In September 1900, a Category 4 hurricane ravaged Galveston, Texas, killing more than 6,000 people and damaging nearly all of the city’s structures.
In the aftermath of the storm, city officials inspected the wreckage, and did the only thing they could to move forward: rebuild. But with a new perspective after tragedy, city engineers took it upon themselves to make sure the city didn’t face the same fate ever again, building a seawall that surrounded the town—and literally lifting the community’s elevation by 16 feet.
From bendable concrete that protects against hurricane-force winds to protection pumps that can control the impact of flooding, engineers have developed new and unique technologies to meet the needs of several communities. With engineering jobs being some of the fastest growing in 2018, and the knowledge that these natural disasters will not stop, there is significant potential for not only civil engineers, but all engineers, to innovate even more in the coming years.
Alongside an engineer’s ability to innovate, comes the financial means to do so. That’s where a powerful-yet-underutilized government incentive has come into play for engineering firms seeking to take their craft to the next level.
The Research & Development Tax Credit was enacted in the late 1980s in order to encourage domestic corporate innovation. The credit became permanent in 2015 after the passage of the Protecting Americans from Tax Hikes Act, and, despite its place in our intricate tax code, qualifying for the credit is more straightforward than companies usually think.
Although it often is the case with the work of engineers, qualifying activities for the credit do not necessarily need to be incredibly complex. In order to qualify for the incentive, an engineering firm simply needs to invest its time, money and resources into the advancement or improvement of one of its products or processes.
An engineering firm that qualifies for the credit through a qualifying research activity (QRA) can potentially receive a credit in the amount of a percentage of its qualified research expenditures (QREs) that are directly associated with the identified QRAs.
Simple enough. But how can engineering businesses specifically make use of the credit through its research and development activities? Whether it is the design of a new multifamily project, its parking or its surrounding infrastructure, an engineer’s practice is more than likely to qualify.
Here are some specific examples of engineering improvements, innovations and activities eligible for R&D tax incentives:
- Ventilation, plumbing, piping and refrigeration system configuration
- Process optimization evaluations
- Developing control system layouts
- Spatial configuration considerations
- Testing of components to determine vibration of equipment
- Determining alternative structural design
- Fluid dynamic analysis and design
- Development of control panel layout and operation
- Designing innovative access or motion controls for large-scale systems
- Programming Logic Control (PLC Programming)
All of these types of activities not only qualify but were exactly the types of innovations that Congress was wanting to incentivize when it enacted the R&D credit. Whether you are a civil, structural, municipal or mechanical engineer, the design, testing and implementation of your projects can lead to substantial credit returns.
One example of a company taking advantage of the credit came when an engineering firm whose annual revenue was $44 million took on a project to implement a building’s electrical and HVAC services. The company had to evaluate a linear accelerator and computed tomography scanner separately in order to design solutions capable of meeting manufacturer and client requirements for the project.
The firm’s work resulted in several technical challenges requiring the evaluation and incorporation of alternative solutions. The company’s work ultimately resulted in more than $500,000 in federal tax credits, all of which was eligible to be put back into the business.
A second engineering firm, whose annual revenue was approximately $71 million, provided structural engineering services for the development of a parking garage. The company determined a more sound way to insert a structural beam into the garage in order to make room for a gym and retail space. The development of this design not only allowed for optimal ceiling clearance and pedestrian use but also earned the company $650,000 in tax credits.
Engineering firms have the potential to reinvest thousands, if not millions, back into their business to remain competitive, grow and further innovate. Choosing not to take advantage of this incentive could mean bypassing an opportunity for company growth, or the chance to develop the next innovation to help our country weather the storm.
This article appears as it was originally published on our sister site, www.hiveforhousing.com
ABOUT THE AUTHOR
Brian Aumueller is a Managing Director in alliantgroup’s New York office with more than 20 years of experience providing consulting services to CPAs and their clients. Brian specializes in federal and state tax credits and incentives, managing CPA firm relationships, and helping CPA firms identify qualified clients.
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by Mark Everson, Former IRS Commissioner and alliantgroup Vice Chairman
July 30, 2020
Published in Tax Notes
June 23, 2020
by RICK LAZIO
Published in Fortune
The U.S. is facing a path diverged.
During the third month of the COVID-19 pandemic, Americans are rightfully wondering not only how long this health and economic crisis will last, but what the other side of this tragedy will look like.
When it comes to supporting the economy and the American business owner, how much of what we’ve implemented during the crisis will remain? What support strategies will disappear?
Or, perhaps more broadly, how can the U.S. leverage the obvious resurgence of American innovation during this crisis to compete on a global scale in ways we never have before?
While this crisis has certainly held certain aspects of the U.S. economy hostage, particularly the manufacturing industry, it has also put a spotlight on our country’s ability to adapt quickly and innovate rapidly.
Congress has admirably reacted quickly to help American taxpayers and businesses in the short term through multiple phases of COVID-19 relief. Where we are failing, however, is the need to look long term.
