- By Tracy Lustyan
- March 29, 2021
There is no doubt that automation is the key to unlocking our potential across all industries in the very near future, and there are substantial tax breaks available to incentivize this movement.
The Fourth Industrial Revolution is here, but the question is, will the United States be as influential as we have been in recent decades? Many would argue the opposite as we exit the top-10 index of global innovation.
Samsung was the world’s largest R&D investor last year, positioning South Korea just behind the U.S. as the second largest hub for semiconductor production. So, with countries such as China becoming increasingly competitive, what can we do to regain our authority in the world as our economy struggles to compete in a global marketplace?
There has been an overwhelming need for automation technology in both commercial and industrial settings as Industry 4.0 continues to make its impact on a variety of industries. The beauty of automation is the fact that we can build upon the work that led us to be a world leader in innovation before.
The integration of automation technologies into our tried-and-true methods of work is crucial to make us competitive and provide Americans the opportunities to take on and improve the technical roles integrators need to fill moving forward. The implementation of interconnectivity, 5G, robotics, machine learning, real-time data, and other technologies are becoming increasingly essential.
Now more than ever, owners of commercial buildings and industrial manufacturing facilities need to adopt automation in these workspaces to not only stay competitive by increasing output, but to make the environmental improvements that accommodate safe working conditions—especially in the midst of a global pandemic.
There is no doubt that automation is the key to unlocking our potential across all industries in the very near future, and there are substantial tax breaks available to incentivize this movement. For the last few years, and now under a new administration, Congress is prioritizing incentives for the innovative leaders who work with their teams to develop custom solutions that help integrate the features and functions of various systems and equipment.
With a new President and the passage of the Consolidated Appropriations Act of 2021, there are a few U.S. Tax Code provisions and legislative changes that every technical professional should know about.
The Research and Development (R&D) Tax Credit
I’ve worked with many integrators who have qualified for R&D for years but either prematurely disqualified themselves or were not reviewing all business activities that maximize their returns. The list of qualifying activities within this space is almost endless, and claiming R&D is highly prevalent in the system integration space, especially today. The days of needing a patent or industry-shaking invention are behind us. There is no end or guardrail around the activities that qualify.
If you are designing and/or installing turnkey automation solutions, fabricating a control panel, or even selecting equipment to improve processes for your clients–the list goes on and on–you can qualify for substantial tax credits for each and every person on your team who is working on these projects.
The 179D Energy-Efficient Commercial Buildings Deduction
Recent legislation also made section 179D a permanent fixture of the U.S. tax code, a change particularly beneficial to those working in the green building sector. Automation professionals make energy-efficient improvements to countless buildings every year–in both the private and public sectors–and there are major opportunities on the table to reduce tax liability for companies that pursue environmental projects.
Claiming energy-efficient deductions is a competitive process, especially in the public sector as companies compete for bids and the allocation letters that follow to secure these deductions. Integrators, installers, and technical professionals should make sure all potential qualifying activities of each project are considered – in some cases, automation innovations that reduce energy consumption costs by as little as 10% can result in substantial tax savings.
Determining the value
The value of these incentives can take weeks to determine and differs for everybody. Consultants and advisors will consider all business activities, material costs, and other factors to get started. For example, a custom solution provider with an annual revenue of $26 million was able to receive $255,924 in federal and state credits for their R&D activities. For the 179D deduction, businesses can receive up to $1.80 per square foot for projects that qualify.
Looking to the future
Congress and companies throughout America are joining forces to streamline innovation in automation technologies. It’s time for us to get ahead of the curve and become world leaders once again. Since the 1980s, the R&D Tax Credit has proven its value by allowing companies to onshore their work, train more technical professionals on American soil, and expand research to develop new products and services.
America is home to the talent and resources needed to build businesses that outperform global competitors, so it’s important for automation integrators to start claiming the incentives they are entitled to today.
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