The R&D Tax Credit Aspects of High Performance Vehicles
High-Performance-Vehicles
High performance automobiles are
specifically designed and built for speed. From the engine's
carburetor functionality to the external design of tires and
wheels, each and every aspect of all vehicle components are
constantly evaluated, redesigned, and tested to eke out more
speed, power, and efficiency.
High performance car parts manufacturers constantly research
new technologies for engine operations to contribute to new
models released each year and to satisfy the growing market
demand for increased performance, quality, and functionality
in consumer and after-market vehicles. System and part
innovations in this growing niche industry are a prime
opportunity for significant Federal and State R&D tax
credits.
The R&D Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to
thirteen (13) percent of eligible spending for new and
improved products and processes. Qualified research must meet
the following four criteria:
- New or improved products, processes,
or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include employee wages, cost
of supplies, cost of testing, contract research expenses, and
costs associated with developing a patent.
On December 18, 2015 President Obama signed the bill making
the R&D Tax Credit permanent. Beginning in 2016, the
R&D credit can be used to offset Alternative Minimum tax
and startup businesses can utilize the credit against payroll
taxes.
Engine Carburetors
A key developmental area in a high
performance vehicle is the engine's carburetor. The
carburetor's main function in a vehicle is to mix the right
amount of gasoline with air, enabling an engine to function
properly. The main problems that can occur is when the engine
runs "lean" with not enough air being mixed, and the engine
running "rich" which can flood the engine.
To improve carburetor performance, the industry is looking to
innovative technologies to meet the increased performance and
efficiency demands of consumers. Fuel efficiency is a
growing concern for consumers, even in the high performance
vehicle industry. Fuel injection technology enables increased
fuel efficiency and lower emissions, while maximizing
performance from the usual fuel amounts consumed by a vehicle.
There are many benefits of having a fuel injection system
including improved vehicle functionality, cost savings, and
performance increase in the consumer's automobile. The fuel
injector also functions to filter out carbon and sediment
build-up from the vehicle's fuel system. By performing this
filtering of dirt particles, the injector system reduces air
pollution and improves system performance and emissions
quality of the vehicle. Not only do carburetor and fuel
injection developments increase power and performance in
high-end vehicles, similar innovations are equally applicable
to vehicles targeted to the average consumer.
The high-performance automobile industry is constantly
"pushing the envelope" to develop improved mechanisms and
systems, making the companies of which it is comprised prime
candidates to claim the R&D Tax Credit.
Figure 1: Engine
Carburetor
Exhaust Headers and Manifolds
Another automobile component that is
targeted for improved performance and quality by the
high-performance community is the exhaust headers and
manifolds. Through extensive research and development,
the performance of header design is continuously
improving. An intake or exhaust system is unique because
there are many aspects of the overall flow mechanism that can
be re-engineered to generate improved horsepower and
performance.
The following system
and part descriptions provide an overview of potential
improvements to intake and exhaust systems that are prime
opportunities for companies engaged in these development areas
to claim the R&D Tax Credit.
Exhaust Headers
The exhaust header is an essential engine component because it
functions to force gases out of the engine's cylinders more
quickly and more efficiently. After the exhaust gases leave
the combustion cylinder, they are pushed into the exhaust
manifold.
Figure
2: Exhaust Header
Intake
Manifolds
A
manifold vacuum or "engine" vacuum controls the rate of
airflow through the internal combustion engine, which will
also determine how much power the engine will generate. The
carburetor then adds vaporized fuel to the airflow of the
manifold, reaching the end goal of a properly running engine. An intake manifold is one of the
key aspects for performance vehicles. To
meet consumer needs for high power, a high quality intake
manifold is required.
In modern engines, sensor technology is used to measure the
pressure in the intake manifold. Similarly, in
supercharged engines, manifold pressures are generally
independently measured compared to surrounding pressure
levels. As this pressure level is directly tied to engine
power generation, sensor and control technology is essential
to the performance of an intake manifold. MaP (manifold
absolute pressure) sensors are modern-day innovations that are
used to measure the air pressure in an intake manifold.
Engineering a more accurate and more reliable sensor system or
method in turn increases power generation capability which
subsequently improves overall engine performance.
Exhaust Manifolds
Thermal designs are a major factor in the design of exhaust
manifolds because the main goal is avoiding thermal shock. In
a high performance exhaust, the exhaust flow, pressure and
runner are important factors in deciding what characteristics
make up a supercharged car. Engineers must estimate the
fatigue life for the exhaust manifold while going through
temperature fluctuations, utilizing an experimentation
technique known as the "elastic-plastic finite element
analysis." Under this analysis, an extended run-time period is
analyzed from before and after using a specialized software to
simulate the exhaust manifold. The data and real-world
results are then reviewed to identify areas of improvement,
which the engineers then address by re-configuring the
manifold itself.
