Enhanced R&D Tax Credits for Specialized Co-Shared Spaces



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Co-Shared-Spaces
        In recent years, co-shared spaces for modern businesses have experienced tremendous growth. Now, the increasingly sophisticated co-shared space market is focusing on specialized business verticals or themes to distinguish themselves and attract more like-minded tenants with similar resource needs. To support specialized tenants, co-shared space owners are increasingly making investments in the facilities, assets, and programs necessary to support tenant categories. Landlord investments in these shared space assets and programs are assisting tenants in identifying and documenting enhanced Federal and State R&D Tax Credits.


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/Improved Products, Processes, or Software
  • Technological in Nature
  • Elimination of Uncertainty
  • Process of Experimentation

        Eligible costs include employee wages, supplies, contract research and testing 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 startup businesses can utilize the credit against $250,000 per year in payroll taxes.


Selected Specialized Co-Sharing Themes


Hardware

Asset investments to support hardware co-sharing themes include:

  • 3D Printers
  • Machine Tools
  • Tool Cribs
  • Welding Equipment
  • Packaging Equipment
  • Robots
This category of shared space tenants typically need larger physical facilities, stronger floors, inventory storage areas and receiving and loading docks. 



Media

Media tenants need access to some very specific and specialized equipment.  Asset investments to support media include:

  • Studios
  • Audio Video Equipment
  • Theaters
  • Green Rooms


Software


Software is one of the largest shared space categories. Software developers need strong computer hardware and telecom support systems including high speed networks, redundant server banks and data security.



Life Sciences

Life Science tenants with wet lab requirements need controlled HVAC (Heating, Ventilation and Air Conditioning Systems) and specialized mechanical systems. Robust ventilation systems and protective fume hoods are particularly important for wet labs. Flexible laboratory spaces are needed to accommodate both changing tenants and various sciences.   Physical proximity to major universities and university hospitals is also a key factor so doctors, professors, and students can access facilities for varying time periods, perhaps 24/7.

   

Program Themes


University Incubators

University incubators need proximity to the sponsoring university so both professors and students can access base time ability.  In addition, university business incubators often need expansion space options.  For example, a manufacturing start-up may only need a small space during the conceptualization stage but a large space once actual manufacturing commences.


Urban Science, Smart City, and E-Gov

These programs need connectivity to government agencies and government initiatives including economic development and the city planning department.


Conclusion

The co-shared space is becoming more specialized and vertically focused. Landlords can use specialization to differentiate themselves and justify facility and equipment investments to attract particular tenants. Tenants can utilize these customized facilities and assets to augment their Federal and State R&D Tax Credits.  

Article Citation List

   


Authors

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

Tricia Genova is a Tax Analyst with R&D Tax Savers.

Peter Saenz is a Tax Analyst with R&D Tax Savers.


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