The R&D Tax Credit Aspects of Delaware Innovation



By , , and


        Despite its small geographical footprint, Delaware is a major state for innovation. The federal and state Research and Development Tax Credit is available to assist commercial innovation in Delaware.


The Research & Development Tax Credit

        Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% 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 January 2, 2013, President Obama signed the bill extending the R&D Tax Credit for 2012 and 2013 tax years. As of this writing, both the Senate Committee on Finance and the House Committee on Ways and Means have recommended extension of the R&D tax credit.



Delaware R&D Credit

        In order to boost Delaware's job market and to create synergy between large research companies and smaller independent startups, lawmakers have enhanced the state's research and development (R&D) tax credit for small businesses. Previously, the state of Delaware had offered R&D incentives to in-state businesses by matching 50 percent of the federal tax credit given to eligible organizations and the state drew from a $5 million per year budget. However, there was no distinction between large and small businesses. Therefore, state leaders thought more could be done to help small companies, particularly those who generate less than $20 million per year.

        Governor Jack Markell signed House Bill 318, ensuring that smaller companies who are eligible for the R&D tax credit will receive a greater share of funding than the larger organizations by receiving double the tax credit. According to Senator Robert Venables, Delaware will match a business' federal subsidy by up to 100 percent. Larger companies will continue to qualify for up to 50 percent of the federal subsidy. Markell believes that encouraging research and development in companies will incentivize innovation and growth for Delaware, which is vital to the economy. This legislation will undoubtedly increase opportunities for Delaware's entrepreneurs to innovate and grow.



National Science Foundation Grants

Rising Sea Levels
        The World Economic Forum's Global Competitiveness Report for 2012-2013 ranked U.S. infrastructures as 14th in the world, seven slots lower than where it was in 2008. This considerable change can be explained by the country's aging infrastructure, which calls for urgent investments and upgrading efforts. A growing number of universities and research centers are engaging in infrastructure R&D. Their efforts speak to the importance of this line of research and set the basis for innovation from the private sector.
In 2013, United States Senators Tom Carper and Chris Coons and Representative John Carney announced $20 million in National Science Foundation funding for four Delaware colleges and universities to invest in science education and research. The emphases of the donations are on the effects of sea level rise and soil contamination. Furthermore, renewable energy and workforce development will be studied at The University of Delaware, Delaware State University, Wesley College and Delaware Technical Community College.

Bioenergy Crop Research
        The National Science Foundation issued a $7 million grant to The University of Delaware, Delaware Technical Community College, Wesley College and Delaware State University. The grant funds the investigation of advanced molecular genetics and epigenetic studies on perennial grasses as potential non-food sources of fuel, and the effects of non-agricultural land use and climate on the Chesapeake and Delaware Bays. As part of the project, researchers are seeking to identify how environmental forces effect gene expression in the crops. Additionally, as another focus, they are looking at aquatic health and changes in marsh grass equality in relation to changes in coastal habitat. Delaware is a coastal state and the study of climate change might prove to be vital to their existence in a world of climate change.



University of Delaware

        The new Interdisciplinary Science and Engineering Laboratory (ISE) is a 194,000 square foot facility at the University of Delaware (UD) that is going to be a hub for innovation. The facility brings together students and faculty from various disciplines to teach, learn and conduct research in a collaborative environment. Research will provide content for the curriculum and students will learn though exploration of real world problems. At the University of Delaware they have found that electric cars equipped with technology invented at UD can send battery power back to the grid. The approach being taken at the University of Delaware is having biomass, wind, solar and fuel cells all have a part to play in future energy solutions. In 2008 the U.S. Department of Energy awarded the University of Delaware a five year, $17.5 million grant to establish the Catalysis Center for energy. At this center called the Energy Frontier Research Center researchers are working to establish a scientific foundation for a fundamentally new U.S. energy economy. The central focus is on biomass conversion and the center's major breakthroughs include discovering potential ways to produce plastics from plants.

Researchers are promoting the use of direct carbon fuel cells for converting biomass to electricity, and replacing biological processes with thermo chemical processes to transform trees into corn syrup that can be used in a food or be transformed into fuels and chemicals.

Delaware STAR Campus
The first health science building at the University of Delaware's Science, Technology & Advanced Research (STAR) campus opened in February of 2014. Among the first groups to move into the new center were the Nurse Managed Health Center and the Physical Therapy Clinic. This new campus encourages innovation at the University of Delaware.



Delaware State University

        At Delaware State University they have developed a Hydrogen Research Center with the primary focus of finding novel materials that can store and release large quantities of hydrogen gas at moderate temperatures and pressures.



College of Education & Human Development

        The University of Delaware has been the receiver of many grants in past years, many of which have proved to be successful. The Institute of Education Sciences awarded a $10 million grant to University of Delaware professor Nancy C. Jordan, Lynn Fuchs at Vanderbilt University in Tennessee, and Robert Siegler at Carnegie Mellon University to fund this research and development center that will last 5 years. The center's research is aimed at understanding difficulties that students have with fractions. The Center for Improving Learning of Fractions, administered at UD, focuses on improving math instruction for elementary and middle school children with problems with math concepts, specifically fractions. Today's commercial innovation opportunities require a workforce with a much stronger math foundation.



