The R&D Tax Credit Aspects of Airport Design



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Airport-Design

        Airport design in numerous airports throughout the United States is outdated and lacking in modern technology. The airport experience is constantly being improved because airports are no longer sufficient and adequate to support the amount of people traveling through them each day. Vice President Joe Biden was recently quoted saying that New York's LaGuardia Airport feels like a third world country due to its deteriorating infrastructure.


        United States airports provide service to more than 800 million passengers annually and is projected to reach the billion mark annually by 2027 or sooner.  Compared with their counterparts abroad, U.S. airports receive lower marks for customer service, feature more delays and congestion, and have older infrastructure.  There are many large airports in the U.S. however, few are considered good enough by global standards. Nations in Asia and the Middle East are developing new, efficient, and technology-enhanced airports  that resemble high-end shopping malls full of leisure amenities, while American airports are falling behind in core infrastructure areas as well as in amenities.  The ACI-NA predicts that U.S. airports will need $15.1 billion per year until 2019 to support infrastructure investments.  New development and innovation efforts to improve airport design are R&D Tax Credit eligible activities.

 

The Research & Development Tax Credit

        Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

                  • New or improved products, processes, or software
                  • Technological in nature
                  • Elimination of uncertainty
                  • Process of experimentation


        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On December 18, 2015 President Obama signed the bill making the R&D Tax Credit permanent.  Beginning in 2016, the R&D credit can be used to offset Alternative Minimum Tax and start up businesses can utilize the credit against $250,000 per year in payroll taxes.


San Francisco International Airport

        San Francisco International Airport (SFO) recently worked with renowned San Francisco-based design firm, Gensler, to renovate Terminal 2. Through extensive renovations with an emphasis on service, hospitality, and comfort, Terminal 2 was the first terminal to achieve LEED Gold certification from the U.S. Green Building Council. The airport is also the first U.S. airport that is an accredited museum.
 
        The terminal features local and organic food cuisine, mood-lit counters at the gates equipped with energy efficient LED lighting , night and day motion sensors, environmentally friendly certified wood other green building materials.

        SFO reduces water use through low-flow restroom fixtures and automatic shutoff valves. A dual plumbing system is used which is 40% more efficient than typical fixtures.  A flush for solid waste uses about 1.6 gallons of water per flush while the liquid waste option uses 1.1 gallons per flush.  The airport was also designed for increased sustainability through the re-use of building materials from the original building and implementing composting and recycling programs. AFO also reduced energy costs by employing innovative displacement ventilation systems which use 20% less power than conventional systems and are designed to save 15% more than the energy cost of an average airport terminal.


Restaurant & Retail Design

        Airport terminals are beginning to focus more on airside retail and dining design. Sales at airports are expected to grow by 73% from 2013 to 2019 and food and beverage sales accounted for $588 million in revenue in 2013. Rather than food courts and fast food, airports are transitioning to locally sourced fresh foods and five-star dining services. Travelers can now obtain higher quality and artisanal foods while also experiencing the different foods from the regions they are in. 

        Newark Liberty Int’l Airport (EWR) of New Jersey Terminal C is installing iPads in eating and waiting areas so travelers can browse the web, track their flights, and order food and beverages. Expecting to cost $120 million, 6,000 iPads will be put in by mid- 2016. This new system will help improve efficiency for travelers by reducing wait time on line for food. Instead, travelers can check their flight status while waiting for the food they just ordered to be delivered to them. iPads have also been installed at gate areas in restaurants at John F. Kennedy (JFK) and LaGuardia (LGA) in New York, as well as Toronto Pearson Int’l Airport (YYZ) and Minneapolis-St.Paul Int’l Airport (MSP). The new terminal restaurant design will also consist of rotating signage and sliding walls that will transform restaurants from a bagel stand in the morning to a deli in the afternoon.

        Currently, airports in India and Germany already allow shoppers to view items on floor to ceiling walls that use QR codes.  The QR codes are then scanned on smartphones and used to purchase luxury items. When the code is scanned, the order is placed in a virtual shopping basket which can be picked up at a nearby station in less than 15 minutes. In the near future, Transtailing, a new concept of Transit Retail, will use a mixture of physical and digital retail.  The same walls used from floor to ceiling will be transformed into virtual shopping walls. Customers will be able to browse through products just by touching the screen to scroll through items. In 2013, Tokyo's University of Agriculture and Technology developed a "smelling screen" where odors would go through specific areas of the screen. So if a traveler wanted to buy perfume they could smell the perfume right through the screen.  It is estimated that global ad spending will increase by approximately 20% from 2014, to 2018, a large amount of this  growth coming from increases in digital and mobile ads. This provides opportunistic ad space for Transtailing as well as for iPads at restaurant dining in terminals.


Automation & Self Service Technology

        Airports of the future will heavily rely on self service. There will be an emphasis on self service kiosks, self service bag drops, automated boarding pass scanners, and self boarding gates. As technology advances, the majority of cell phones in use are smartphones.  Many people use their smartphones to buy plane tickets, find out information about flights, and load boarding passes. Self boarding gates takes this a step further where travelers can scan their boarding passes from their phones to board the plane with no gate agents required. Smartphone applications are also being developed to track luggage, flights, airport maps, etc.

