Research and Development Tax Credit Opportunity- 3D Printing With Foam

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3D printers have come a long way and offer benefits that traditional manufacturers can’t. Companies have been exploring the potential of 3D printers, leading to research and development (R&D) tax credit opportunities.

3D printing gives industries the ability to manufacture custom products at a low cost. Material scientists at the Lawrence Livermore National Laboratory have researched 3D printing with foam materials, finding printed products work better than mass manufactured ones in terms of durability and performance. R&D tax credits are available to all industries investigating new technologies, such as 3D printed products.  For example automotive companies using 3D printed foam to create prototypes would be eligible to claim.

NASA has expressed an interest in the use of 3D printed foam, offering $100,00 to the University of West Virginia to research the material. The R&D Tax Credit is even more beneficial in this case, federal returns allow an additional 20% credit when research and development is conducted through a university.

If your company is experimenting with new products or technologies please contact a Swanson Reed R&D Tax Advisor today, so we can help maximize your claim.

Our Homes Could Be Heated From The Earth- Geothermal Startup Created in R&D Lab

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Dandelion Energy, Inc. is a geothermal startup that was created in Alphabet, the research and development (R&D) lab of Google’s parent company. Dandelion believes that it can lower Hudson Valley’s energy costs and decrease their carbon footprint.

Vice President of marketing Katie Ullmann has said that they have already scheduled the installation of the geothermal technology in a number of homes. The system “uses the earth to regulate the temperature of a home,” deriving 75% of the energy from the earth and the other 25% from electricity. Dandelion and Hudson Solar have partnered up, in hope that homes will be able to run on clean energy alone, with Hudson using solar to provide the remaining 25%.

The R&D Tax Credit is available to all industries where companies are developing new or improved products or services. Startups as well as large companies can claim up to 14% back for their R&D activities. Companies such as Dandelion and Hudson are eligible to benefit from these R&D credits.

If you would like to find out how your company could benefit from R&D Tax Credits, contact a Swanson Reed R&D Specialist today.

 

Increase in R&D Activities Prove to Aid in Automotive Lithium Ion Battery Market

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The automotive lithium ion battery market is showing steady growth, thanks in part to an increase in research and development (R&D) funds provided by the R&D Tax Credit.

Many countries are trying to lower their dependency on gas and diesel for transportation, and focus more on sustainable fuels. This has been driving companies to look to alternative sources of energy. However, until recently there has been little advance in battery technology due to high production costs and a limited availability of the rare materials required. But with the rise in popularity of electric cars, the global lithium ion battery market is expected to increase rapidly; and R&D credits are fueling their development.

Along with R&D tax credits, there are a number of other incentives that the government is providing for this sector. The Internal Revenue Service (IRS) are giving tax credits of $2,500-$7,000 per electric vehicle purchased in the United States. with some states also providing rebates (e.g. $2,500 in California, $1,000 in Delaware and $5,000 in Colorado) towards the purchase of an electric vehicle.

These government incentives and the growing consumer desire to use clean fuels will continue to drive the demand for electric vehicles; and subsequently the demand for improved lithium ion batteries. R&D credits will prove invaluable in helping companies overcome the high cost of developing and improving new battery technologies.

Although the electric car market is still in its infancy, the projected future looks very promising, thanks in part to R&D Tax Credits. If you would like to find out how your company could benefit from R&D Tax Credits, contact a Swanson Reed R&D Tax Advisor today for an assessment.

New Hampshire’s High-Tech Industry on The Rise With $7 Million In R&D Tax Credits

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New Hampshire Governor Chris Sununu has issued a statement saying that $700 million will be given out to 200 New Hampshire businesses in 2017, meeting 92.4% of the total requested dollar amount for each company. This wasn’t all done by the Governor, but with the help of the Republican leadership and the Legislature, as well as the Senator Jeb Bradley who increased the Research and Development (R&D) tax credit from $2 million in 2008 to $7 million in 2017.

The reason for increasing the R&D Tax Credit for New Hampshire is the small economy of this area. Although most businesses are SMEs, they are high-tech focused and would benefit greatly from the increased R&D credits.

Governor Chris Sununu believes that the change in the R&D Tax Credit will send out a message that New Hampshire is now “open for business.” He is hoping that this change will promote a business-friendly environment that will spark company growth and job creation, thereby benefiting everyone.

