July 7, 2020
by Neil Shah
Every business is adapting to a rapidly changing world. Water treatment companies, like many small and medium sized businesses right now, are looking for funding for the future so they can retain their employees, hire more technical talent and better serve their clients.
Many are finding that relief programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) are not adequate enough to cover all the thingsthat they will need to adapt in the post covid-19 world. Companies are finding that these programs may help with payroll in the short term but not with future needs such as new equipment and technical talent that will help businesses in the post Coronavirus economy. The federal government has recognized the shortcomings of PPP and EIDL and is asking businesses to look into the other relief provisions that are already available and successful..
Relief for Water Treatment Companies
The uncertainty of the economy is of great concern for all businesses across the country even if they have remained operational during lockdown. One of the best solutions for businesses to mitigate uncertainty is of course capital. For AWT members, there are long established economic recovery tools that specifically apply to these companies that employ technical talent.
The most venerable relief provision applicable to AWT members is the R&D Tax Credit. The R&D credit has a long history as a job creation and recession fighting tool. It was originally created to combat the recessions of the early 1980s that caused widespread unemployment, particularly in the automotive industry where unemployment reached 24.7%.
The R&D credit helped bring technical jobs backs to the auto industry and by the mid 80’s, unemployment in the sector had dropped to pre-recession levels at around 6%. In fact, automobile manufacturers were able to add a quarter of a million jobs between the credit’s introduction in 1983 and 1996. Not only did it bring jobs back, but also helped the industry adapt and change how it competed at a global scale by encouraging innovation.
Since then, Congress has significantly altered the credit so it can benefit a wide array of business activities. Now after multiple iterations, the credit applies to water and chemical treatment companies and laboratories, and many have already started to take advantage of it to prepare for the future.
How AWT Members Qualify
Many water treatment companies already qualify for the credit based on the work they are doing on a daily basis. The name “R&D Tax Credit” often makes people think they need to have a R&D department with scientists in lab coats to qualify but it is much simpler than that.
“When our CPA originally referred alliantgroup, we were not taking the R&D Credit. However, through our partnership, we have been able to realize an incredible benefit which mirrors the innovation we are doing on a daily basis,” said Brett Glenn, President of International Chemtex.
To qualify, a water treatment company only needs to have workers that are developing, designing or enhancing new products or processes.
The definition to qualify may seem fairly broad, and that was by design so that more industries can take advantage of this provision. Water treatment companies can qualify for activities such as:
- Gathering water quality samples and collecting data to improve treatment solutions;
- Creating concepts or prototypes for new water treatment products;
- Conducting biocide experiments;
- Conducting field tests to ensure water treatment products meet requirements;
- Developing specialized analytical procedures; and
- Developing and experimenting with chemical treatment formulations.
Of course, this is not an exhaustive list but it should give you an idea of the things that water treatment companies are already qualifying for right now. The credit is derived from the wages of the employees that are working on qualifying projects like the above. Being a wage-based credit is really what makes the provision so valuable. It is not uncommon for water treatment companies or laboratories to claim six figure credits.
For instance, a water treatment company with $9 million in revenue, that developed a line of corrosion control chemicals for recirculating and once-through cooling systems, was able to claim nearly $230,000 in credits. By comparison the average PPP loan amount is about $120,000.
With the new tax deadline of July 15thjust around the corner, AWT members should leave no stone unturned as they garner funds and the R&D Credit is the first place they should look. For more information about how valuable the R&D Credit can be for you company reach out to the alliantgroup team at [email protected]
Neil Shah is a Technical Director for alliantgroup, specializing in the manufacturing, architecture & engineering, and construction/contracting industries. An engineer by trade, he has worked for a prestigious architecture & engineering firm, as well as a Fortune 500 software and technology company. In his role at alliantgroup, Neil has worked with hundreds of small to mid-sized businesses and has helped claim over $250 million in credits and incentives.