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The R&D Tax Credit: Big Savings Available for Security System Integrators and Solution Providers

[vc_row][vc_column offset=”vc_hidden-xs”][vc_single_image image=”15338″ img_size=”full” image_hovers=”false” lazy_loading=”true”][/vc_column][/vc_row][vc_row bg_type=”bg_color” bg_color_value=”#f5f5f5″ css=”.vc_custom_1618938311697{margin-top: 0px !important;margin-right: 0px !important;margin-bottom: 0px !important;margin-left: 0px !important;padding-right: 1em !important;padding-left: 1em !important;}”][vc_column][vc_column_text el_class=”article-info”]by Tracy Lustyan, alliantgroup Managing Director
Dec 12, 2018[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Technology is taking over the security industry— and for industry executives, this shift offers a potentially valuable opportunity they may have never considered for their firms.

From the growing connectivity of systems and mobile devices through the Internet of Things (loT) to the use of AI and automation to monitor cyber and physical security systems, the industry is in the midst of massive technological changes that will ultimately make us (and the confidentiality of our data) much safer. Along with enhancing our physical and cyber security, these technological advancements also qualify security companies (be they integrators or solutions providers) for one of the most valuable tax incentives available to U.S. businesses—the Research and Development (R&D) Tax Credit.

The R&D Tax Credit: Who Qualifies and Why?

The R&D Tax Credit has actually been around since the 1980s—but if this is the first time you’ve heard of the credit in relation to the security sector, there is a good reason.

The credit used to be much more restrictive, but due to new legislation, a series of pro-taxpayer court rulings and various regulatory changes over the past few decades, the credit has evolved for the benefit of numerous industries throughout the American economy. Today, the R&D Tax Credit has become the premier government incentive to reward companies that are pushing for technological advancement and keeping highpaying technical jobs here in the United States.

Given these parameters, it’s easy to see why companies from today’s security sector qualify for this valuable tax benefit. Due to the technical nature of their work and their role in advancing and enhancing technology, security integrators and solutions providers can receive substantial tax savings from the R&D Tax Credit. For the technical enhancements made to their products, can generate the savings needed to hire new employees, reinvest in new technologies and expand the overall scope of their operations.

Qualifying Activities

For reference, here are a few common industry activities that traditionally qualify security companies for the R&D Tax Credit:

  • Providing product and security system solutions, including design engineering, hardware and software integration, testing and validation, and mechanical fabrication
  • Integrating smart devices into network applications and overall security system solutions
  • Performing system level tests and evaluations to ensure solutions achieve all performance and functionality requirements
  • Programming and configuration of security systems and devices within the overall systems
  • Developing conceptual design, schematic design, and construction drawings for integration, installation and configuration of security system components
  • Integrating various infrastructure components into new or improved designs (cable, fiber optics, etc.)
  • Commissioning security systems

Real-World Application

To gain a better understanding of the credit and its application, let’s take a real-world example.

For a year’s worth of qualifying activities, a security integration and technology provider received over $700,000 in federal and state R&D tax credits. Among a host of qualifying projects, this company designed and installed a security surveillance system compatible with the floor layout of a new warehouse facility.

At the outset of the project, the company faced a number of challenges related to the design, installation and integration of the system. For example, because the facility was new, the placement of new machinery or future building redesigns would always compromise primary camera placement. To overcome this problem, the company experimented with the design of multiple alternate camera mountings for flexibility and engineered various solutions to accommodate the unique architecture of the building. This included developing a system for mounting cameras in gypsum and processes or services—activities that quite frankly describe what these companies do on a daily basis—security integrators and solutions providers acoustical ceilings as well as utilizing CAD technology to create a functional design that would account for the wiring, integration and installation of the cameras and related security components. Ultimately, the company’s hard work would create a functional and effective surveillance system for the building.

The improvement of technology or the development of technical solutions to solve a client’s issues—these are very common ways for security integrators or solutions providers to qualify for the credit.

Growing Your Business

By completing projects and activities that they perform on a daily basis, security companies can qualify for a potential game-changing tax incentive. For security integrators and solutions providers, the R&D Tax Credit represents one of the best ways to organically grow and add capital to their business—and industry executives would be wise to explore their eligibility and see what the credit can do for their business.[/vc_column_text][/vc_column][/vc_row][vc_section][vc_row][vc_column][vc_separator][/vc_column][/vc_row][vc_row css_animation=”fadeInRight”][vc_column][vc_custom_heading text=”About the Author” use_theme_fonts=”yes” css=”.vc_custom_1621268389440{margin-bottom: 20px !important;}” el_class=”alt-h1″][/vc_column][vc_column width=”1/4″][vc_single_image image=”19312″][/vc_column][vc_column width=”3/4″][vc_column_text]Tracy Lustyan is a Managing Director based in alliantgroup’s Chicago office, focusing on clients in the Midwest, primarily Illinois, Missouri, Minnesota, and Iowa. Tracy offers a vast knowledge of governmentsponsored programs, with concentrated expertise in the business application of the R&D Tax Credit, IC-DISC, energy credits, and tax controversy services. With over 20 years of experience in the staffing industry, Tracy is passionate about the importance of spreading the word about government-sponsored tax incentives and the role they play in keeping jobs in the U.S.

Since 2010, Tracy has partnered with more than 120 CPA firms to uncover significant tax savings for clients in the Midwest and Great Lakes region. With Tracy’s guidance, more than 420 companies operating in diverse industries—software, contract manufacturing, systems integration, architecture, engineering, construction, and more claim government-sponsored benefits.

Tracy is a graduate of California Polytechnic State University at San Luis Obispo.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator][/vc_column][/vc_row][/vc_section][vc_row][vc_column][vc_row_inner][vc_column_inner]