The New Hampshire Legislature enacted an R&D tax credit in 2007 for businesses that paid taxes to the state of New Hampshire. In 2007 the Legislature designated $1,000,000 to be available for the next five fiscal years. In 2013 that was changed and a new Bill was passed changing the amount to $2,000,000, which was subsequently increased to $7,000,000 in 2015 (effective as of July of 2017).

Sununu believes that R&D is key to driving the future investment of businesses in New Hampshire. If you would like to find out how your business could benefit from R&D tax credits, contact a Swanson Reed R&D Tax Advisor today.

R&D Tax Credit Boosts Growing Material Handling Industry

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The demand for material handling and logistics industry has had a continued upward trend in today’s global world. The need for global supply chains and distribution of goods through advanced technology has employed over 700,000 in the material handling market, according to recent figures, and consumption greater than $156 billion in the U.S. In 2013, business logistics accounted for 8% of the U.S.’s GDP. This growth could accelerate with the Research and Development (R&D) Tax Credit. With recent legislative changes, the credit can now be claimed by more businesses and includes more eligible supply costs; a change that may increase a business’ claim by up to ten times.

What qualifies as “research and development” for credit eligibility? There are a number of qualifying activities, including developing material handling systems, designing robotic systems, manufacturing motor systems, or developing overhead material handling solutions, to name a few. The R&D Tax Credit is permanent and many states also have a similar credit which can be added to the federal claim.

Previously, small and medium businesses were often ineligible to claim the R&D tax credit due to the alternative minimum tax (AMT). At the start of the 2016 tax year, the AMT barrier was removed allowing all businesses to benefit from the incentive. Other regulatory and legislative changes have expanded the credit further, allowing companies to be rewarded for innovative solutions such as solving a technical problem on a factory floor or improving a distribution process.

Design improvements through automated systems and innovative technologies can pay off for companies who take advantage of the R&D tax credit. A material handling company which improved designs to an existing industrial system received $596,000 through federal and state R&D credits. These incentives help encourage companies to invest in automated solutions and advance the material handling industry.

If you think your company’s innovative solutions or designs could qualify for the R&D Tax Credit, contact a Swanson Reed Tax Advisor for a free assessment.

 

Increased 3D Printing in STEM Initiatives Assisted by R&D Tax Credit

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Science, technology, engineering, and mathematics (STEM) initiatives have recently turned to 3D printing to build tools and equipment in response to the increasing demand for laboratory equipment. Tools are built faster and more cost-effective when created using 3D printers. The Research and Development (R&D) Tax Credit aids in this type of work by encouraging innovation.

The R&D Tax Credit, introduced in 1981, allows up to 13% credit for eligible spending on project and product innovations. Research qualifies by meeting the Four-Part-Test:

  1. New or improved products, processes, or software
  2. Technological in nature
  3. Elimination of uncertainty
  4. Process of experimentation

The R&D Tax Credit was made permanent by President Obama on December 18, 2015. Costs such as labor, supplies, testing, research expenses, and developing a patent are all eligible under the R&D Tax Credit. Startup businesses have an allowance of $250,000 per pay year in payroll taxes that they can use the credit against.

The vast array of products created through 3D printing have a direct benefit to STEM initiatives. These benefits range from materials including plastics, steel, copper, and ceramics, to equipment such as beakers, test tubes, pulleys, microscopes, and custom add-on components for equipment and instruments. As well developing an extensive range of products, there are also cost-saving benefits to 3D Printing. A recent study by the Public Library of Science found over 97% cost reductions using 3D printed optics equipment.

Scientists and engineers are also turning to open source models in which designs are shared for 3D printed lab equipment. The model originates from computer science where programmers made source code publicly available for use or modification from the original design. In 3D printing, exact replicas or modified designs are being created using this open source concept which promotes evolution and improvements along the way.

Scientists and engineers using 3D printing in innovation may be eligible for R&D Tax Credits. To find out if your project qualifies or to learn more about the program, contact a Swanson Reed Tax Advisor.

How to Get the Most Out of Your Research & Development Tax Credit

One of the many reasons why the United States is a global leader in science, technology, and innovation is the Research & Development Tax Credit offered by the US government. The program involves a series of tax credits that offer financial relief to companies that are on the cutting edge of technology. If your business is doing exactly that, then it is time to take full advantage of the research and development tax credit. Here are just a few ways to make the absolute most of those R and D tax credits so you can help your business innovate faster and take products to market more quickly.

1.  Gear Your Research to What Can Be Credited

While the tax credit program is robust, it does not extend to absolutely every kind of research and scientific inquiry. It focuses instead on a few major industries that can help change the world and innovate how we do things. To that effort, the absolute best and easiest way to make the most of the tax credits available is to ensure that your research is in the areas that are eligible.

