The Industrial Evolution of Mansfield, Ohio

The economic architecture of Mansfield, Ohio, is deeply rooted in a manufacturing legacy that spans over a century and a half. The city’s transformation from a midwestern agricultural village into an industrial powerhouse began in earnest during the 1840s with the arrival of the railroads. Established in 1808 by James Hedges, Jacob Newman, and Joseph Larwill, Mansfield initially relied on its fertile soils, which inspired the naming of Richland County. However, the arrival of the Sandusky, Mansfield and Newark Railroad in 1846, followed by the Pittsburgh, Fort Wayne, and Chicago Railroad in 1849, linked the region’s agricultural output with the broader logistical networks of the Great Lakes and the eastern seaboard. This logistical advantage catalyzed a rapid industrial transition, changing the fundamental trajectory of the city.

By the late 19th century, Mansfield boasted a highly diverse manufacturing sector. Early economic pillars included Hautzenroeder & Company, a massive cigar manufacturer that stood as the city’s largest employer in 1888 with 285 workers, and the Ohio Brass Company, founded in the same year by Frank B. Black, which specialized in bronze castings and electric railway supplies. The true paradigm shift for Mansfield, however, occurred in the 1910s and 1920s with the rise of the home appliance and electrical equipment industries. Westinghouse Electric Corporation moved into the vacant Baxter Stove Company plant in 1918, eventually expanding its footprint to 42 acres under 16 buildings. By 1955, Westinghouse employed over 8,000 residents—roughly a quarter of the city’s population at its peak, with fully one-third of the city’s wage-employed workforce commuting to that single facility. This immense industrial concentration established Mansfield as a global center for electrical engineering and metal fabrication.

The growth of these colossal enterprises necessitated a massive influx of labor, drawing European immigrants who settled in neighborhoods known locally as “The Syndicate”. Between 1890 and 1925, immigrants from central and southern Europe provided the human capital required to tend the forges, turn the tires, and shape the brass that drove Mansfield’s economy. This diverse, highly skilled, blue-collar workforce was united socially through the city’s robust “Industrial Leagues”—a highly competitive baseball network founded in 1902 where company-sponsored teams from Ohio Brass, Aultman Taylor, and local breweries competed, fostering a unique civic identity centered around industrial pride.

As the 20th century progressed, the region’s industrial base diversified further into automotive components, heavy steel production, fluid dynamics (pumps), and eventually advanced polymers. Although Mansfield, like many Rust Belt cities, faced significant deindustrialization, consolidation, and job losses in the 1970s and 1980s, the underlying engineering expertise and supply chain infrastructure remained intact. Today, Mansfield’s economic revival is driven by advanced manufacturing sectors that leverage heavy research and development (R&D) to remain globally competitive. To sustain this technological edge and offset the high costs of innovation, the utilization of federal and state R&D tax incentives is paramount.

The United States Federal R&D Tax Credit Framework

The United States Federal R&D Tax Credit, codified under Section 41 of the Internal Revenue Code (IRC), was originally enacted as part of the Economic Recovery Tax Act of 1981 to stimulate domestic innovation and ensure the global competitiveness of American industry. The credit provides a dollar-for-dollar reduction in federal income tax liability for taxpayers that incur qualifying expenses related to the development or improvement of products, processes, software, techniques, formulas, or inventions.

The Section Four-Part Test

To qualify for the Section 41 credit, a taxpayer’s activities must pass a rigorous, activity-based “four-part test.” This test must be applied separately to each “business component,” which is defined as the specific product, process, software, or formula being developed. The failure to satisfy even one of these criteria disqualifies the activity from federal tax relief.

• The Section 174 Test (Permitted Purpose): The expenditures associated with the research must be eligible to be treated as research and experimental (R&E) expenditures under IRC Section 174. The research must be undertaken for the purpose of discovering information to be used in the active conduct of a trade or business. Furthermore, the objective must be to develop a new or improved business component that enhances functionality, performance, reliability, or quality. Research aimed merely at stylistic or cosmetic changes does not satisfy this requirement.
• The Discovering Technological Information Test: The activity must be undertaken for the purpose of discovering information that is technological in nature. The process of experimentation used to discover this information must fundamentally rely on the principles of the hard sciences: physical sciences, biological sciences, computer science, or engineering.
• The Business Component Test: The technological information discovered must be intended to be useful in the development of a new or improved business component of the taxpayer. The application of the research must be tied directly to a specific product, process, computer software, technique, formula, or invention that is to be held for sale, lease, or license, or used by the taxpayer in their own trade or business.
• The Process of Experimentation Test: Substantially all (defined by the IRS and Treasury Regulations as 80 percent or more) of the research activities must constitute elements of a process of experimentation. This process involves a structured, scientific evaluation of alternatives to eliminate technological uncertainty. The taxpayer must (a) identify the specific uncertainty regarding the development or improvement of the business component, (b) identify one or more alternatives intended to eliminate that uncertainty, and (c) identify and conduct a process of evaluating those alternatives through modeling, simulation, or systematic trial and error.

