Digital Marketing Companies Are Missing Out on R&D Tax Credits

digital marketing 1433427 1280 e1503557498391

While research and development activities are generally equated with technical industries, you may be surprised to learn that traditionally non-technical industries may be eligible for R&D tax credits. Digital marketing and media agencies, advertisers and publishers must invest in research and development to survive in a dynamic and ever-increasing competitive environment. 

Software development has become the norm for these industries, who have seen a shift from traditional to digital media. While Google and Facebook are the largest players in programmatic marketing technology, companies of all sizes are investing in marketing R&D and hiring teams of technical staff like software developers, data engineers and marketing statisticians. Furthermore, user experience design and strong search engine optimization are now critical to gaining an edge over the competition.

Today, firms are focusing on marketing that relies on numbers and science, rather than vague estimates. Clients continually want better metrics and performance, creating a need for programs that gather and analyse data. Companies making innovative technical improvements to web technology, software development or data analysis may be eligible for R&D tax credits. As well as the front end development required for firms providing business statistics to their clients, APIs often need to be developed in order to provide real-time data metrics. Other qualifying activities include developing algorithms for advertising campaigns, developing or integrating CRM software and coding new features to tackle difficult business challenges. 

Keep in mind that work in the arts, humanities and social sciences is not eligible as research and development. Research must be technical or scientific in nature. For instance, graphic design and copywriting are not eligible.

R&D tax credits generally equal 15 percent or more of eligible expenditure. Qualified activities must meeting four criteria.

Activities must:

  • Be intended to improve or develop the performance, functionality or quality of a product, technology or service.
  • Involve experimentation.
  • Be technological or scientific in nature.
  • Attempt to eliminate an uncertainty.

See whether you could be eligible for the R&D Tax Credit by taking our online eligibility test. If you have any questions, please don’t hesitate to contact our office.

R&D Tax Credit for Software Companies

code 1839406 1280

Research and development (R&D) tax credits can make a significant difference to a company’s tax return, with the US government providing billions of dollars worth of credits annually. Despite the financial benefits, many software companies are not taking advantage of the credit, as they believe that their work does not qualify.

While this may have been the case in the past, changes to the PATH Act of 2015 expanded eligibility to include small and medium sized businesses who may not have previously qualified, allowing them to offset their regular and alternative minimum tax liabilities and use the credit against payroll taxes. Prior to these changes, many tech start-ups could not claim the credit as they were not yet profitable. The Startup Provision amendment acknowledged the fact that start-ups are some of the country’s most innovative companies. Further changes to the PATH Act also made the credit permanent, so that innovative companies could continue to invest in R&D with confidence.

Another incorrect assumption is that the software needs to be developed for commercial use. The R&D tax credit can be applicable to the development of improved internal business systems. Any applied science and technology that is used to solve a practical business problem can be considered qualified R&D. This means that the software should be new to the business, but does not need to be groundbreaking. Improvements to a program, new iterations, coding solutions and developing algorithms can be considered eligible activities. The work does however need to differ from existing software and there needs to be substantial financial risk if the project proves to be unsuccessful.

Finally, it is also possible to claim for paid work. For government contracts, eligibility will depend on the terms of the contract. For instance, the contract must state that the work will only be paid for if successful, otherwise there is no financial risk to the company for the research.

It is a good idea to consult a tax advisor to determine your eligibility. Contacting Swanson Reed R&D Tax Advisors for a free assessment is a fantastic first step. They will guide you through the process, taking away any uncertainty or stress in claiming the R&D tax credit.

Fostering Innovation in the Energy Sector

solar panels 1794467 1280

Innovation helps to develop the economy, create jobs and improve our standard of living. In recent years, we have seen innovation hubs popping up all over the world. Innovation is not only created through research institutions but through experimental research and development activities in commercial environments. In fact, many experts cite collaboration between industry and researchers as crucial to successful implementation of innovative ideas. Building an environment that fosters innovation requires mindful effort on behalf of the government, academia and business.

Jon Creyts and Curtis Probst from the Rocky Mountain Institute recently wrote an article regarding innovation in the energy sector. They mentioned that America’s early success in clean energy was greatly influenced by research and development funding, which encouraged businesses to innovate in the sector and created incentives for greater risk-taking. Creyts and Probst believe that whilst stability is important for capital providers, a portion of their financial system must provide adequate risk capital to support higher risk ventures.

