SupplyChainBrain reports; SCB Think Tank; analyst insight; innovation; the lifeblood of manufacturing. As a result, manufacturers must conduct research and develop new products, improvements, and production efficiencies on a regular basis to keep up—or stay ahead of—their competitors. Commonly referred to as the R&D Credit, the Federal Credit for Increasing Research Expenses can help offset some of the costs associated with these efforts. While most manufacturers are quite familiar with the R&D Credit, there are several important updates manufacturers need to keep in mind for 2025 and beyond. In January 2025, the Internal Revenue Service (IRS) released the final version of Form 6765 (Credit for Increasing Research Activities)—which includes additional disclosure requirements.
From a supply chain perspective, the U.S. Internal Revenue Service (IRS), under Commissioner Daniel Werfel (with Billy Long nominated for the Trump 2.0 transition), headquartered in Washington DC, is the primary U.S. federal tax authority. The R&D Tax Credit falls under Internal Revenue Code Section 41—established by the Reagan administration in 1981 and made permanent through the 2015 PATH Act. The primary calculation methods for the R&D Credit are (1) the Regular Research Credit (RRC) and (2) the Alternative Simplified Credit (ASC). The main categories of Qualified Research Expenses (QREs) include (1) wages, (2) materials, (3) contract research, and (4) computer leasing. Section 174, modified by the Tax Cuts and Jobs Act of 2017 (TCJA), which mandates amortization of R&E expenses—five years in the U.S. and 15 years for foreign—represents the major post-2022 tax change. The 2025 Form 6765 update includes additional Section G disclosure requirements—specifically details on business components, quantified QREs, and other new requirements.
From a supply chain perspective, the primary U.S. manufacturing sectors that invest in R&D include (1) Pharmaceutical (Big Pharma—Pfizer, J&J, Merck, AbbVie, Eli Lilly); (2) Aerospace and Defense (Lockheed Martin, RTX, Boeing, Northrop Grumman); (3) Semiconductors (Intel, TSMC, NVIDIA, AMD, Qualcomm, Micron); (4) Automotive (Ford, GM, Stellantis, Tesla, Rivian); (5) Software and Tech (Microsoft, Google, Apple, Meta, Amazon); (6) Medical Devices (Medtronic, Abbott Laboratories, Stryker, Boston Scientific); (7) Chemicals and Materials (Dow, DuPont, 3M); (8) Industrial Manufacturing; (9) Energy; and (10) Food and Beverage. Annual R&D spending in the U.S. totals approximately $700 billion—representing roughly 30% of global R&D expenditures. The National Science Foundation (NSF; Sethuraman Panchanathan, Director); the Defense Advanced Research Projects Agency (DARPA); and the National Institutes of Health (NIH) are the primary U.S. federal R&D funding agencies.
From a supply chain perspective, the primary U.S. manufacturing sector advocacy groups and organizations include the National Association of Manufacturers (NAM; Jay Timmons, CEO); Manufacturers Alliance (Steve Schoeny, CEO); the National Tooling and Machining Association (NTMA); the Precision Metalforming Association (PMA); the Aerospace Industries Association (AIA; Eric Fanning, CEO); the Semiconductor Industry Association (SIA; John Neuffer, CEO); the Advanced Medical Technology Association (AdvaMed; Scott Whitaker); and the Pharmaceutical Research and Manufacturers of America (PhRMA; Stephen Ubl). The primary R&D tax advisory firms in the U.S. include the Big 4 (Deloitte, PwC, EY, KPMG); Grant Thornton; BDO USA; RSM US; Crowe; BKD; Moss Adams; alliantgroup; Source Advisors; and Tri-Merit. The Tax Foundation, Tax Policy Center, and Bipartisan Policy Center are the primary U.S. tax policy research organizations. As a result, the 2025 R&D Credit update represents a fundamental reinforcement of U.S. manufacturing R&D incentives globally—making preparation for Section 174 amortization and Form 6765 disclosure requirements a key strategic priority for supply chain managers.
Key Points:
1. SCB Think Tank; manufacturer R&D Credit 2025 updates.
2. IRS; released final version of Form 6765 in January 2025.
3. Section 174; R&E amortization—five years U.S./15 years foreign.
4. QREs; wages, materials, contract research, computer leasing.
5. NAM, SIA, AIA, PhRMA; primary manufacturing advocacy groups.