Statutory Exclusions under Section 41(d)(4)

Even if an activity successfully navigates the four-part test, it may still be disqualified under specific statutory exclusions outlined in IRC Section 41(d)(4). The code explicitly states that qualified research does not include any research conducted after the beginning of commercial production of the business component. Once a product meets its basic design specifications and is ready for commercial deployment, further tweaking is generally ineligible. Furthermore, the adaptation of an existing business component to a specific customer’s needs, or the reverse engineering and duplication of an existing business component, are excluded.

The tax code also excludes surveys, market research studies, routine quality control testing, and research relating to management functions. Research in the social sciences, arts, or humanities is strictly barred, reinforcing the requirement that activities rely on the “hard” sciences. Crucially for multinational corporations, foreign research conducted outside the United States is ineligible for the Section 41 credit, a mechanism designed to keep high-paying technical jobs domestically situated. Finally, “funded research”—where the taxpayer either does not retain substantial rights to the intellectual property developed or bears no financial risk of failure (e.g., operating under a fixed-fee contract where payment is guaranteed regardless of success)—cannot be claimed by the performing entity.

Legislative Volatility: Section and the One Big Beautiful Bill Act (OBBBA)

The financial mechanics of deducting R&D expenses have experienced severe legislative volatility over the past decade. Historically, under IRC Section 174, taxpayers possessed the highly favorable option to immediately deduct all domestic research and experimental (R&E) expenditures in the year they were incurred. This provided an immediate cash-flow benefit that heavily subsidized corporate innovation. However, the Tax Cuts and Jobs Act (TCJA) of 2017 radically altered this landscape. To offset other tax cuts, the TCJA mandated that, for tax years beginning after December 31, 2021, taxpayers were strictly required to capitalize all specified research or experimental (SRE) expenditures and amortize them over five years for domestic research, and fifteen years for foreign research. This capitalization requirement fundamentally altered corporate tax modeling, artificially inflating taxable income and severely impacting the working capital of research-intensive manufacturing and software firms.

Following intense lobbying by the technology and manufacturing sectors, a pivotal legislative pivot occurred. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, enacted a new statute, IRC Section 174A. This monumental legislation permanently restores the ability of taxpayers to fully and immediately expense domestic R&E expenditures paid or incurred in taxable years beginning after December 31, 2024. The reversal of the five-year amortization requirement restores a critical cash-flow advantage for American businesses.

Notably, the OBBBA provides complex transition rules to address the “gap” years of 2022 through 2024 when capitalization was mandatory. “Eligible small businesses”—defined under Section 448(c) as those with average annual gross receipts not exceeding $31 million for the prior three-year period—are granted a retroactive election. They may elect to retroactively apply the full expensing rules to the 2022–2024 tax years by amending prior returns, allowing them to recover previously amortized costs and potentially generating significant refunds. Conversely, larger taxpayers who do not meet the $31 million threshold are not granted retroactive amendment rights; instead, they may deduct their remaining unamortized domestic R&E amounts either entirely in 2025 or ratably spread across the 2025 and 2026 tax years.

Importantly, while the OBBBA provides immediate relief for domestic expenditures, foreign R&D expenses remain strictly subject to the 15-year amortization rule established by the TCJA. This bifurcated treatment creates a powerful strategic incentive for corporations to repatriate their R&D operations back to the United States, directly benefiting industrial hubs like Mansfield.

IRS Administrative Guidance and Enhanced Reporting Requirements

Concurrently with legislative changes, the Internal Revenue Service has drastically raised the barrier to entry for claiming the research credit, transitioning to an era of heightened transparency and rigorous substantiation. In October 2021, the IRS released a Chief Counsel memorandum that dramatically increased the disclosure requirements for R&D refund claims filed on amended returns. To be considered a “valid” claim for refund, taxpayers must now provide exhaustive, contemporaneous detail. Specifically, they must identify all business components to which the claim relates; detail all research activities performed for each component; name the specific individuals who performed those activities; and articulate the precise information each individual sought to discover. Failure to provide this granular data results in the IRS rejecting the claim as “deficient” before an audit even commences, effectively blocking the taxpayer’s access to the courts.