It’s clear that we face two choices in our path forward as a country.
One route is to shift back into our old way of thinking, where temporary incentives and weak policies continue to half-heartedly support America’s educational system, workforce training initiatives, and business innovation measures—leaving China and others with an open track to continue harnessing control over global supply chains.
Or instead, we can seize on this opportunity to acknowledge the hare-paced surge in innovation that American businesses have leaned into during this pandemic and offer comprehensive, sustainable, long-term support to prohibit that pace from tapering out.
I vote for the latter, and I know it’s possible to get there, as we’ve done it in the past with the Economic Recovery Tax Act of 1981. Then, we offered a tax credit to businesses who were improving their products or processes. This legislation helped the American auto industry compete at a more global scale, and drove the unemployment rate in automotive back to pre-recession levels.
This credit is proven and continues to work today. (Alliantgroup offers a variety of consulting services, including tax credit support, for small and medium-size businesses in numerous industries, including those described in this article.) Congress is now looking to accelerate the credit’s impact with the proposed bipartisan FORWARD Act, which Alliantgroup endorses.
While American companies have shown incredible ingenuity by addressing our health care needs during this crisis, much more needs to be done to sustain those efforts.
And although innovation tax credits are essential, our country needs to embrace systemic changes at a deeper level to come out of this crisis with an eye toward sustainable growth, and the ability to weather the next storm.
This includes creating systems that bring technical labor back to the U.S., encouraging the implementation of advanced manufacturing technologies so we aren’t left relying on others for necessities, such as PPE in times of crisis.
This starts with how we educate our youth, placing a heavier emphasis on STEM subjects in order to direct American students toward careers in medicine and engineering—fields that countries like China and India are increasingly dominating. But, most critically, this technological sea change needs to be driven by a change in the nation’s mindset concerning automation.
Certainly, in an environment where millions are out of work, there isn’t a single person who would want to bring on tools that could replace human labor. But, contrary to popular belief, that isn’t the case with automation.
These technologies bring opportunity for new jobs, including for those who need to develop, maintain, repair, redesign, and integrate the tools necessary to compete on a global scale. If we don’t move now, other countries will run away with what has become critical in geopolitics: control of the global supply chain.
China already took its fate into its own hands when it launched the Made in China 2025 initiative in 2015. This multifaceted plan is the country’s moonshot to lead the world in high-tech industries, from robotics to medical devices.
So far, it’s working, as evidenced by China’s grip on manufacturing in a variety of sectors, including drugs and active pharmaceutical ingredients.
We are currently in a new age of discovery. One that brings industrial evolutions, such as automation, led by engineers and software developers instead of the untouched territories discovered by frontiersmen. And, although it seems America’s focus on using that explorer mentality to climb to the top of global competition has waned in recent years, this can be a time to reignite that flame.
The American workforce is incredibly flexible, but the businesses that make up the backbone of our economy need a thriving market, trained workforce, and available capital in order to compete.
Legislation like the FORWARD Act incentivizes domestic manufacturing through increased tax credits that provide a long-term solution, but the same types of policies should be created that reward companies for their training programs, schools that produce necessary domestic technical labor, and businesses that invest in new technologies to give our country a leg up.
These will be plans for long-term growth. Plans that have the potential to give the U.S. the fighting chance it needs in battles that rage abroad, such as the race to 5G. It’ll create a system that is sustainable for more than just short-term crisis survival—and the key will be aligning incentives correctly.
This doesn’t mean that an open market shouldn’t be at the core of this strategy. It simply means that incentives can be the vehicle for change.
America needs to develop policies that keep our modern-day explorers, the technical labor that drives industries forward, here. The timing is mission critical. The opportunity for change is wide open.
Let’s embrace the abnormal and dive headfirst into an era of constant change where our country has repeatedly proved to be a force to be reckoned with.
Rick Lazio is the Senior Vice President based in alliantgroup’s New York office. Lazio is a former US Representative for New York. Throughout his tenure and post-Congressional career, he has been a strong advocate for small businesses sponsoring impactful legislation such as the Small Business Tax Fairness Act. He received his B.A. from Vassar College and his J.D. from Washington College of Law at American University.
June 30, 2020
by Dhaval Jadav, Chief Executive Officer at alliantgroup
Published in Industry Today
The case for a necessary shift in manufacturing across America to spur job growth and innovation post COVID-19.
Our country is currently faced with a myriad of problems.
The ongoing global pandemic has wreaked havoc on our country from both a health and economic perspective. Mixed with undeniable political tension in the U.S. and we are left with a population crying out for answers to help us move toward progress.
The good news is that America’s history of success is due in large part to our ability to innovate. We have prospered as a nation due to our willingness to embrace new ideas and adapt to tumultuous times with valid solutions.
With COVID-19’s impact still taking a toll, and our reliance on outside parties fully exposed by the pandemic, now is the time to solve for how American ingenuity can offer us a path to progress.
