Contributed by:
Charles R. Goulding & Randy Rothbort
R&D Tax Savers
www.rdtaxsavers.com
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This is Part 3 of a guest post series. Check out the other posts in this series on Tax Credits for the Lighting Industry. Views expressed are those of the author/s and the firm they represent. Representatives of R&D Tax Savers have presented at the LightFair Conference in the past.
One of the optimal ways to accelerate innovation is to intertwine two fast-growing technologies. In what ways could leveraging the collaboration between two such areas of innovation impact your bottom line?
The Lighting Resource Center (LRC), arguably the leading university lighting research center in the US, is doing exactly that. The LRC is part of Rensselaer Polytechnic Institute in Troy, New York. Founded in 1988, the LRC has made great advancements in the research of light and its effects on human health, transportation lighting and its effects on safety, solid-state lighting, and plant health. The LRC also brings other industries into the lighting field in order to make advancements for both.
LED lighting and 3D printing: An Innovation-Driven Partnership
LED lighting, like all semi-conductor technology, has continuously improved in performance since it has begun development.
Meanwhile, after over 40 years in development, the 3D Printing (3DP) industry has finally begun hitting its stride. The 3D printing industry is achieving record results in their manufacturing work in large part because of the chemical and materials industry, which is now providing a much wider range of 3DP-compatible raw materials, including a wide range of metals (including steel, copper, and aluminum). Recognizing the huge commercialization opportunities that the 3D printing industry can offer the LED lighting industry, the LRC has organized working partnerships between many leading lighting and 3DP companies.
In 2019, the LRC organized a discovery group of leading lighting companies, 3D printing manufacturers, and 3D printing material suppliers. Some of the companies participating in this discovery group included Acuity Brands Lighting, Current by GE, Desktop Metal, DSM, Eaton Corp., Finelite, Focal Point, Henkel, HP, Hubbell Lighting, Lumileds, Stratasys, Tempo Lighting, and Ultimaker. The LRC organized this group to stimulate collaboration between the two industries, and to develop potential pathways of innovation for both industries while working together.
3D Printing and Its Impact On Lighting Production
The lighting industry has already utilized 3D printing extensively for prototyping, however additive manufacturing has not been properly integrated into the full manufacturing process. However, this collaborative effort between the LRC and these leading lighting and 3D printing companies has now led to additive manufacturing being utilized in the production of lighting products, which has vastly improved the design and functionality of many products. Two Rensselaer professors from the Lighting Research Center, Dr. Nadaraja Narendran and Dr. Indika U. Perera, discussed the benefits of this at length in August 2019.
While the use of 3D printing in production of lighting is innovative, the real functional benefits of it come in the supply chain efficiencies.
- 3D printing does not just improve the functional manufacturing potential, such as creating unique geometries and materials with greater precision and quality, but it also improves the speed and efficiency of production.
- 3D printing can be used to create various lighting components that can significantly improve the products, such as heat sinks, reflective optics, and transmissive optics.
- Lighting fixtures can also be developed more efficiently. These components reduce the cost of materials and weight, while still considerably improving the thermal and energy efficiency of the lighting products.
- Furthermore, the flexibility and convenience of 3D printing help to shorten the supply chain of products, the effects of which are particularly useful for various lighting projects. For example, if lighting must be installed on-site for a new construction, components of the product that normally would be fabricated elsewhere can now be produced on-site, reducing the need for shipping and transport. Instead, only the materials must be transported. This produces significant environmental and energy savings in the process while producing a more advanced and effective product.
The Research & Development Tax Credit
Whether it’s used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D credit-eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.
Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
- Must be technological in nature
- Must be a component of the taxpayer’s business
- Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
- Must eliminate uncertainty through a process of experimentation that considers one or more alternatives
Eligible costs include US employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, US contract research expenses, and certain costs associated with developing a patent.
On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and, startup businesses can obtain up to $250,000 per year in payroll tax cash rebates.
Conclusion
Both the lighting and 3D printing industry serve to benefit a great deal from their collaboration. As the lighting industry continues to advance, the innovative manufacturing capabilities offered by 3D printing manufacturers serve to further innovation for both industries. As more leaders in each field begin to collaborate, and as 3D printing becomes more ubiquitous in the lighting industry, the innovations will continue to grow.
There is still time to get the 2020 credit on your unfiled 2020 tax return. If you are looking to take advantage of this credit, consider consulting with an R&D tax credit expert to get started.