This philosophy of heightened scrutiny has now been extended to original tax returns. The IRS has overhauled Form 6765 (Credit for Increasing Research Activities), introducing Section G. While completion of Section G is optional for the 2024 tax year, it becomes mandatory for tax years beginning in 2025 and 2026 for the vast majority of taxpayers. Section G requires taxpayers to report quantitative and qualitative data on a strict, business-component basis. Companies must list their significant business components, detail the wages associated with direct research, direct supervision, and direct support for each project, and classify expenditures meticulously. There are limited exceptions to Section G reporting for “Qualified Small Businesses” (QSBs) claiming the payroll tax offset, and taxpayers with total QREs equal to or less than $1.5 million and gross receipts under $50 million.

Federal Case Law Landscape

The IRS’s aggressive posture in audits has generated a wave of recent federal case law, providing critical guidance on how the courts interpret the four-part test. The trendline in recent years has been heavily weighted in favor of the government, forcing taxpayers to reconsider their substantiation methodologies.

In the landmark case Little Sandy Coal Co. v. Commissioner (7th Cir. 2023), the appellate court affirmed the Tax Court’s disallowance of a shipbuilding company’s R&D credit. The central issue was the “substantially all” requirement within the process of experimentation test. The taxpayer claimed expenses for first-in-class vessels but failed to adequately prove that at least 80 percent of the research activities for each vessel constituted elements of a process of experimentation. The court noted that the taxpayer relied on arbitrary, retroactive estimates of time spent by employees, rather than providing a principled, contemporaneous tracking system to differentiate experimental work from routine construction. Little Sandy Coal stands as a stark warning that high-level percentage estimates for employee wages are no longer defensible in court.

In Phoenix Design Group, Inc. v. Commissioner (2024), the Tax Court evaluated a firm specializing in the design of mechanical, electrical, and plumbing (MEP) systems for commercial buildings. The IRS disallowed the credits, and the court agreed, finding that the taxpayer failed to identify specific technological uncertainties at the outset of its projects. The court ruled that engaging in routine engineering design using established industry standards and codes, even if the final layout is unique to a specific building, does not equate to a “process of experimentation.” The knowledge required to perform the design was already available to the taxpayer’s professionals, meaning there was no true scientific discovery occurring.

Similarly, in Meyer, Borgman & Johnson, Inc. v. Commissioner (8th Cir. 2024), an appellate court upheld the denial of credits to a structural engineering firm based on the “funded research” exclusion. The firm argued its payments were contingent on the success of its research because it had to meet specific building codes. However, the court found that standard contractual requirements to provide a functional design do not equate to bearing the financial risk of technological failure under Section 41.

Conversely, taxpayers have achieved occasional victories regarding the definition of innovation. In Suder v. Commissioner (2014), the Tax Court affirmed that a business developing telephone systems did not have to “reinvent the wheel” or achieve revolutionary breakthroughs to qualify; evolutionary improvements and resolving uncertainty regarding the method or appropriate design of a known technology satisfy the Section 174 test. The court also allowed the allocation of wages for C-suite executives (including the CEO) who provided direct supervision of R&D, provided there was credible documentary evidence, though it strictly reduced the allowable wage amount to what was deemed “reasonable” under the tax code.

Currently, the tax community is closely monitoring Park-Ohio Holdings Corp. v. United States, filed in the Northern District of Ohio in 2025. In this case, an automotive parts supplier is actively challenging the IRS’s stringent 2021 refund claim procedures. Park-Ohio argues that the IRS’s requirement for exhaustive detail violates the Administrative Procedure Act (APA) and contradicts decades of established case law (such as Burlington Northern Inc.) which held that a refund claim need only fairly apprise the IRS of the grounds for recovery. The outcome of this case could significantly impact how Mansfield manufacturers file their retroactive claims under the OBBBA.

The Ohio State R&D Investment Tax Credit Framework

While federal incentives lower the cost of capital on a national scale, state-level incentives dictate the geographic distribution of research facilities. The Ohio Research and Development Investment Tax Credit serves as a critical economic development tool, explicitly designed to incentivize corporations to physically locate their engineering, scientific, and testing personnel within Ohio’s borders.

Evolution from Franchise Tax to Commercial Activity Tax (CAT)

The architecture of the Ohio R&D tax credit has undergone significant transformations to align with the state’s broader tax philosophy. Originally designed to offset the Corporation Franchise Tax, the credit was transitioned to offset the Ohio Commercial Activity Tax (CAT) following the phase-out of the franchise tax initiated by House Bill 66 in 2005. The CAT is a gross receipts tax levied on businesses operating in Ohio, meaning it is assessed on revenue rather than net income. Because a company must pay the CAT regardless of its profitability, the nonrefundable R&D tax credit represents a highly valuable mechanism for reducing direct overhead costs for research-intensive manufacturers. A parallel provision under ORC Section 5726.56 provides a similar credit for financial institutions subject to the Financial Institutions Tax (FIT).

