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The R&D Tax Credit: A Valuable Opportunity for Building Automation Companies

March 9, 2017
by Tracy Lustyan, alliantgroup Managing Director

Competition is traditionally the mother of innovation—and nowhere is this more evident than within the building automation industry.

Over the years, the demand for better and more cost effective buildings has been the key driver for technological advancement, with building automation companies having developed solutions to help their clients contain costs, improve operating efficiencies, reduce energy usage and improve the life cycle of utilities. From automated solutions to improve and regulate the energy efficiency of a building’s HVAC system, to taking steps to enhance the safety of a building’s electrical, fire or security systems, the building automation industry is one of the most innovative around—and one that is based on finding technical solutions to fit the needs of their clients.

It is the technical and solutions-seeking nature of their work that also makes building automation companies among the best candidates for a valuable and widely overlooked opportunity—the Research and Development (R&D) Tax Credit.

The R&D Tax Credit: Available and Widely Under-Claimed

Bringing in an estimated $10 billion to U.S. businesses each year, no one would dispute the value of the R&D Tax Credit. However, it may surprise you to know that the credit is severely under-claimed within a variety of industries—and the building automation industry is no exception. It’s been estimated that only 5-10% of eligible businesses actually claim the credit, and with a long list of qualifying projects and activities, building automation companies are among the candidates most likely to overlook their fully entitled to tax savings.

Why is this the case?

In our experience, it ironically has to do with the name of the credit itself, with many misunderstanding what the government defines as “Research and Development”. While the words ‘R&D’ may bring to mind white lab coats and petri dishes, in reality the R&D Tax Credit is also very much about rewarding applied research—the experimentation and everyday technical work that is done to make a product or process faster, cheaper, greener or more efficient. As it relates to building automation companies, it is the enhancement of building processes (be they to make those processes less time consuming, more energy efficient, etc.) that will lead to eligibility and significant tax savings.

What Qualifies?

Here are a few common activities that we have seen qualify companies in the past (but bear in mind, this is by no means a comprehensive list):

  • Designing, developing or enhancing centralized controls for a building’s HVAC, mechanical, security, fire and flood safety, lighting and other electrical/mechanical systems
  • Designing the layout for electrical wiring and installing control systems
  • Integrating existing building systems with new building systems
  • Enhancing a building automation system to improve occupant comfort, improve efficiency, reduce energy consumption or improve the life cycle of utilities
  • Designing, developing or integrating security systems (such as cybersecurity, video surveillance or life safety systems) within a new or existing facility
  • And much more

Review Today

If your company has performed any of the above activities, now is the time to explore your potential eligibility for the R&D Tax Credit. For completing what amounts to their everyday projects, we have seen building automation companies receive significant tax savings, often producing results that have allowed these companies to hire new employees and expand their footprint within the marketplace.

Every day, building automation companies are advancing technology and creating innovative solutions for their clients. The R&D Tax Credit is the reward for their hard work—so isn’t time for these companies to take advantage of every benefit designed for their business?

tl-smTracy Lustyan is a Managing Director based in alliantgroup’s Chicago office. With Tracy’s guidance, more than 500 companies operating in diverse industries—including software, technology and systems integration—have claimed over $200 million in government-sponsored benefits. Tracy is passionate about government-sponsored tax incentives and the role they play in keeping jobs in the U.S.

Would you like additional information or do you have questions?