Posted by William Mehi on 11.08.18

Bringing intelligent robots into every home across the United States means tackling the challenges of hardware, software and design. With the recent announcement of Amazon’s plan to build a domestic robot with Alexa assistance, things are progressing beyond the conventional vacuum cleaning and lawn mowing robots. Social robots have also started emerging, and companies like Intel are planning launches of new companion robots, in an attempt to tap the growing senior populations’ need for service. Through computing innovation, companies are pushing the boundaries of smart and connected technology to make amazing experiences possible for every household across the U.S. 

Businesses in the robotics industry are performing research and development in everyday activities and most are not aware these operations could qualify for a dollar-for-dollar reduction of their income tax liability. If your company attempts to create products that are lighter, less expensive, reliable or more precise, the R&D tax credit adds up to money that can be reinvested into your business, rather than pay out to the IRS or state governments. 

Tax credits can deliver immediate and significant benefits to your company as a result of your innovative activities. Benefits include: 

• Source of cash for other needs - including reinvestment 
• Large reductions on current and future tax liabilities
• Credits – carrying forward up to 20 years

R&D Tax Credit

The R&D tax credit, originally enacted as part of the Economic Recovery Tax Act of 1981 was designed to encourage investment in innovation in the United States. 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. 

Which Activities Qualify?

Robots with mapping and spatial awareness capabilities and how they will play an important role in allowing other smart devices in the home to more seamlessly work together is just one example of innovation taking place in the home robotics industry. Developers are also exploring ways for robots to control all the devices and appliances in your home with just voice commands.

Many activities in the domestic robotics industry will qualify for the R&D tax saving credits, including but not limited to the list below.

• Testing the use of natural language processing
• Evaluating Cognitive Robotics creating new levels of judgment-based automation, enabling new levels of productivity and accuracy
• Resolve complex user queries by applying “Deep Learning,” such as the ability to automate judgment on images
• Exploring the use of lighter or more environmental friendly material
• Exploring better sight and sound or voice recognition
• Improving the production of robots to lower system engineering and installation costs
• Exploring ways to extend battery life by decreasing the amount of battery power wasted through inefficient trajectory cuts
• Testing and integrating alternative materials to improve product performance and manufacturing processes
• Using cognitive systems that learn what makes for effective performance and identify deviations from these learned models
• 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 human-robot collaboration
• Testing the application of artificial intelligence in robotic controllers

How to Qualify

While R&D tax credits are available, it can be challenging to navigate through the complexities involved with qualifying for the tax credit and the necessary documentation. For example, to be eligible, an activity must meet a four-part test. A qualified R&D tax credit expert can help determine which activities qualify and help you with the required documentation.

Find Out if Your Activities Qualify

The R&D tax credit can be a lucrative incentive for innovative businesses. Given the new permanent nature of the federal tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving tax credit opportunities.

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

Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, call us at 800-260-4138 or please leave us a message below.