        Self service bag drops also have the potential to make traveling a faster process for those who are familiar with airport procedures. In addition, numerous luggage tags are being developed which incorporate smartphone programmable electronic tags and permanent RFID  to prevent lost baggage. In turn, this will allow employees to focus on travelers with questions who are less experienced.  Multiple hour flight can be exhausting however by promoting self service, airport traveling time can be cut down and utilized more efficiently at airports.    


Intermodal Airport Hubs

        Getting to and from airports is another pain point in the United States.  In many larger cities, airports are often located fairly far from the city center. These distances contribute to traffic congestion on the ground from cars, vans, and buses; while rail service to airports is rare.iii Traffic and road congestion is one of the biggest problems in big cities such as New York and Los Angeles and there is a high demand from travelers for a better connection to the airport. Also known as intermodal hubs, airports would be a focal point where railroads, buses, cars, and taxis, would convene to make transportation easier. Cities like Providence, Rhode Island, Miami, Florida, and Portland, Oregon are already building these hubs. Similar to an "Aerotropolis" the hope for the future is that business and urban development will be shaped around airports.  Governor Andrew Cuomo of New York recently proposed a new and improved AirTrain system to LaGuardia's soon to be renovated airport. The AirTrain would connect the subway and the Long Island Rail Road at an expanded terminal in Queens. The $450 million dollar plan is expected to improve New York's transportation and infrastructure. 


Aruba Happy Flow

        Happy Flow, a pilot program developed by Vision-Box, is a new self service facial recognition technology recently placed in Aruba's Queen Beatrix Int’l Airport (AUA). The facial recognition technology is the main passenger identifier. Travelers will have to show their passport only once at check-in where a photo will be taken of them and then verified against and linked with their electronic passport. As they continue to move through the airport, biometric face cameras , within different self-service touch points such as bag drop, immigration and boarding, will recognize their facial features and continue to check it against their electronic passport all within seconds. With an emphasis on comfort, improved security and efficiency, Happy Flow will make the airport process faster and safer.


LED Lighting

        LED lighting is one of the best implements an airport can do to become more energy efficient. LED's are most likely to be installed in airport parking garages due to the large space and lighting needed. Therefore, energy and maintenance savings are significant. Since LED lights do not need to be replaced frequently, there are also large maintenance savings. LEDs are projected to last at least 50,000 hours while fluorescent lights are only meant to last for a max of 30,000 hours.  Logan Int’l Airport (BOS) in Boston, MA input 2,000 LED lights in their Terminal B parking garage. The upgrade is expected to use approximately 50% less electricity and save $263,000 in energy costs this year and $3.8 million over the next 20 years. LED lights are also used on runways and in main terminal buildings.  Hartsfield-Jackson Atlanta Int’l (ATL) in Atlanta, GA also replaced 4,342 metal-halide fixtures with 80-watt LED lights in north and south covered parking lots. Replacing parking garage lighting can save energy, reduce costs, and lower CO2 emissions. In addition to these energy savings, Atlanta is expected to save almost $500,00 each year in energy costs.


Day-Lighting

        Another form of lighting to save energy is an emphasis on using the illumination of airports by natural lighting, also referred to as daylighting. Airport gate access requires that airport terminals have an elongated structure. This structure is perfect for daylighting.  Airports can utilize this structure to reduce lighting costs and provide a more comfortable environment for travelers. Typical buildings that take advantage of daylighting are able to save 40-60% of the energy used for lighting.  Airports can also utilize skylights to expose natural light. San Francisco Int’l Airport's Terminal 2, designed by Gensler, uses clerestory windows as well as skylights to enhance daylighting.  Airports in Denver, Colorado and Sacramento, California also use daylighting in their airport terminals and it has helped them achieve LEED certification.


Solar Farms

        An increasing number of airports are implementing solar panels to help power airports while also saving on energy costs. Solar panels convert sunlight into electricity, either directly using photovoltaics which convert light into electric current, or indirectly using concentrated solar power which use lenses, mirrors, and tracking systems to focus a large area of sunlight into a small beam. Indianapolis Int’l Airport (IND) contains the largest solar panel system, also known as a solar farm, in the United States. The solar farm contains 76,228 photovoltaic solar panels and produces 17.5 megawatts of electricity which is equivalent to producing enough energy to power more than 1,410 homes for a year.  
 

Conclusion

        As the airport industry and number of travelers continues to grow, new innovations are put into place to fix current infrastructure problems, become more environmentally friendly, and turn airports into a place where travelers actually want to spend time. Federal and state R&D Tax Credits are available to help support and stimulate these innovative efforts in the airport design industry.

Article Citation List

   


Authors

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Lauren Chin is a Tax Analyst at R&D Tax Savers.

Andrea Albanese is a Project Manager with R&D Tax Savers.


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