What you can research is subject to guidelines, but how you do your research is also subject to certain guidelines. The government requires that all businesses taking advantage of the research and development tax credit must follow four key criteria: a clear and permitted purpose, an elimination of uncertainty in the research techniques, a detailed explanation of the research process, and a technological nature behind the research and discoveries. By sticking to the guidelines, you have a much better chance of getting the most out of your research, and your tax credits.

2.  Hire Professionals

You probably have accountants for your books so you can take advantage of every tax program you can. It’s a responsibility you have to your company to do so. The same approach should be taken with your research and development tax credit. Without professionals helping you discover the many facets of research and development tax credit, you could end up missing out on its full potential. That is why you should call up the professionals, like the talented financial professionals at Swanson Reed, to help you and your business maximize your research and development tax credit.

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3.  Think Ahead

One of the beautiful things about the research and development tax credit is that it provides you and your business with a stable, reliable source of financial relief. The tax credit is almost like a salary: a predictable income source on which you can rely, and one that, when it comes to your business, can help you plan for the future.

On top of gearing your research to what is included in the tax credit, move some of your resources to departments that will speed up the processes between research and putting a product to market. By reorganizing your assets based, in part, around what you will receive as part of your research and development tax credit, you can streamline your entire company and, as a result, start selling things on the global marketplace much faster.

Maximizing your research and development tax credit is about moving forward—not simply figuring out your present situation—so start planning for the future! Contact us as Swanson Reed today to get started.

Five Questions & Answers about R&D Tax Credits

1.  What are R&D Tax Credits?

The federal R&D Tax Credit is the Research and Experimentation Tax Credit, available to companies that incur research and development costs in the United States. The R&D credit is used as a tax incentive for performing qualified research within the United States, resulting in a credit to your company’s tax return. This credit was established as a part of the Economic Recovery Tax Act of 1981 and was intended to act as an economic stimulus, encouraging investment within the U.S.

2.  Who is Eligible to Receive R&D Tax Credits?

Federal R&D Tax Credit laws apply to all eligible R&D activities, but there are three different types of credits available. These types include: Traditional Credit, Start-Up Credit, and Alternative Simplified Credit. In order to determine which type of tax credits your company is eligible for, your qualified research must meet the requirements outlined in the Four-Part-Test, a quick guide that is available on Swanson Reed’s webpage. Most industries and businesses can qualify for the R&D Tax Credit if they can pass this test, which is used by the IRS to determine eligibility.

3.  Are R&D Tax Credits Only Available on a Federal-Level?

Not only are industries and businesses able to claim the R&D Tax Credit at a federal level, but if your company exists in Texas, you may be eligible for state-level credits as well. Texas R&D Tax Credits were reinstated for use between 2013 and 2026. This state-level tax credit uses the same information as the federal credit, so you need not worry about gathering two separate sets of information to apply. If you are applying on a federal level, it is definitely worth considering applying in Texas as well because it requires minimal additional effort.

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4.  Are you Worried About Being Audited?

Many businesses that choose not to partake in the benefits of applying for the R&D Tax Credit do so in fear of being audited by the IRS. In the United States, the government is allowed to audit a company at any time in order to ensure compliance. If you do the proper preparation and planning and understand how to keep your accounts and documentation correctly stored, there will be no need for you to be worried. Developing your business and making improvements to the benefit of your industry and economy is more important than anything else. As long as you’ve worked through the planning, ensuring that nothing is left to chance, you will have the proper paperwork to support the claim.

5.  Who Can Help Prepare R&D Tax Credit Claims?

At Swanson Reed, we are dedicated to helping industries and businesses succeed in their applications for the R&D Tax Credit. We will help you with your accounts management so everything adds up when it is time to file your claim. We will assist in the preparation of your claim, and we are also experienced in dealing with IRS audits. We support our clients every step of the way, eligibility criteria and documentation support included. Contact Swanson Reed today at (800) 986-4725 or through our contact form to get the R&D Tax Credit process started.

Seven Misconceptions About R&D Tax Credits

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The Research and Development Tax Credit can be one of the most lucrative tax credits for businesses who conduct research based on scientific principles. Also, several key details of the tax credit changed with the Protecting Americans from Tax Hikes Act of 2015, or “PATH Act.” Find out whether one of these misconceptions has been preventing you from looking into the R&D Tax Credits.

