Posted by Jeffrey Feingold on 10.19.22

Developing new Artificial Intelligence (A.I.) and robotic technology as well as improving on past technologies requires research and development. Companies can and should be utilizing R&D tax credits during their innovation process in the development of any new Robotics or A.I. products and technologies.

Technology is evolving faster than ever and the development of Artificial Intelligence (A.I.) and robotic technologies are front and center.  A.I. and robotic development is being used in healthcare, education, biotechnology, food processing, communication, just to name a few and spans through almost all industries of business. New brands such as Siri, Alexa and Google Home A.I. products are becoming household staples to most families across the United States. Searching online for information, turning on your house lights and even adjusting your room temperature are just a few every day tasks that A.I. is being utilized for. Companies are incorporating AI and robotic development into their production lines and processes saving billions for industries worldwide in the safety aspects alone.

The Research & Development Tax Credit is a federal program designed for companies that perform manufacturing in the U.S. The R&D Tax Credit, originally enacted as part of the Economic Recovery Tax Act of 1981, was designed to encourage investment in innovation. The credits are also intended for activities related to process design and development. Examples include new techniques, formulas, processes, software, and the use of innova­tive materials to create more reliable, energy-efficient products or processes.

Four-Part Test for Eligibility

R&D tax credit eligibility largely depends on wheth­er the work you are conducting meets the criteria established by the IRS in its four-part test:

1. Developing a new or improved business component (The Business Component Test): The research’s purpose must be to create a new or im­proved product or process, resulting in increased performance, function, reliability or quality.
2. The activity is technical in nature: The process of experimentation must rely on the hard sciences, such as engineering, physics, chemistry, biology or computer science.
3. Elimination of technical uncertainty: You must demonstrate that you’ve attempted to eliminate uncertainty about the development or improvement of a product or process.
4. Process of experimentation: You must demonstrate – through modeling, simulation, systematic trial and error or other methods – that you’ve evaluated alternatives for achieving the desired result.

Listed are examples of the types of activities and innovation projects most likely to contain qualified research:

• Developing new or improved products, processes, formulations or technologies
• Designing, developing and testing product prototypes
• Programming software source code
• Establishing electronic interfaces and functional relationships between various software modules
• Testing and integrating alternative materials to improve product performance and manufacturing processes
• Developing fraud detection A.I. used to spot anomalies in large data sets, empowering human agents to investigate results
• Using cognitive systems that learn what makes for effective performance and identify deviations from these learned models
• Testing the use of natural language processing, machine learning and rules to automate drug safety analysis
• Evaluating Cognitive Robotics creating new levels of judgment-based automation, enabling new levels of productivity and accuracy
• Creating or improving Virtual Agents/Representatives which automate dialogue with users in natural languages and understand and resolve complex user queries by applying “Deep Learning,” such as the ability to automate judgment on images
• Exploring better sight and sound recognition
• Improving the production of Robots to lower system engineering and installation costs
• Exploring The use of industrial robots for non-automotive industries
• Improving the A.I. of vehicles to extend their battery life by decreasing the amount of battery power wasted through inefficient trajectory cuts.
• Inventing new mechatronics systems
• Testing human-robot collaboration
• Testing the application of artificial intelligence in robotic controllers

Request a free assessment to determine qualifying R&D tax credit eligibility

Artificial Intelligence is a wide term that covers a huge number of distinct areas of research and development. The R&D tax credit can be a lucrative incentive for innovative businesses in the A.I. and Robotics industry. Tax Point Advisors, a firm with expertise in working with small and midsize companies, can help to determine if activities performed by your company qualify for major cash-saving tax credit opportunities. For more information, call us at 800-260-4138 or please leave us a message below.