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Foam Industry Pioneer Carves Out
Significant Tax Savings
R & E credit helps Edge-Sweets Company expand
in new directions
THE COMPANY
From its 70,000-square-foot manufacturing facility in Grand Rapids, Mich., Edge-Sweets Company (ESCO), got its start in 1883 fabricating jigsaw blades for the booming furniture industry. Around 1950, the operation evolved into designing blades for cutting flexible foam rubber, which became its main activity as it grew with the U.S. foam industry.
Today, ESCO offers products and knowledge as well as custom-engineered cutting and dispensing equipment. It serves the furniture, automotive, marine and medical industries and many others. Though its equipment is designed and built in the United States, ESCO has a worldwide presence.
THE CHALLENGE
ESCO was upgrading a lot of its custom-engineered equipment and software while also developing new products and bringing them to market. The company saw an opportunity to at least investigate whether it might qualify for the Research & Experimentation Tax Credit.
“We were spending hundreds of thousands of dollars on research and experimentation and didn’t realize you could do anything with that tax-wise,” said Tom Van Portfleet, Vice President of Finance for ESCO. “Our CPA firm recommended Hull & Knarr. There were items we weren’t even aware of that qualified us for this credit, such as the software development for pattern-cutting and other related items. That was a big benefit for us.”
THE SOLUTION
ESCO engaged Hull & Knarr to conduct a comprehensive retroactive study in the summer of 2006 for the years 2003, 2004 and 2005; and again for current-year studies for 2006 and 2007 to secure a Research Tax Credit.
“They were really comprehensive,” said Tom Van Portfleet, Vice President of Finance for ESCO. “They interviewed people from every area: engineering, service, production, sales and accounting. They looked at what we did in the past — and what we’re doing now. That’s where we discovered we could get more than we originally thought."
“I was very impressed with Hull & Knarr,” Van Portfleet continued. “Each year, they come back and don’t waste anyone’s time. They know who to talk to and what to ask. That’s important to all of us here.”
THE BOTTOM LINE
The Hull & Knarr team gave ESCO and its CPA firm a comprehensive set of binders and CDs that tied everything together in case the IRS were to audit ESCO in the future. Hull & Knarr provided the completed form to ESCO’s regular CPA firm, who incorporated the form with the company’s regular tax return.
“We just got a check last week from the IRS,” Van Portfleet said. “We had approximately a 20-percent savings on our taxes in these specific areas.”
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