Posted by William Mehi on 04.12.23

The water recycling business is brimming with opportunities to claim Research and Development (R&D) tax credits. While there are many existing technologies currently in use to safely and effectively recycle water, most create “grey water” which is useful for irrigation, creating and enhancing wetlands and replenishing groundwater sources. This is valuable and necessary, but the need for clean drinking water in the United States is far greater than it has ever been, due to population growth, dry weather and aging water treatment and delivery systems. The benefits and profit potential for providing clean drinking water from recycled water are immense. Innovative technologies that help to solve this problem are in high demand. Get the R&D tax credits your business deserves for your invested time, effort and resources.

The R&D Tax Credit

The R&D tax credit was instituted by the federal government to stimulate the United States’ economy through innovation. The idea being that: by providing companies that were ready and willing to invest in improving their processes and developing new products with tax incentives, technology would progress and the nation would advance economically. In 2015, after many extensions on the temporary bills that would become the R&D credit, it was made permanent by the U.S. Congress and is now a dollar-for-dollar benefit against tax. 

Which Activities Qualify?

Many activities in the water recycling industry will qualify for the R&D tax saving credits, including:

• New and/or improved cleaning processes
• New chemical compounds to improve the cleaning process
• New machinery or equipment to improve the cleaning process
• Advances in portability of the machines and/or processes used to clean the water
• Enhanced microbiological test procedures
• Devices used for testing purposes
• Added nutrients to the recycled water
• Improving efficiency for existing processes
• Research to develop new processes for sterilization
• Software programs to maintain and organize results
• Water delivery systems
• Filtration methodologies

Find Out If Your Business Qualifies For These Tax Saving Credits

The activities and associated expenditures (derived mostly from employee time, consultant expenses and related R&D supplies) of a company can qualify for the R&D tax credit if the activities meet the requirements of the four part test established by the IRS:

1. Qualified Purpose - The purpose of the research must be to create a new or improved product, process, or formulation, resulting in increased performance, function, reliability or quality.
2. Technological in Nature – The research must rely on the hard sciences, such as engineering, physics, chemistry, biology or computer science.
3. Elimination of Uncertainty – Activities must overcome some unknowns, such as uncertainty as to capability, optimal design, or optimal methodology. 
4. Process of Experimentation – Experimentation can be demonstrated through prototypes, simulations, systematic trial and error, or other methods of evaluating alternatives to achieve a desired result.

Opportunities to claim the Research and Development (R&D) tax credits for the water recycling industry are abundant. Creating a new process for the sanitation of non-potable water, transforming it into clean drinking water and creating more efficient and cost-effective desalination techniques are just a few activities performed that can qualify for the R&D credit. The possibilities for claiming the R&D tax credit in the water recycling business are many and varied.

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 800-260-4138or please leave us a message below.