Furthermore, although laws and regulations have an important place, they can increase business costs and stifle innovation at the same time. Creyts and Probst argue that innovative technologies (such as rooftop solar power) can reduce the costs of business as well as the negative effects of energy production on the environment, and therefore regulators need to leave room for experimentation.

It is imperative that today’s energy companies keep up with the rapidly changing sector. Many new technologies are emerging and challenging current energy production methods. This change will affect all industries as economies rely heavily on energy usage.

To assist with the transition, federal and state R&D tax credits are available for energy companies investing in qualified innovative activities. Companies can find out whether their project is eligible for the credit by contacting Swanson Reed R&D Tax Advisors. Tax incentives and disincentives allow policies to favor positive outcomes such as clean energy and discourage less desirable outcomes such as the burning of fossil fuels. Incentives can help to increase the speed that clean technology is adopted and allow for further research and development to be undertaken in order to improve existing technologies. By investing in research and development for clean energy, governments can save significant amounts of money that would otherwise be spent on conventional energy infrastructure.

California company spends US$24 Million on R&D

panel 2562240 960 720

SunPower is a US high-efficiency PV cell and module producer. The company has recently invested approximately US$25 million over the past 12-months towards a research and development and pilot line facility located at its headquarters in San Jose, California.

The facility includes several high-volume production-sized manufacturing tools and automation, and specialized testing equipment, designed to support its next generation of high efficiency N-type monocrystalline IBC (Interdigitated Back Contact) solar cells and modules, which are being designed with greater emphasis on lower cost manufacturing.

SunPower places significant emphasis on producing the world’s best solar panels with technology developed and tested in Silicon Valley. In addition to this, SunPower also facilitates significant job creation, capital investment opportunities from equipment manufacturers and deals, and more affordable solar energy options for homes and businesses worldwide.

SunPower had the second highest expenditure from a basket of module manufacturers analysed in 2016, investing US$116.1 million, which is up from $99 million in 2015. Although the company’s R&D staffing levels did slightly fall from 449 in 2015 to 406 in 2016, the job opportunities to be created from the new R&D facility will significantly increase this number once again.

An R&D Tax credit can significantly support a business to further develop its research. If you would like to find out more about R&D tax and whether your company may qualify for an R&D tax credit, contact a Swanson Reed R&D tax specialist today, we look forward to speaking with you.

Generac Ramp Up R&D Spending

electricity 1854093 1280

Generac Power Systems have been steadily increasing their R&D spending over the past decade. The company spent $9.9 million on R&D in 2008 and by 2016, they were investing $37.5 million per annum. Aaron Jagdfeld, President and CEO said that investing in R&D would “quicken the pace of our product development cycles, which is critical to remaining at the forefront of the industries we serve.”

The company plans to invest $73 million in its Wisconsin headquarters and manufacturing facilities over the next five years in order to “realize efficiencies… that will drive continued innovation.” The funds will be used to expand corporate headquarters, production operations and research and development activities to advance Generac’s engineering and major product development. The improvements will allow prototypes to be made and tested more quickly.

It is expected that around 400 jobs will be created in Wisconsin by the project, adding to the current workforce of 2,000. The Wisconsin Economic Development Corp (WEDC) will support the project with up to $10 million in enterprise zone tax credits through to 2021. The tax credits awarded will depend on the number of jobs created, amount spent on training employees and capital spent on the expansion.

Mark Hogan, CEO of the WEDC commented that “In addition to the jobs created by this project, this expansion will enable Generac to usher in a new era of innovation and develop products to reach new markets and position the company for future growth.”

Generac manufacture power products including residential, commercial and industrial generators. Jagdfeld has stated the company is looking to diversify its product range and will focus on growing its natural gas business. Over recent years, the company has expanded through global acquisitions in Germany, Mexico and Italy.

The Wisconsin Credit for Increasing Research Expenses is available for companies undertaking eligible R&D activities, and can be reinvested into growing the business. If you would like to discuss R&D tax credits for your business, contact Swanson Reed R&D Tax Advisors today.