Eligibility and Calculation Methodology

Authorized under Ohio Revised Code (ORC) Section 5751.51, the Ohio credit legally “piggybacks” on the federal definition of “Qualified Research Expenses” (QREs) found in IRC Section 41. Therefore, an activity must first pass the federal four-part test to even be considered in Ohio. However, the Ohio Department of Taxation (ODT) enforces a strict jurisdictional limitation: the expenses must be incurred physically within the state of Ohio.

• Wages: W-2 remuneration paid to employees for directly performing, directly supervising, or directly supporting qualified research. To qualify for the Ohio credit, these employees must be performing these tasks within Ohio facilities.
• Supplies: Tangible personal property (excluding land, buildings, or depreciable equipment) consumed or destroyed directly in the experimental process within the state (e.g., prototype materials, testing chemicals).
• Contract Research: 65 percent of amounts paid to third-party contractors for research performed on the taxpayer’s behalf, provided the third-party research is conducted physically in Ohio.
• Computer Rental: Costs for leased computing equipment or cloud-based server time used exclusively in the conduct of qualified research within the state.

The financial calculation of the credit is mathematically defined by ORC 5751.51(B)(1) as a 7 percent credit on the excess of the current year’s Ohio QREs over a specific base amount. The base amount is calculated as the taxpayer’s average annual Ohio QREs for the three preceding calendar years.

This formula is inherently designed to reward incremental investment. If a company’s research spending in Ohio remains stagnant or decreases compared to its three-year historical average, no credit is generated for that tax year. This structure forces companies to continuously increase their R&D budgets or wait for the rolling three-year average to reset downward. Conversely, if a company is entirely new to Ohio—or is a newly formed startup with no prior QRE history—the base amount is treated as zero. In such scenarios, the 7 percent credit applies to the entirety of the first year’s qualified spend, offering a massive incentive for relocation or initial scaling. Any credit generated that exceeds the taxpayer’s current CAT liability may be carried forward for up to seven subsequent tax years.

Legislative Updates: House Bill

The Ohio General Assembly has tightened the administrative oversight of the credit. The recent biennial budget, House Bill 33 (enacted in 2023), implemented crucial amendments to ORC 5751.51 that significantly altered compliance strategies. First, the legislation explicitly granted the Tax Commissioner the authority to audit representative samples of a taxpayer’s QREs and issue assessments based on those statistical samples. This codified an aggressive audit posture by the ODT.

More fundamentally, HB 33 mandated that combined and consolidated taxpayer groups must calculate the R&D credit on a strict “member-by-member” basis for tax periods beginning on or after January 1, 2024. Previously, holding companies could aggregate the QREs of all their subsidiaries. Under the new member-by-member rule, each individual legal entity within a corporate group must track its own Ohio QREs and establish its own independent three-year historical base. This prevents multi-entity conglomerates from artificially generating credits by offsetting a decline in R&D spending at a mature manufacturing subsidiary with a spike in spending at a newly acquired tech subsidiary. Each entity must demonstrate its own incremental growth to justify its portion of the 7 percent credit.

Ohio Board of Tax Appeals (BTA) Jurisprudence

The Ohio Board of Tax Appeals (BTA) and the Ohio Supreme Court handle disputes between taxpayers and the ODT. State jurisprudence demonstrates a rigid, unforgiving adherence to statutory language and procedural requirements, placing a heavy burden on taxpayers.

In Nestle R&D Center, Inc. v. Levin (2009), the Ohio Supreme Court engaged in a complex review of statute of limitations triggers for tax credit refunds. Nestle had filed for a refund to claim a job creation credit after receiving delayed certification from a state agency. The BTA initially ruled the statute of limitations had expired, but the Supreme Court ultimately reversed, highlighting the intense procedural friction taxpayers encounter when seeking state credits. Similarly, in International Paper Company v. Testa (2016), the court evaluated a dispute over $17 million in corporate tax credits related to Net Operating Losses (NOLs) during the transition from the franchise tax to the CAT. The litigation hinged on whether the Tax Commissioner had missed a statutory deadline by entering a journal entry but delaying the mailing of the notice. These cases underscore that in Ohio, minor technical or procedural missteps can void millions of dollars in valid tax attributes.

