CSIA members among millions of business owners who will see cash refunds and tax savings in 2016 as a result of the new and improved R&D Tax Credit
As the momentum of your tax season picks up in the coming weeks, it’s important that you familiarize yourself with the major efforts and progress Congress has made to enrich the financial positions of businesses just like yours.
Ordinarily, the news that a bill was passed by Congress and signed into law by the president may not find a place in your industry newsletter, but there are three aspects of a brand new $600+ billion tax deal that will have CSIA members celebrating a major long-term windfall starting in 2016 and in the years ahead.
Of the many perks of the Protecting Americans from Tax Hikes (PATH) Act, the real game-changing excitement revolves around the Research and Development (R&D) Tax Credit.
Do system integrators qualify for the R&D credit?
It’s fair to say that if a CSIA business is making use of sophisticated, multi-disciplinary technology, then it has a great shot at qualifying for the R&D credit. Only a tax study from a trusted partner can ascertain if a business can expect tax credits this year; that same study can determine if a company is entitled to credits going as far back as three or four years.
The R&D Tax Credit applies to a broad range of explorative industries, including controls and automation sciences. Your line of work requires you to try new things every day, and the government wants to reward you for that. If that sounds too good to be true, it’s because until recently, it was.
The innovative, solutions-seeking nature of your work is the major marker of eligibility. The R&D Tax Credit is as much about the applied sciences as it is laboratory research, with eligibility tied to improving existing products or processes—in other words, the steps taken to make a product or process better, faster, cheaper, cleaner or more efficient.
If research and development still doesn’t sound like something that would apply to your automation realm, I assure you, CSIA members are among the most qualified of candidates to reap the rewards of this often-overlooked tax credit for U.S. businesses.
A promising PATH for innovation
Unluckily, business owners have been passed over for this opportunity for years, despite being able to pass the technical requisites with flying colors. Until just of late, so many companies were precluded from claiming this cash refund (or offset against tax liability) because they found themselves in one of two very common tax positions; they were either subject to the alternative minimum tax (AMT), or they were struggling to make a profit.
That’s all changed, and as a result, so could your bottom line.
Last December’s PATH act will open up this opportunity to innumerable businesses previously deemed ineligible. The president’s signature on this bill substantiates what Congress has always intended for the R&D Tax Credit, and is evidence that the U.S. government is a champion supporter of innovation. Congress is prepared to provide more businesses that are making technical contributions to the American economy with the resources to think bigger, produce better and succeed more.
As many as 10 million more businesses could stand to qualify for the R&D Tax Credit as a result of this ground-breaking legislation.
In addition to the PATH act broadening the applicability of the R&D credit, the new provisions also solidify the opportunity as a permanent fixture of the IRS tax code. This means that companies can now approach their financial planning and investment outlook with the confidence that the R&D credit will be available to them year after year, provided they continue to perform qualifying activities, of course. A lot of business owners are going to be very grateful for this extra security.
For more information about these tax extenders, take a look at former Senior Counsel to the U.S. Senate Finance Committee Dean Zerbe’s piece in Forbes on the impact of these changes and their implications for U.S. businesses.
How does my business qualify?
Now, back to your business. Again, many of the activities that meet the baseline for R&D are so ingrained in a systems integrator’s DNA, some business owners would call them unremarkable, or even joke that they qualified in their sleep. The everyday techniques and processes that are associated with industrial automation—as routine as they may seem—often exceed the criteria.
Does your company:
• Resolve unique automation challenges for diverse applications?
• Deliver custom solutions that utilize design engineering and mechanical fabrication?
• Perform evaluations, feasibility studies and system tests to ensure optimal functionality?
• Program automated controllers such as industrial PCs, PLCs and HMIs?
• Develop and draft schematic drawings?
• Overcome regulatory compliance challenges and exceed safety requirements?
• Implement cost-effective or innovative operational processes?
• Install, assimilate, maintain and/or fabricate machinery, including legacy systems?
If any of the listed activities are comparable to the type of work that your business is carrying out, you may be sitting on an enormous tax benefit.
Free R&D assessment for CSIA members
The control systems integration business community is largely unaware that companies operating in this industry are likely qualifiers for one of the IRS’ most powerful tax credits. Your business is invited to partake in a no-cost assessment of your technical activities to determine the dollar value of this tax-saving opportunity for your company.
alliantgroup plays a constructive role in helping system integrators and control engineers navigate complicated tax issues to find powerful cash rewards for their work. To date, alliantgroup has helped over 18,000 businesses claim more than $4 billion.
alliantgroup Partners With CSIA
alliantgroup and CSIA share a mutual commitment to supporting the advancement of control engineering, systems integration and industrial automation, and do so by promoting best practices, encouraging competition and providing continued education.
For more information, visit www.alliantgroup.com or call Cathryn Peno at alliantgroup at 713-552-5544.
About the author:
Tax expert and alliantgroup Managing Director Michael Siegel, CPA, has more than 20 years of experience working with small and mid-sized companies to provide tax, accounting, and consulting services; he has partnered with countless CPAs to helped over 900 businesses, both public and private, claim hundreds of millions of dollars in tax credits. Michael frequently speaks publically about tax incentives designed to reward industry innovation and technological advancements.