As we find ourselves in the fourth industrial revolution – dubbed Industry 4.0 – we are seeing a shift away from manual processes into an overwhelming drive towards automation technology in the design and manufacturing of products. The integration of automation technologies into our longstanding work methods is crucial to make us competitive and to provide Americans with the opportunities to take on and improve the technical roles integrators need to fill moving forward. The implementation of interconnectivity, 5G, robotics, machine learning, real-time data, and other technologies are becoming increasingly essential.
As technology becomes fully integrated at all levels of industry, so does the opportunity to maximize your company’s research and development tax credit.
Research Tax Credit
The Research Tax Credit (RTC) is available to companies who are developing or improving products, processes, techniques, formulas, inventions, or software. You could easily qualify for the RTC if your business is related to technology, industrial production and design. In addition, machine shops, tool and die shops, and custom machine manufacturers can have strong claim profiles.
This dollar-for-dollar credit can be used against your federal income tax liability. This means that companies can receive a dual benefit on their tax returns; the deduction in the year the expenditure is incurred, as well as claiming the research tax credit. In some cases, business owners can use the credit against their payroll tax liability.
Examples of Qualified Research Activities
Many taxpayers prematurely disqualify themselves from eligibility or have not adequately reviewed their operational activities to maximize their claims. Potential qualifying activities within this space are vast, and claiming the RTC is highly widespread in the systems integration space.
There are four guiding principles within Industry 4.0 spanning across many businesses:
- Interconnection – where machines, devices, sensors, and humans possess the ability to connect and communicate with one another via the Internet of Things (IoT).
- Information Transparency – the vast amount of information and data collected by operators can be used to inform decisions and improve upon processes.
- Technical Assistance – systems can aid and assist humans in decision making and problem solving, and can help humans with difficult or unsafe tasks.
- Decentralized Decisions – cyber-physical systems have the capability of making decisions on their own and perform tasks autonomously.
More than ever, Industry 4.0 technologies are becoming part of regular business operations across all sectors.
Some examples of industry applications are:
- Designing or integrating Radio Frequency Identification (RFID) part tracking on production lines.
- Using cloud computing resources to develop methodologies to increase processing power to perform complex calculations.
- Developing software to use augmented reality to provide customers with an in-car experience without travelling to a dealership.
- Manufacturers using autonomous robots to transport parts between assembly stations.
- Testing new mold/die designs that were engineered and developed through additive manufacturing, including experiments with new alloys or other composite materials, and the processes needed to adequately bond them to the surface.
- Providing product and system solutions, including design engineering and mechanical fabrication
- Designing new lines or configurations by integrating communication or technologies in a non-traditional manner (e.g., using a known technology from a different industry into your application).
The DST Advantage
DST’s technical team is comprised of engineers with specific experience in automation and Industry 4.0 fundamentals. Coupled with our legal and tax team, we can construct a solid claim based on engineering facts, supporting legislation and regulations. Our team will explain the program in detail and explain how we can take you through the process of ensuring you maximize your legitimate Research Tax Credit claim.
Contact DST Advisory Group at 877-214-8920 for a no-charge assessment to confirm if your company can qualify for these credits.