Substantively, the ODT routinely denies credits when taxpayers fail the Business Component Test by confusing standard regulatory compliance with genuine technological experimentation. Administrative determinations have shown that modifying standard commercial systems (like fire sprinklers or HVAC ductwork) to fit a new building layout does not qualify, as it relies on existing engineering parameters rather than resolving technical uncertainty. Consequently, taxpayers claiming the Ohio R&D credit must maintain robust documentation linking their local expenses to federal definitions of experimental risk.

Mansfield, Ohio: Five Industry Case Studies in R&D Tax Credit Eligibility

Mansfield’s modern economy has successfully transitioned from early 20th-century appliance manufacturing into highly specialized, technical sectors. The following five case studies dissect the historical origins of these specific industries within Mansfield and provide a detailed analysis of how their contemporary operations align with the rigorous requirements of federal and state R&D tax credit laws.

Case Study: Advanced Pump Manufacturing and Fluid Dynamics (The Gorman-Rupp Company)

Historical Development in Mansfield: The pump manufacturing industry in Mansfield is inextricably linked to the founding of The Gorman-Rupp Company. In 1933, during the depths of the Great Depression, two unemployed engineers, J.C. Gorman and Herb Rupp, pooled $1,500 and began working in a barn on the outskirts of Mansfield. They sought to solve a persistent engineering problem: the frequent clogging of existing centrifugal pumps used in infrastructure projects. Their simplified, self-priming, non-clogging pump design vastly outperformed competitors, and the company quickly secured municipal and industrial contracts.

Mansfield provided the ideal ecosystem for Gorman-Rupp to scale. The city’s strategic location along major rail lines facilitated nationwide distribution, while a local workforce already highly skilled in heavy metal casting—developed over decades working in the city’s iron stove foundries and at the Ohio Brass Company—provided the necessary metallurgical labor. By World War II, the company was heavily contracted by the U.S. military, cementing its status as an industry leader. In the 1950s, the company diversified by creating the Gorman-Rupp Industries (GRI) division in nearby Bellville to focus on smaller, non-corrosive centrifugal pumps for the booming home appliance market, leveraging Mansfield’s existing appliance supply chain. Today, operating out of an 825,000-square-foot facility in Mansfield, Gorman-Rupp remains a global titan in fluid movement technology, producing over 4,000 pump models.

R&D Tax Credit Eligibility Analysis: Modern pump manufacturing involves highly complex fluid dynamics, metallurgy, and mechanical engineering, making it a prime candidate for R&D tax credits.

• Section 174 & Technological Nature: The development of a new line of self-priming centrifugal pumps designed to handle highly abrasive and corrosive industrial wastewater relies fundamentally on the principles of physics (fluid dynamics) and materials engineering.
• Elimination of Uncertainty: At the outset of the design phase, the engineering team faces technological uncertainty regarding the optimal impeller geometry and volute casing angles required to achieve a specific high-pressure head without inducing cavitation, vibration, or premature chemical degradation of the internal components.
• Business Component: The new industrial pump line itself is the business component, intended for commercial sale to water treatment facilities.
• Process of Experimentation: To resolve the design uncertainty, engineers in Mansfield would utilize Computational Fluid Dynamics (CFD) software to model various flow scenarios. Following CAD simulations, they would cast physical prototypes using experimental alloys. These prototypes would be subjected to rigorous testing in their on-site hydrometric labs, empirically measuring vibration, flow attenuation, thermal cycling, and efficiency degradation over time.
• Credit Application: The wages of the Mansfield-based mechanical engineers designing the impellers, the cost of the raw materials (specialty alloys) used to cast the failed prototypes, and the depreciation of the specific testing supplies would all qualify as QREs for the Federal IRC 41 credit. Because this testing physically occurs at the Mansfield headquarters, these exact costs serve as the foundation for the Ohio ORC 5751.51 CAT credit calculation, generating a 7% nonrefundable offset against state taxes.

Case Study: Polymer Science and Advanced Flexible Packaging (Charter Next Generation)

Historical Development in Mansfield: While Akron, Ohio, is historically recognized as the “rubber capital of the world,” the broader Northeast Ohio region, including Richland County, has evolved into a massive, diversified polymer and materials science cluster comprising nearly 1,000 companies. This regional dominance is heavily driven by geographical and geological advantages: proximity to the Utica and Marcellus Shale plays provides an abundant and cost-effective supply of Natural Gas Liquids (NGLs), which are the fundamental chemical feedstocks for plastics and polymers. Furthermore, access to top-tier polymer engineering talent from the University of Akron and Case Western Reserve University provides the necessary human capital.