The Best and Worst CyberStates for 2017

cpu 447483 1280

The Computing Technology Industry Association (CompTIA) is a leading not-for-profit technology association. Their 18th edition of the Cyberstates report aims to provide a representation of the size and scope of the US tech sector. The report analyses the industry and workforce by state and uses metrics such as tech patents, venture capital funding, business establishments and job postings.

Here is a summary of the results by state:

Tech Industry Employment

There were around 6.9 million US tech workers in 2016, up from 6.7 million in 2015.

Top 5

  1. California
  2. Texas
  3. New York
  4. Florida
  5. Massachusetts

Bottom 5

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. North Dakota
  5. Montana

Tech Patents Granted

Top 5

  1. California
  2. Texas
  3. Washington
  4. New York
  5. Massachusetts

Bottom 5

  1. Alaska
  2. South Dakota
  3. Mississippi
  4. Montana
  5. West Virginia

Innovation Score Per Capita

The number of tech startups and new tech establishments grew to 36,508 in 2015. Many were IT services covering data processing, hosting and web search portals.

Top 5

  1. California
  2. Massachusetts
  3. Washington
  4. Colorado
  5. New Jersey

Bottom 5

  1. West Virginia
  2. Mississippi
  3. Arkansas
  4. South Dakota
  5. Ohklahoma

Tech Gross State Produce (GSP) As A Percent of Total State Product (in billions)

Top 5

  1. Oregon
  2. Washington
  3. Massachusetts
  4. California
  5. Colorado

Bottom 5

  1. Wyoming
  2. Louisiana
  3. Oklahoma
  4. Mississippi
  5. West Virginia

Average Tech Industry Wages Rank

The average tech sector wage was 105 percent higher than the average national wage of $53,130 in 2016.

Top 5

  1. California
  2. Washington
  3. Massachusetts
  4. New Jersey
  5. New York

Bottom 5

  1. South Dakota
  2. Mississippi
  3. Wyoming
  4. West Virginia
  5. Montana

The full report is available at Cyberstates.

US tech companies undertaking qualified activities can apply for the state and/or federal R&D tax credit. To check whether your projects meet the necessary criteria, contact a Swanson Reed representative today.

2017 R&D Awards Finalists Announced

cup 1613315 960 720

The 2017 R&D finalists have been announced today by the R&D Awards Committee and R&D magazine. This year will mark the 55th annual R&D 100 Awards program which honors the 100 most innovative technologies of the past year. The finalists were selected by an independent panel of more than 50 judges representing R&D leaders in a variety of fields.

The R&D 100 Awards are considered the most globally prestigious recognition of invention and innovation. The awards represent 100 of the top innovations across the categories: Analytical/Test, IT/Electrical, Mechanical Devices/Materials, Process/Prototyping, and software/Services.

The committee will also honor excellence with four special recognition awards to be presented, which will be from the categories; Market Distributor services, Market Distributor Products, Corporate Social Responsibility, and Green Tech.

This year the awards will be held in Orlando and they will be expanded to include the R&D 100 Conference, where industry professionals will have the opportunity to learn first-hand about critical advances in technology and science.

The R&D 100 Awards program was first established in 1963 and has since been an integral part of the R&D Magazine brand. Past winners have consisted of sophisticated testing equipment, innovative new materials, distributive chemistry breakthrough, new biomedical products, breakthrough consumer products, and new industry technologies, academia, and government.

Companies creating new knowledge on a global scale can apply for a federal or state R&D Tax Credit. To find out more about R&D and to assess your company’s eligibility, contact a Swanson Reed R&D Tax Advisor today. We look forward to speaking with you and guiding you through the R&D process.

New Biotech Institute To Develop Organs For Transplant

organs

The Advanced Regenerative Manufacturing Institute (ARMI) has just opened in Manchester and has the potential to transform the region into a flourishing tech hub for healthcare. The institute will work to develop transplant organs and tissues grown from scratch for soldiers and veterans who have lost limbs in combat, as well for as other patients, such as those with renal failure.

BioFabUSA is ARMI’s first large project, a public-private partnership designed to build the technologies necessary to create human organ factories. The goal is to one day mass-produce human organs for those in need of a transplant.

President and CEO of the Greater Manchester Chamber, Michael Skelton, believes that the project could be transformative for the city. Jerry McGinn from the Department of Defense commented that “Many of the challenges we face in the department are in areas that are either adjacent to the battlefield or not on the battlefield itself and that’s why this institute is so important.”

