Posted by William Mehi on 12.12.18

The future in LED technology is very bright, just look around. The holidays are in full swing this month, families are replacing old bulbs with new technology and lighting up their homes across the United States. LED lights use lightemitting diodes, rather than filament to produce light. This technology makes LED lights more efficient, durable and longer lasting than the traditional fluorescentlights of the past. They won't burn out like standard bulbs and do not get hot to the touch, making them safer for your home as well. Beyond holiday decorations, LED lighting technology is making a positive impact in our everyday lives with the integration into our homes through smart home technology and the connectivity to the Internet of Things. There are many LED products available and the number continues to grow with new generations of devices emerging daily.  Manufactures and engineers in the LED lighting and technology industry are constantly developing new solutions to bring the initial cost of products down while also making them more energy efficient.  Federal and state research and development (R&D) tax credits are available to further stimulate these efforts. 

For companies that are carrying out innovative work in LED technology in the United States, R&D tax credits are a valuable resource, allowing businesses to receive a corporate tax reduction and/or a cash credit. LED lighting is used everyday in households and businesses across the United States. Horticultural lighting, specialty lighting for human health and productivity, automotive lighting and outdoor lighting are just a few areas LED technology is being used across many outlets.  Infrared LEDs are still frequently used as transmitting elements in remote-control circuits like your TV remote. Outdoor LED lighting used in private gardens or public landscapes for the enhancement and purposes of safety, aesthetics and security, are some of the many aspects of LED technology around us that is developing and changing because of the industry’s ongoing R&D efforts. 

The R&D tax credit was originally enacted in 1981 with the intent to stimulate the United States economy. The credit is an incentive for businesses of all sizes to invest in research and development activities to increase technological growth and competitiveness. This credit was made permanent in 2015, offering ongoing incentives for R&D investment and should be utilized if available.

Some typical qualifying R&D credit activities for LED technology include; 

• Design-build construction
• Connectivity with the Internet of Things (IoT)
• Developing better LED filament design
• Investigating dimmable features
• BIM modeling
• Development of LED TVs
• Advancing LED lighting and technology in the farming and agricultural sector
• Researching new methods and construction techniques for improved building integration
• Design for LEED/green initiatives
• Advancing LED lighting and how it helps with human well being
• Development of new installation methods
• Investigating flexible integration of package, driver and optics elements
• Wavelength research to control quality and properties of light emitted
• Improving manufacturing technologies focusing on yield and reliability
• Manufacturing cost effective light extraction solutions
• Developing high efficiency and long lifetime emitter systems
• Developing luminaire concepts to achieve enhanced light distribution control
• Targeting high refractive index and improved thermal stability
• Developing efficient, stabile, and narrow line width converter materials
• Developing materials and processes for manufacturing on flexible substrates

How to Qualify for the R&D Tax Credit

In order to qualify for the federal R&D tax credit, four things need to occur. First, the company must be developing a new or improved product or process in the United States. Second, the activity needs to involve the hard sciences, like engineering. Third, there needs to be some technical uncertainty at the onset with respect to the appropriate design. Finally, there needs to be an evaluation of different alternatives when the design is being developed, examples of this include systematic trial and error, modeling and simulation.

Watch this video: How to Qualify for R&D Tax Credits: The Four-Part Test

Find Out if Your Activities Qualify

If your business manufactures LED products and you’re constantly working to improve those products through research and experimentation, this qualifies as R&D.  Many of the daily activities conducted by LED technology companies qualify for the R&D tax credit, and it’s an industry that can benefit greatly from these tax credits and incentives. Tax Point Advisorscurrently partners with some of the most forward-thinking companies in the industry already, and we’re eagerly looking to help additional companies take full advantage of the available credits in the most effective way. 

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

Tax Point Advisorsprovides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more about R&D tax credits from the experts at Tax Point Advisors, please call us at (800) 260-4138 or please leave us a message below.