The answer? A dynamic shift in our approach to manufacturing in order to relaunch our economy and create sustainable job growth while lessening our independence on third parties.
Recent reports have shown that two in five U.S. manufacturing companies have either relocated to China or plan to in the near future. We must create tangible ways to incentivize onshoring manufacturing jobs back to the U.S.
The first, and arguably most crucial step, is embracing new technologies such as robotics, AI and automation. Digitizing the supply chain will allow for an increase in production and the ability for humans to work in tandem with machines to create better outcomes.
Leveraging new tech through Industry 4.0 will eliminate unnecessary overhead, create a healthier environment for laborers manually operating these systems, and open the door for new jobs to become a part of the technological cycle.
These positions will include those who need to design, produce, operate and maintain the tech that is implemented.
China has taken its destiny into its own hands with its “Made in China 2025” initiative, a plan to strengthen manufacturing by high-speed development of their tech industries. America should take note and use the momentum of leveraging new technologies to help with another crucial step in this industrial evolution: changing the stereotype of manufacturing jobs.
American manufacturing still carries with it the image of soot covered workers laboring away in a rusted warehouse. Reinventing this narrative starts with our education system.
STEM education must become a top priority for American education institutions, which can help in breaking these inaccurate stereotypes encouraging students to see themselves working in an increasingly tech-driven, innovative field.
Our educators, with the requisite support to make these types of initiatives a reality, can showcase the opportunity for younger generations to be a part of a high-tech movement that both literally and figuratively will build our country up.
This leads to the proverbial elephant in the room. Where will this support come from?
The answer is that this industrial evolution needs support from local, state and federal governments.
This should come in the form of incentives that will lessen the financial burden of domestic production and ultimately pay for themselves while creating an even playing field for American businesses of all sizes. An easy buy in as the outcome will be more jobs, innovation, and output.
It won’t, however, be an easy fix. Between infrastructure erosion, a decline of skilled labor, capacity constraints and foreign dependency having a stranglehold on our operations, this shift won’t come within weeks or months.
However, the long term gains are worth the resources poured into this movement.
The impact of revitalizing the American manufacturing engine will go beyond the simple economic numbers. It will create better lives for American workers and their families by creating a healthier manufacturing sector centered on higher paying jobs, and in turn, better opportunities for Americans.
In the late 1940s, one out of every three American workers outside of farming was involved in manufacturing. Today that number is approximately one in ten.
Weaknesses within our manufacturing sector were laid bare from the coronavirus, as shown from U.S. state governments and medical facilities relying on China and other foreign manufacturing hubs that sold PPE with incredibly inflated prices.
95 percent of U.S. companies reported that the ongoing pandemic would likely impact their supply chains. However, 65 percent of surveyed North American manufacturers recently said they are likely to bring their sourcing and production back to North America after the pandemic.
Let’s give them that chance.
This dark period can be the impetus for positive change. Let’s address our vulnerabilities, change our mindset, embrace new technologies and use this opportunity to show the true power of American innovation.
Dhaval Jadav is Chief Executive Officer of alliantgroup, America’s leading provider of credits and incentives for businesses of all shapes and sizes. Jadav co-founded the firm in 2002 and; since its inception, his passion to help and serve U.S. businesses (and their CPA firms) has resulted in alliantgroup assisting thousands of businesses claim powerful cash-generating credits and incentives.
Born from alliantgroup’s mission and Jadav’s passion for igniting innovative thinking in the next generation through STEM skills and education opportunities, Jadav created the firm’s Blue Heart Fund to give back to the community. Along with supporting various philanthropic endeavors and promoting STEM education in K-12 schools, the Blue Heart Fund offers generous STEM-based scholarships to students pursuing a career in the field.
Jadav was born in Manhattan, and grew up in California and Texas. He is a licensed attorney in Texas and received his LL.M. degree in taxation from Georgetown University Law Center. He has been featured on multiple industry publications including CFO.com, Harvard Business Review and Reuters Breakingviews.
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 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 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.
by Dean Zerbe for alliantgroup
March 18, 2020
Published in Forbes
by Tracy Lustyan, alliantgroup Managing Director
October 29, 2019
Published in The Fabricator
by Rick Lazio, alliantgroup Senior Vice President &
Harold Ford Jr., alliantgroup Strategy Advisory Board Member
September 24, 2019
Published in Des Moines Register
Fitting the Mold: Why Plastics Professionals Should Join Their Competitors and Take Advantage of the R&D Tax Credit
by Tracy Lustyan, alliantgroup Managing Director
August 21, 2019
Published in Plastics Technology
by Mike Johanns, former U.S. Secretary of Agriculture, Governor and U.S. Senator for Nebraska; alliantgroup Chairman of Agriculture
May 9, 2019
Published in The Progressive Farmer
by Dean Zerbe for alliantgroup
April 26, 2019
Published in Forbes