Figure 3: Exhaust
Header Manifold
Designing an Intake/Exhaust Manifold
The process for creating an intake manifold
starts with the design phase. The intake manifold is critical
to how other parts of the engine will function, and,
therefore, must be designed carefully and accurately. For
high-performance cars, any increase in air flow volume results
in increased fuel combustion, which generates more
horsepower. As such, high-performance vehicle engineers
must identify means and methods to expand the air intake
capabilities of manifold in order to maximize the capability
of the cylinder head.
Figure 4:
Manifold Design Schematic
Manifold
Design Software
To improve the functionality of this initial process, Burns
Stainless of Costa Mesa, California developed a software
program called "X-Design" to model exhaust systems.
Specifically, the program is designed to analyze the existing
system and identify areas where the system is not functioning
ideally. The automobile designer can then utilize this
data to re-engineer specific portions of the system, and test
them for efficacy. The program produces valuable data
that tracks horsepower and torque numbers in all categories
and relevant dimensions to target and analyze specific areas
and improvement zones of a particular vehicle.
Ultimately, the goal of the X-Design software and programs
like it is to obtain and organize the data necessary to allow
engineers to design an improved exhaust header process to
achieve target performance specifications. Though the
engineering process may require additional experimentation
before the final, appropriate design is achieved, the X Design
data is crucial as a starting point to develop improved
functionality of the vehicle's exhaust and manifold build as
well as the entire engine system. Additionally,
not only does the software program provide improvement
avenues, but the innovative software project itself is also a
prime R&D tax credit opportunity.
Two other major custom intake manifold companies include
Wilson Manifolds of Oakland Park, Florida and Berry
Motorsports of Clermont, Georgia. These companies design
custom intakes which usually requires computer aided design
(CAD) software to isolate and reconfigure sections and
openings of the manifold to improve airflow, as well as
discovering problems during the engineering phase, before
actual metal is cut for the custom part design. Ultimately,
the purpose of these CAD drawings and modeling is to improve
the airflow and dimensions on an intake for the given
vehicle. As such, not only the actual prototyping and
testing of the experimental manifold design, but also the
generation of the CAD designs themselves, and any related
revisions are prime opportunities for the R&D Tax Credit.
Fabrication Engineering Software
The software engineering process to actually produce the
prototype part design also may qualify for the R&D Tax
Credit. After a prototype design is developed, the
fabrication phase for the intake manifold utilizes CNC
technology (Computer Numerically Controlled). A CNC
machine will "read a long list of digital coded information
from a computer to move the motors and other positioning
systems in order to guide a spindle over the raw material the
machine is working on."
However, any CNC machine requires specific coding for each
specific prototype design in order to translate the CAD model
into real world fabrication. A engineering programmer
must design the initial CNC coding structure, test the program
on appropriate materials, and determine if the coding is
appropriately designed in order to produce a functional
part. The CNC coding design process regularly involves
multiple revisions and configurations before the code properly
translates into a workable part that reflects the prototype
design as drawn. Often, the CNC process reveals
additional challenges that require the engineers to go "back to the drawing board"
and continue considering alternatives on the CAD design
level. Activities that involve the design and testing of
prototype intake and exhaust manifolds using CAD and CNC
technologies are prime opportunities for companies engaged in
these development areas to claim the R&D Tax Credit.
Figure 5: CNC
Machine Processing
Performance Wheels and Tires
While the performance of a vehicle focuses
on internal composition, the tire quality will also increase
horsepower and improve the vehicle's response time and surface
traction. Generally, the goal in developing a
high-performance tire is to have a "sticky" tire, meaning that
engineers will test different materials, compounds, and tire
patterns to increase traction and, subsequently, horsepower.
Often, a company can spend up to $1 million in potentially
qualifying R&D costs developing a performance tire
suitable for high-performance cars. Chemical composition
testing, materials testing, CAD designing, and prototype
development are only a few examples of experimentation
necessary to improving tire quality and performance.
Throughout the high performance industry, extensive research
and design has been put into developing improved tires for new
models of each high performance vehicle, and the benefit of
that R&D innovation often is incorporated into stock
wheels usually used by consumers.