In Mansfield, this industry is anchored by Charter Next Generation (CNG). CNG’s presence in the area expanded significantly following the 2020 merger between Wisconsin-based Charter NEX and Lexington/Mansfield-based Next Generation Films (a company founded locally in 1994). Recognizing the logistical strength of the I-71 corridor and the local polymer talent pool, CNG has continuously invested in the region. In 2025, CNG announced a $106 million expansion, constructing a 157,000-square-foot addition to its Lexington campus and adding multiple new extrusion lines in nearby Ontario to produce highly engineered specialty films for food, medical, and industrial packaging.

R&D Tax Credit Eligibility Analysis:

The creation of advanced polymer films is a continuous exercise in chemical engineering and materials science, perfectly aligned with R&D definitions.

• Section 174 & Technological Nature: Developing a new 9-layer machine-direction orientation (MDO) film that provides high-barrier protection but remains fully recyclable (a mono-material structure) relies entirely on the hard sciences of chemistry and polymer engineering.
• Elimination of Uncertainty: The company faces immense technological uncertainty regarding the exact resin blending ratios, extrusion temperatures, and cooling rates required to bond nine distinct microscopic layers of polyethylene without causing delamination, while simultaneously maintaining an oxygen transmission rate (OTR) low enough to extend the shelf life of perishable food.
• Business Component: The specific 9-layer recycle-ready MDO film structure is the new product held for commercial sale to consumer packaged goods companies.
• Process of Experimentation: The R&D team in Mansfield would conduct systematic trial-and-error runs on their pilot extrusion lines. They would test different thermal profiles, cooling web parameters, and proprietary resin combinations (such as integrating post-consumer recycled content or voiding agents). Physical samples of the film would then be sent to the quality assurance lab to undergo tensile strength testing, puncture resistance testing, and OTR analysis. Failed batches would result in iterative adjustments to the chemical formulation.
• Credit Application: Because these highly experimental extrusion runs and lab analyses occur at the Mansfield/Lexington campus, the wages of the polymer scientists and the cost of the experimental resins and polymers consumed and destroyed during the testing phases qualify as Ohio QREs. These costs generate the 7% credit against CNG’s Ohio CAT liability, effectively subsidizing their regional expansion.

Case Study: Automotive Component Engineering and Fabrication (Newman Technology)

Historical Development in Mansfield: Ohio is currently the second-largest automotive manufacturing state in the U.S., supporting a massive, interconnected end-to-end supply chain. Mansfield’s strategic location along the Interstate 71 corridor perfectly positions it between major OEM assembly plants in central Ohio (such as Honda in Marysville) and the heavy steel producers along Lake Erie in the north. Capitalizing on this logistical advantage and the region’s multi-generational expertise in metal fabrication, Sankei Giken Kogyo established its North American subsidiary, Newman Technology Inc., in Mansfield in September 1987.

Beginning with a modest 100,000-square-foot footprint on Newman Street, the company quickly expanded and relocated to a massive campus on Cairns Road in 1989. Newman Technology focused on becoming a premier Tier 1 supplier, specializing in complex metal stamping, tube bending, and welding for exhaust systems, door sash systems, and exterior trim. To maintain its competitive edge in an industry demanding constant lightweighting and efficiency improvements, Newman established a dedicated, full-scale R&D center adjacent to its Mansfield manufacturing facility in 2008. The company recently announced a $74 million expansion to invest in new stamping press technology, securing its future in the region.

R&D Tax Credit Eligibility Analysis:

Automotive component manufacturing demands relentless innovation to meet stringent OEM specifications for lightweighting, acoustics, and emissions.

• Section 174 & Technological Nature: Designing a new, lightweight, high-performance exhaust system for a next-generation hybrid vehicle relies on metallurgy, acoustics, and mechanical engineering.
• Elimination of Uncertainty: Newman engineers face capability and methodology uncertainty regarding whether they can utilize high-strength steel or aluminum to reduce the wall thickness of the exhaust tubing by 15 percent (to save weight) without compromising the structural integrity of the welds or altering the acoustic sound profile specifically requested by the OEM.
• Business Component: The specific hybrid vehicle exhaust assembly.
• Process of Experimentation: Utilizing their Mansfield R&D center, engineers translate CAD designs into physical reality. Prototype technicians employ in-house CNC tube bending, hydroforming, and advanced laser welding to build highly accurate prototype exhaust systems. These prototypes are then mounted on dynamometers and subjected to rigorous physical testing, including exhaust flow and attenuation testing, severe thermal cycle testing (heating the metal to extreme exhaust temperatures and cooling it rapidly), and highly calibrated vibration analysis.
• Credit Application: The wages of the prototype technicians, design engineers, and validation analysts at the Mansfield R&D facility, along with the raw materials (high-strength steel tubing) consumed during the destructive thermal and vibration testing, are eligible for federal and state R&D credits. Crucially, under the strict precedent established in Little Sandy Coal, Newman Technology must utilize precise, contemporaneous time-tracking to prove to the IRS that at least 80 percent of these specific project hours were dedicated to this experimental testing, rather than routine commercial production or generic tool setup.

