $7MM
2006 – $8MM

Net Credit Benefit for 2003 thru 2006 tax years:
$500,000


Ex: Engineering Co.
– Pipe and Filtration Systems
– Prototyping
– Solvent and Adhesive bonding
– Quality Assurance
– Thermoforming Process
– Designing systems and products
– Developing layouts and schematics
– Testing and Failure analysis

Annual Payroll
–
2003 – $10MM
–
2004 – $11MM
–
2005 – $12MM
–
2006 – $13MM
–

Net Credit Benefit for 2003 thru 2006 tax
years: $700,000


The Final Product R&D Tax
ABC, Inc. Credit Study
1234 Research Lane 2002 – 2005
Houston, TX 77000 Tax Years

The R&D Study / Technical Report

• The R&D Study / Technical
Report is where all the arguments,
documentation of qualification
and quantification must coalesce
into a coherent statement of who,
why, when, where and how much.

• The Study will convey the credit
being taken and the basis for such
amount.

• For a credit with varying
qualitative issues, the report is
critical

Form 6765


State R&D Tax Credits

Michigan (Office)
Arizona
Minnesota
Arkansas
Montana
California
New Jersey
Colorado
New Mexico
Connecticut
North Carolina
Delaware
North Dakota
Georgia
Ohio
Hawaii
Pennsylvania
Idaho
Rhode Island
Illinois
South Carolina
Indiana
Texas (Office)
Iowa
Kansas Utah
Louisiana Vermont
Maine West Virginia
Maryland Wisconsin
Massachusetts Washington


Benefits to Clients
• Significant credits/cash back from
previous 3 open years

• $1 for $1 reduction on current year’s
taxable liability

• Additional tax savings in the future

• Unutilized credits are carried back 1
year and then
carried forward up to 20 years

• Increase company assets and value


What’s Next?
Conference Call / Visit with Clients / CPA Firm
I.

Setup office visit with the CPA Firm (Tax
II.
Partners/Managers) and/or with the Prospective
Client (CEO/CFO/President)
Feasibility Analysis
III.

Initiate the Study
IV.


Frequently Asked Questions
What type of background and expertise is necessary to successfully provide the service?
•
The R&D Tax Credit team must have the technical (engineering) and legal expertise to quantify or qualify the credit.
Numerous CPA’s across the country outsource this highly specialized service to our team.

Our Clients have never documented employees activities/time. Is that a concern?
No. Through our interview process, we collect and document the necessary information required by the code/IRS.

What if the shareholders are in AMT situation?
The un-utilized credits are carried back 1 year and then carried forward up to 20 years.

How does our team get paid?
For previous 3 open years, our fees are contingency based. If we can’t help you realize any benefits, we don’t get
paid. For current and future years, due to IRS Circular 230, we charge a fixed fee.

How long does it take for the Client to realize the benefits?
For previous 3 open years, it takes 3 – 4 months after amending returns to receive cash back from the IRS for
taxes paid. For current year, the benefit is realized upon filing, which is $1 for $1 reduction on taxable liability.

Will this project disrupt the employee’s or the CPA’s daily
activities?
Our process is strategically designed so that it takes a total of
–
5 to 10 hours of client time – technical interview. This includes a
few hours with the company’s chief engineer(s), and a hour or
two with the controller/CFO and the CPA.


Contact Information

Bruce Etterling, CEO
Tel: (888) 598-9667
FAX: (888) 817-0921
BEtterling@bestbottomlines.com

R&D Presentation 1 28 09

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