1.  The credit only applies to real scientific research

It is true that the tax credit only applies to research and development based on scientific principles, but that doesn’t mean that your business needs a laboratory full of scientists in long white coats. The R&D tax credit applies to any work done within your company to develop or improve a product. If your company is improving software, investigating more environmentally clean materials, or devoting resources to improving machinery and tools, you may qualify.

2.  The credit only applies to big companies

This misconception was once true, but thanks to the PATH Act of 2015, small startups, defined as businesses with under $5 million in gross receipts and with fewer than five years of receipts, can claim up to $250,000 per year in R&D Tax Credits, which can offset Payroll Taxes for Social Security and Medicare.

3.  The credit does not count against the minimum tax amount

This is another truth that became a myth thanks to the PATH Act. Previously, there was a minimum tax that businesses had to pay, meaning that small and medium-sized businesses could not necessarily benefit from the R&D Tax Credit. Now, however, businesses with less than $50 million in gross receipts can claim their R&D Tax Credit against their minimum tax liability.

4.  It is too late to apply for the credit for previous years

In fact, the PATH Act makes it so that businesses can make a retrospective claim for R&D Tax Credits starting in 2015. If your company is only now realizing that it could have applied in the last couple years, it is not too late.

5.  The tax credit only benefits companies who make a profit

Actually, the R&D Tax Credit can be carried forward to future years, which is especially useful for new businesses who have significant R&D costs for the first few years before they can bring their product to market.

6.  The credit is only federal

More and more states have adopted some form of R&D Tax Credit, such that the number is up to 43 states. However, the amount for the credit varies wildly from state to state: it is only 1.25% in North Carolina, compared to 40% in Louisiana. Look into your state’s tax laws to determine whether there is a profitable R&D Tax Credit for you to take advantage of.

7.  The credit does not apply to research with outside funding

It is true that grants and other outside funding normally make research and development unable to qualify for the R&D Tax Credit. However, if your business assumes financial risk, such as because the funding is contingent on the success of the research, then your business may still qualify for the Tax Credit.

Overall, the R&D Tax Credit became a different animal in 2015, and businesses should take a second look to see whether they can benefit from this lucrative law.

Top 5 Benefits of Research and Development Tax Credit

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Is your business eligible for the research and development tax credit?

The R&D tax credit is a general business tax credit that was created to incentivize businesses to perform qualified research in the US. It was formed as a part of the Economic Recovery Tax Act of 1981 to provide an economic stimulus for businesses to contribute to research and development initiatives that would encourage investment in the US and thus build a stronger US economy.

The credit falls under section 41 of the Internal Revenue Code, allowing companies that incur research and development costs to receive a credit on their tax returns. If your industry or businesses performs work that is technological in nature, has a permitted purpose, participates in elimination of uncertainty, and follows a process of experimentation, it may be eligible for a tax credit that forms 6% of the total qualified research expenses (QRE) in the first three years.

What are the benefits of the R&D tax credit?

1)  The Startup Business Benefit

The R&D tax credit is specifically designed to help all businesses finance research and development initiatives, and that means clear benefits for small and startup businesses who may not otherwise have the finances to invest in research and development. Startup companies with annual gross receipts under $5 million can apply up to $250,000 of the R&D credit against payroll liability, and that can help smaller companies invest in the research and innovation that will carry them forward in the global economy.

2)  Increase Your Bottom Line

Not only can the R&D tax credit reduce your company’s federal and state tax liabilities, but it can also become an asset in itself by helping to increase the company’s market value. Money saved as a result of the tax credit can be carried forward and reinvested in further R&D initiatives, and that can further generate company growth and cash flow.

3)  Motivate Innovation

Providing a credit for technological research and development can help you turn your business into a more innovative, forward moving business. Not only can that help your company to improve its products, processes, technology, and software, but that, in turn, can also help your business become more efficient, generate higher company profits, and become a stronger presence in the US economy.

4)  Maintain Competitiveness

A tax incentive that rewards innovation can help a business become more efficient and gain the technological advancements that will help it become a stronger presence in an increasingly global marketplace. Research and technology developments can improve a company’s ability to compete with other industries, making it much more likely to succeed in a competitive market and thus enabling the US to better compete in the global economy.

5)  The R&D Tax Credit Makes Investing in Research and Development Worthwhile

The R&D tax credit is available in almost all US states, and, regardless of size, companies that invest in research and development and are eligible for the credit can claim as much as $10 billion per year. It’s one of the largest tax credits available, making it one of the best investments businesses of all sizes can make.