ARMI will be led by DEKA Research and Development Corp, Dartmouth-Hitchcock and the University of New Hampshire. The institute will bring jobs and draw talented researchers to work on the cutting-edge technology.

Founder Dean Kamen said that “This is one of those rare places where the technology that we’re developing is one that is going to give you a better outcome, but it also lowers the cost,” referring to the replacement of a failing kidney, where the patient would no longer need dialysis.

The Department of Defense will invest $80 million into the project over five years, with another $200 million coming from private investors, including universities and medical research institutions.

Governor Chris Sununu said that the best thing that New Hampshire can do is provide an atmosphere that makes it easy for businesses to come in and partner, “Because that’s what this is: a public-private partnership.”

Advanced Solutions are already considering moving their life sciences lab to New Hampshire. CEO Michael Golway presented the BioAssemblyBot (BAB) at ARMI, which is a 3D printer that has the ability to build tissue.

Companies creating new knowledge on a global scale can apply for the federal and New Hampshire R&D tax credit. Companies who are unsure about whether their projects qualify can contact Swanson Reed R&D Tax Advisors to assess their eligibility.

Self-driving car R&D site in Michigan

speed 1249610 960 720 1

Foxconn Technology Group, which is best known as an iPhone manufacturer, is planning a multi-billion dollar R&D site in Michigan, dedicated to developing self-driving cars.

This announcement came shortly after the company said it will build a $10 billion facility in Wisconsin that would make LCD displays and could generate as many as 13,000 jobs.

Foxconn founder, Terry Gou, says that automotive development in the US is still more advanced than in China. In addition to self-driving technology, Gou is also interested in artificial intelligence and deep learning technology.

While Foxconn is an established and successful company, it also has plenty of competition in Michigan with other automakers such as General Motors, Ford Motors and Chrysler also having their headquarters in Michigan. Due to this close competition it is essential to remain competitive in the market, therefore Foxconn establishing the following R&D center will greatly assist the company to remain at the forefront of the competition.

While Foxconn’s plans for the R&D facility seem promising, there is still some uncertainty as to whether they will come to fruition. Foxcomm have previously announced plans to build a $30 million facility in 2013, however these plans were never executed.

Now seems like a more urgent time than ever for Foxcomm to open their R&D center as Japanese car makers Mazda and Toyota have also announced a partnership to build a $1.6 billion plant close by. Additionally, American tech giants like Google parent company Alphabet and ride-hailing company Uber are also deep in the field.

Innovative automotive development in the US is taking off with several companies investing into developing similar advanced technologies. Investment into R&D allows for a company to distinguish itself from others that are pursuing similar projects, and this is what Foxconn is aiming to achieve.

For companies in Michigan that are investing into R&D, the State research and development tax credit is a valuable tool. If you would like to discuss the R&D Tax credit further, please contact a Swanson Reed’s R&D tax advisor today.

Manufacturing company expands R&D center in CA

berry 1239100 960 720

The organic flavor and ingredient manufacturer, Blue Pacific Flavors, has announced the opening of it’s expanded research and development laboratory, named the Flavor Creation and Culinary Innovation Center.

Blue Pacific develops natural, organic and organic compliant fruit and sweet flavors for a broad range of food applications. The expanded lab will handle all product development and flavor creation for the company’s global operations in the U.S and Asia.

The company’s initial space has been doubled to 3,100 square feet in the expansion and a total of $1.5M has been invested. The expanded R&D center aims to increase the company’s application, creation, sensory testing and compliance capabilities for natural and organic flavor and finished food development. It will consists of labs, quality assurance offices, quality control spaces, regulatory and product safety areas and space for new equipment.

The center is a collaborative space for Blue Pacific Flavors clients to create clean-label, plant-based, natural and organic food and beverage applications. The company’s vision was to build a world-class innovation center, which would be the core of the organization. This is a reflection of the food manufacturing renaissance taking place in Southern California and the company’s commitment to meet the needs of a growing organic flavors business.

The company has already hired a substantial amount of staff in regulatory and quality control and has plans to hire for additional positions in R&D for its next phase of investment.

An R&D Tax incentive can significantly support a business to further develop its research. To find out more about R&D and to determine whether your business is eligible for a tax credit, contact a Swanson Reed R&D Tax Advisor today.