Case Study: Specialty Flat-Rolled Steel Production (Cleveland-Cliffs Mansfield Works)

Historical Development in Mansfield: The heavy steel industry in Mansfield is a direct product of 19th-century geography and infrastructure. Following the discovery of vast iron ore deposits in the Lake Superior region of Michigan in 1844, and the opening of the Sault Ste. Marie Canal in 1855, bulk ore could be shipped cheaply via freighter across the Great Lakes to ports like Cleveland. From Cleveland, expanding railroad networks transported the ore south into Ohio, where it intersected with the abundant, high-energy coal supplies mined in the Appalachian basin. Mansfield, situated precisely on these critical rail intersections, became a highly advantageous location for heavy metal processing and steelmaking.

The specific site of the current Cleveland-Cliffs Mansfield Works traces its industrial lineage back to the 1920s with the establishment of the Mansfield Sheet and Tin Plate Company. Over decades of intense corporate consolidation and changing market demands (operating variously as Empire Detroit, Cyclops, Armco, and AK Steel), the massive facility evolved from basic carbon steelmaking into a highly specialized, niche producer of advanced alloys. In 2020, Cleveland-Cliffs acquired the facility, integrating it into its expansive North American automotive supply network. Today, the Mansfield Works operates a massive melt shop with electric arc furnaces (EAF) and a specialized thin-slab continuous caster, focusing on high-chrome ferritic and martensitic stainless steels.

R&D Tax Credit Eligibility Analysis:

Metallurgical innovation is incredibly capital-intensive and inherently experimental, aligning perfectly with legislative intent for R&D tax relief.

• Section 174 & Technological Nature: Developing a new, proprietary grade of 400-series ferritic stainless steel with enhanced oxidation resistance for next-generation automotive catalytic converters relies entirely on the hard science of metallurgy and thermodynamics.
• Elimination of Uncertainty: The metallurgical engineers are uncertain of the precise combination of chromium, carbon, and trace elements, as well as the exact thermal cooling profile required in the argon-oxygen decarbonization unit and the thin-slab caster, to achieve the desired microscopic grain structure without causing material embrittlement during cold-rolling.
• Business Component: The newly formulated grade of stainless steel coil is the product held for sale.
• Process of Experimentation: At the Mansfield Works, metallurgists would conduct experimental “heats” (multi-ton batches of molten steel) in the EAF, systematically altering the alloy composition. They would process the metal through the continuous caster and then subject samples of the resulting steel to destructive testing. This involves analyzing tensile strength, yield strength, and corrosive resistance under extreme heat via electron microscopy.
• Credit Application: Because steelmaking utilizes massive, continuous equipment, distinguishing between “experimental heats” and standard commercial production is a critical audit risk. Under IRC Section 41(d)(4), research conducted after commercial production begins is strictly excluded. Therefore, Cleveland-Cliffs must aggressively document the exact point at which the experimental alloys pass validation. The immense energy costs (utilities) of running experimental batches through the EAF, combined with the wages of the metallurgists and the raw alloys consumed prior to commercial validation, represent massive QREs eligible for both federal and Ohio tax offsets.

Case Study: Electrical Sensing and Control Technologies (Sensience, formerly Therm-O-Disc)

Historical Development in Mansfield: Mansfield’s dominance in the electrical and appliance components sector was heavily catalyzed by Westinghouse Electric Corporation’s arrival in 1918. Over the ensuing decades, Westinghouse transformed the city into an epicenter of electrical engineering and home appliance innovation, culminating in the 1934 construction of the famous “Electric Home of Tomorrow” on Andover Road to showcase cutting-edge domestic technology. This immense concentration of local engineering talent inevitably spawned entrepreneurial spin-offs.

In 1947, leveraging the city’s technical expertise, the Bolesky brothers founded Therm-O-Disc in a Mansfield garage. They invented an ingenious bimetal disc thermostat capable of snapping instantly upon reaching a specific temperature. Originally designed to solve overheating issues in early electric blankets, the technology was revolutionary. Recognizing the value of this safety component, Emerson Electric acquired the company in 1968, growing it into a global powerhouse for safety-critical sensors, thermal cutoffs, and hermetic seals used in appliances, HVAC, and aerospace. In 2022, the company was acquired by a private equity firm and became an independent entity, rebranding as Sensience. While the company transitioned its corporate headquarters to Westerville, Ohio in 2024 to accommodate growth, its historical foundation, deep product legacy, and core engineering capabilities were built entirely within the Mansfield industrial ecosystem.