Figure 6: Tire
Layering Technology
Torque Converter
Technology
Torque converter technology (TCT) was
developed to allow for cutting-edge, custom converters to be
manufactured. A torque converter is responsible for the
transfer of fluid to the transmission that produces energy
power to run. A performance car's torque converter must be
designed to meet the needs of performance specifications and
available space. A well-designed TCT performance converter
will improve the overall performance in speed, and quality of
a car.
Comprised of an impeller, a stator, a turbine, and a torque
converter clutch, the torque converter system functions to
transmit and control the power generated by utilizing key
fluid pressure and physical part interaction. Similar to
the intake and exhaust manifold system described above,
improvements to the torque converter system and its component
parts can also be valuable opportunities for the R&D Tax
Credit, including CAD design, CNC programming, and prototyping
development phases.
Figure
7: Torque Converter Diagram
Design
Software
To gather the necessary data, a specially designed software
program is required. For example, Technalysis utilizes
custom PASSAGE®/Flow Software to do flow analyses, which
displays results of velocity and pressure distributions and
the blade loading diagrams. This software is designed to test
a given torque converter and can detect where there may be any
errors and test the overall performance level of the
components.
Though the engineering process may require additional
experimentation before the final, appropriate design is
achieved, the flow analysis data is crucial as a starting
point to develop improved functionality of the vehicle's
exhaust and manifold build as well as the entire engine
system. Activities that involve the design and
testing of torque converters are prime opportunities for
companies engaged in these development areas to claim the
R&D Tax Credit. Additionally, not only does the software
program provide improvement avenues, but the innovative
software project itself is also a prime R&D tax credit
opportunity.
Piston Design
Another high-performance auto part that can
be targeted for design improvement and re-engineering are the
engine pistons, one of few components that allow some
flexibility in the design. Specifically, with performance
pistons, potential areas of development include reduction in
overall weight, increase in material strength, and overall
durability. Similar to the auto part manufacturing
process described above, engineers design and prototype
pistons using high speed CNC machining and 3-D modeling
software.
Additionally, materials testing is another essential part of
developing a lighter but more durable piston. Further,
software called finite element analysis (FEA) allows testing
of the piston under many physical conditions such as stress,
temperature, or pressure. Activities that involve
the design and testing of prototype pistons are prime
opportunities for companies engaged in these development areas
to claim the R&D Tax Credit.
Other High-Performance
Auto Parts
Connecting rods are another vehicle
component that is often subject to re-engineering to improve
vehicle performance. As its name suggests, connecting rods
connect two moving parts of a vehicle, specifically between
the piston and crankshaft. Connecting rods, usually made
of steel, titanium, and/or aluminum, are critical to the
durability and life cycle of an engine, and act as shock
absorbers.
For example, if aluminum was used as the alloy for the
connecting rods then a car is aiming towards boosting
horsepower which will enhance the performance of a car opposed
to using steel connecting rods. In addition to materials
testing and alloy experimentation, engineers design and
prototype pistons using high speed CNC machining and 3-D
modeling software. Once again, development activities in
this area can be qualified toward the R&D Tax Credit.
Fuel-Efficient Engine
Technology
Development of improved high performance
auto parts are often constricted by industry regulations. For
example, Federal Corporate Average Fuel Economy (CAFE)
standards require specific fuel economy whereas high
performance automobiles are categorized as "gas guzzlers",
and, in the case of the Cadillac CTS-V, consumers incur a two
thousand six hundred ($2,600) dollar "gas guzzler" tax.
Additionally, high end "tuning" of a car's engine can
sometimes result in a vehicle that is not "street-legal" due
to fuel consumption and emissions levels.
In order to meet both preference and regulation, high
performance auto part makers must develop and engineer
improved products that increase the intra-engine compression
ratio to increase consumption-to-power efficiency.
Manufacturers must design an improved system by contemplating
available fuel saving technologies, including clean diesel,
direct injection, and variable valve timing, and incorporating
the workable aspects into a customized configuration that also
takes physical space restrictions of the vehicle itself into
account. Just as with component part manufacturing
improvements, activities related to developing a more
efficient internal system that supports the goal of
increased vehicle performance can also be R&D
credit-eligible.
Figure 8:
Fuel Efficiency Tracking HUD
Conclusion
Engine component and system improvements
and enhancements are crucial for overall vehicle performance
and function. In the American auto industry, there has
been an increasing niche market for special equipment. As long
as consumers keep buying performance cars, engineers will
invest their time to advance high-performance auto parts
annually, and the R&D Tax Credit was intended to reward
such investment in American innovation, including the
high-performance auto industry.
