How Industry 4.0 is Transforming the Modern Workplace with the R&D Tax Credit, alliantgroup
How Industry 4.0 is Transforming the Modern Workplace with the R&D Tax Credit, alliantgroup

March 17, 2020
by Tracy Lustyan and Dean Zerbe
Published in The Tube & Pipe Journal

“Automate your production sequence step by step and gain more freedom…Networked, you see more, know more, and get the best out of your production.”

These words are used by TRUMPF Inc. in its TruConnect promotional video in discussing its Smart Factory customized solutions. What makes these words so powerful, particularly for those in the world of manufacturing, is that gaining more freedom and obtaining the best results from production are critical to this sector’s growth.

As the U.S. workforce moves toward digitization, technologies such as TruConnect have become the catalyst for Industry 4.0, which emphasizes connectivity of various, formerly segregated manufacturing processes.

Industry 4.0 has been heralded as the fourth revolution that has occurred in the world of manufacturing, after mechanization, electrification, and mass production. The latest wave of technology involves digitizing vast amounts of data, using connectivity to send and receive that data, employing software that sifts through the data, and using the connected network to further enhance and control process automation. This wave of digital networking has created incredible optimization potential through its effective networking of individual components and systems to drive automation and cost-efficient production.

This revolution has been powered by autonomous systems that leverage data and machine learning to increase efficiencies. Technologies such as autonomous robots, simulation, the industrial internet of things, the cloud, and augmented reality all make up Industry 4.0’s transformation of U.S. manufacturing.

Manufacturing companies now can have access to real-time data while taking control of a more holistic, digitally driven way of controlling the shop floor. From sheet metal fabricating to automated welding, the interconnectivity that Industry 4.0 and its related technologies has provided is an incredible step forward for the industry.

Imagine every piece of data from a shop floor captured, digitized, and compiled for any manager with system access to check progress and production efficiencies on a whim, and you understand the essence of Industry 4.0. Add access for customers so they can track their own orders, and you understand how this enhances customer relations.

Creating a Competitive Edge

Those who work in the tech-savvy industries of manufacturing or fabrication know the razor-thin margins involved with gaining a competitive edge. Industry 4.0 not only offers an upper hand for those who want to garner that competitive edge, it also illustrates perfectly what Congress intended when it enacted tax incentives such as the Research and Development Tax Credit to help spur innovation.

In the 1980s Congress realized the direct impact and potential that U.S. businesses have to help strengthen the U.S. economy and created an incentive to reward businesses that were striving to increase efficiencies and further innovate to compete with companies domestically and abroad. The R&D Tax Credit was enacted to encourage U.S. businesses to innovate and help our country’s economy thrive and remain a worldwide powerhouse. The idea was to reward these U.S. companies for the time and resources exerted to help push their respective industries forward.

The R&D Tax Credit has greatly expanded over the years through judicial activity and legislative changes, including the most recent change, which got rid of the corporate Alternative Minimum Tax (AMT) and curbs the number of passthroughs subject to individual AMT.

A Match Made in Heaven

Upon review, it seems that this government-sponsored tax incentive and the revolution we are seeing with Industry 4.0 are a match made in heaven. The credit being enacted to spur American innovation and the technologies making up the Industry 4.0 revolution help U.S. businesses succeed through innovative technologies.

The key is that the platforms and technologies of Industry 4.0 require a customized fitting for whatever business is employing them. The R&D Tax Credit is given to businesses large and small that design, test, and implement new ways of conducting business. It’s as simple as that.

Whether companies are testing the sequencing of system operations, programming control systems, testing systems to meet site requirements, or developing schematic drawings for integrating system components, the R&D Tax Credit incentivizes the continued push to do things more efficiently—the very impetus behind Industry 4.0.

From order entry to shipping, Industry 4.0 and its related technologies continue to create the efficiencies that manufacturers and fabricators need to develop their businesses to better serve clients’ needs.

We still don’t know for certain exactly where Industry 4.0 will take the workplace. What we do know for now is that its ability to boost productivity has enabled manufacturers to strengthen their operations. Beyond that, we can also say those implementing these technologies should look toward the R&D Tax Credit to strengthen their businesses and reinvest in further innovative technologies or business strategies.

All in all, it’s good news not just for U.S. manufacturing and fabrication, but the nation’s economic strength in general.

Dean ZerbeDean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington, D.C. office. Prior to joining alliantgroup, Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman of the Finance Committee, Senator Charles Grassley, on tax legislation. During his tenure on the Finance Committee, Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law, including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform) and the Pension Protection Act.


Tracy LustyanTracy Lustyan is the Managing Director for the Great Lakes Region and is based in alliantgroup’s Chicago office. Her focus is on clients in the Midwest, primarily in Illinois, Missouri, Minnesota and Iowa. Tracy has a vast knowledge of government-sponsored incentive programs that are designed for the benefit of U.S. businesses, including her work with the R&D Tax Credit, IC-DISC, DPD and hiring incentives.