Delaware Cardiovascular Research Center

        With the aging of the baby boom generation, the impact of heart disease on the American population is bound to grow. In this scenario, innovative ways to improve prevention and treatment are vital. Federal R&D Tax Credits are available to support credit eligible cardiovascular disease innovation activities.

        Cardiovascular disease is the number one cause of death in the United States with 36% of all mortalities nationwide attributed to this disease. Recently, a commitment to form a regional partnership was approved and it united the Delaware Health Science Alliance involving the University of Delaware, Christiana Care Health System, Nemours, and Thomas Jefferson University. In October of 2013 the center received a $1.3 million research grant for Professor Ulhas Naik to continue his studies at the Delaware Cardiovascular Research Center. He is determined to tease out the roles that various blood components play in the formation of clots. Naik has been testing a new compound that he and his team recently created to block the stress activated enzyme ASK1, which also is found in blood platelets. All in all, the ultimate goal of Professor Naik's research is to find a compound that will prevent the formation of a blood clot in circulation but not inhibit the process of hemostasis, which arrests bleeding when one cuts a finger.


Delaware Center for Neuroscience Research

        Since the invention of the non-invasive brain scan and continued improvements in imaging and scanning technology, neuroscience has been shifting from a social science to more of a physical science. As scientists use new non invasive brain imaging technology new products and software that reflect the brain will be created. R&D tax credits are available to support the development of new products and software.

        In 2012 the Delaware Center for Neuroscience Research was awarded a five year $10.5 million grant from the Centers of Biomedical Research Excellence program at the National Institutes of Health. The Delaware Center for Neuroscience Research has been featured in the publication International Innovation which is a global dissemination resource that provides insight and analysis on current scientific research trends and funding and policy issues. The Center unites University of Delaware researchers with Delaware State University which has provided an array of perspectives in their research.



Commercial R&D

Compact Membrane Systems, Inc
        Compact Membrane Systems (CMS) focus on the research, development, and commercialization of membranes and thin films composed of fluorinated polymers with exceptional gas transport properties. With a growing patent portfolio, Compact Membrane Systems has a successful track record of obtaining research grants. CMS has, and is, developing a number of clean energy applications. Some examples are Nitrogen Enriched Air for diesel engine NOx emissions reduction, gasoline vapor recovery, and dehydration of wind turbine gear oil and dehydration of green fuels. Additionally CMS's business model is to develop coating and membrane manufacturing technologies in-house and to create and demonstrate product applications uniquely suited to their products.

Lewis Research, Inc.
        Lewis Research, Inc. is a tribological testing facility and test equipment manufacturer which provides high quality tribology equipment and service to clients worldwide. Their machines are built to test the friction and wear of plastics and other materials for use as bearings, seals, piston rings, gears and other sliding applications.

DuPont USA
        DuPont USA reportedly invests over $2 billion in research every year. With their research and development aimed at substantial global needs, DuPont focuses on improving the food supply, alternative energy, and creating light weight protective apparel in addition to electronics. DuPont has a research and development facility in Wilmington, Delaware. DuPont's experimental station in Delaware is responsible for some of the world's most important scientific advances such as Kevlar, the world's first synthetic rubber and fully synthetic fiber, in addition to many others. The station employs more than 2,000 scientists and researchers who are pursuing science based solutions for global markets. Below is a map of the experimental station's major contributions.

DuPont Experimental Station Inventions

Bilcare Research, Inc.
        Bilcare Research, Inc. is a global leader and an innovation-led packaging solutions provider that partners with the pharmaceutical industry to improve patient healthcare outcomes. Their goal is to deliver effective and affordable solutions that enhance the speed and quality of drug discovery and help build and protect brands by ensuring the delivery of genuine medicines to patients. Bilcare believes in excelling through continuous research and their R&D initiatives focus on pursuing new knowledge about innovative research solutions in both packaging materials and its application to pharmaceutical formulations. This continues to be their key growth factor. Bilcare is at the forefront of delivering sustainable, affordable and innovative packaging solutions to customers globally.

Incyte Corporation
        At Incyte Corporation, the focus is on two core disease areas of oncology and inflammation. This is where they apply their expertise and resources most effectively. They utilize the vast knowledge of their integrated team. They have experienced biologists and chemists who not only select drug targets with strong genetic or pharmacologic validation, but also indentify areas where they have potential to generate original molecules and compounds that are highly differentiated from existing treatments.

Air Liquide
        Air Liquide is a world leader in gases, technologies and services for industry and health. Their American division, American Air Liquide Holdings, Inc., is located in Delaware where they have a specialized R&D center. Their research and development focuses are on process engineering, material science, analytical science, life science, combustion, fine chemicals synthesis & surface science and applied mathematics. Air Liquide develops specifications and optimization of industrial gases manufacturing process including physical and chemical engineering, heat and mass transfer for process plants, heat exchangers, distillation columns, adsorbers, and more.



Conclusion

        Delaware has extensive amounts of research being performed at both the commercial and University levels. Researchers can be assisted by the federal and state R&D tax credit.

Article Citation List