R&D Tax Credit Eligibility Analysis:

The design of safety-critical sensors requires rigorous, highly regulated scientific validation, fitting squarely within the R&D tax credit definitions.

• Section 174 & Technological Nature: The development of a novel sensing solution to detect A2L (mildly flammable, low-environmental-impact) refrigerants for commercial HVAC systems relies on electrical engineering, thermodynamics, and physical chemistry.
• Elimination of Uncertainty: The engineering team is uncertain of the precise semiconductor architecture and housing design required to accurately detect microscopic leaks of A2L gases without triggering false positives caused by ambient humidity, dust, or extreme temperature fluctuations within the HVAC unit.
• Business Component: The new A2L-compatible gas sensor unit.
• Process of Experimentation: Engineers would design multiple iterations of the sensor circuit and its hermetic glass-to-metal housing. They would construct physical prototypes and place them in advanced environmental testing chambers. The process involves systematically exposing the sensors to varying concentrations of A2L gases, extreme thermal cycles, and high humidity over thousands of hours to empirically evaluate reliability and failure rates. Iterative adjustments to the circuit logic or housing seal would be made based on failure data.
• Credit Application: The labor costs of the electrical engineers designing the circuits, the material costs for building the prototypes, and the depreciation of the specialized environmental test chambers utilized prior to achieving commercial UL-certification are quintessential QREs. If this specific, iterative testing was conducted in their historical Ohio labs, it qualifies heavily toward the state’s 7% CAT investment credit, demonstrating how legacy industries continuously fund modern technological pivots.

Strategic Substantiation and Audit Defense for Mansfield Manufacturers

For manufacturers operating in Mansfield, identifying qualifying engineering activities is only the first step in the lifecycle of an R&D tax credit claim. Surviving rigorous examinations by the IRS and the Ohio Department of Taxation requires bulletproof, contemporaneous substantiation. The prevailing regulatory environment is increasingly hostile to undocumented claims.

Federal jurisprudence, heavily shaped by recent cases like Little Sandy Coal and Phoenix Design Group, mandates that taxpayers move entirely away from retrospective, interview-based estimations of employee time. The courts have made it clear that high-level percentage allocations are insufficient. Furthermore, to comply with the IRS’s stringent new Form 6765 Section G reporting requirements (mandatory in 2026), companies must be able to link specific employee hours directly to distinct, individually named business components, clearly articulating the technological uncertainty addressed for each specific project.

In Ohio, the evidentiary burden is arguably even higher due to jurisdictional requirements. Taxpayers must not only prove the experimental nature of the work to satisfy the federal baseline but must also provide geographical proof demonstrating that the exact QREs were consumed within state lines. During a BTA appeal or ODT audit, the state will demand localized payroll records proving the engineer sat in a Mansfield office, facility utility bills proving the prototype was built in Ohio, and raw material delivery manifests verifying zip codes. By integrating R&D tax compliance directly into their daily project management and engineering software—requiring engineers to tag their time to specific “experimental” project codes at the point of origin—Mansfield manufacturing firms can proactively defend against these audits and confidently leverage these multi-million-dollar federal and state incentives to fund their continued industrial evolution.

Final Thoughts

Mansfield, Ohio, serves as a powerful microcosm of American industrial resilience. By transitioning from 19th-century foundry work and 20th-century appliance manufacturing into highly specialized, technologically advanced sectors like precision polymers, specialty steel, lightweight automotive components, and complex fluid dynamics, the region has maintained its economic relevance.

The United States Federal R&D Tax Credit and the Ohio Research and Development Investment Tax Credit are vital financial mechanisms that support this continuous transition. While the legislative and administrative landscape—marked by the favorable passage of the OBBBA but counterbalanced by aggressive IRS reporting requirements and strict Ohio BTA jurisprudence—presents complex compliance challenges, the rewards remain substantial. By rigorously applying the four-part test to their daily engineering activities and maintaining robust, contemporaneous documentation, Mansfield’s manufacturers can systematically lower their cost of capital, reinvest in domestic talent, and secure the region’s technological leadership for the future.

The information in this study is current as of the date of publication, and is provided for information purposes only. Although we do our absolute best in our attempts to avoid errors, we cannot guarantee that errors are not present in this study. Please contact a Swanson Reed member of staff, or seek independent legal advice to further understand how this information applies to your circumstances.