is very R&D intensive and relies on innovation. The state's
manufacturing sector reportedly employs a larger share of the
State's population than any other U.S. state. With over
300 chemical manufacturing companies statewide, chemical
engineering & manufacturing dominate in this sector.
is an important sector in Alabama as well. Alabama's
agricultural production is dominated by the production of
broiler chickens. Almost 60% of the state's livestock production
is generated by these young chickens. The poultry industry
boosts the Alabama economy by $10 billion annually. Innovations
in this sector involve everything from clean organic products to
industry in the state is also extremely research and
development-oriented. Huntsville was the location of
NASA’s building of the Saturn V rocket, which was the first
rocket to put humans on the moon. Since then, the
industry has grown to include at least 300 aerospace
service/technology industry in Alabama has helped the
economy expand as well. While it is not a commodity-driven
economic sector, it has employed over 15,000 Alabamians and
generates more than $1 billion annually. To say that
Alabama is excluded from cutting-edge technology would mean
ignoring these numbers.
industry is significant as well. Alabama automakers
produced more than 1 million cars and light-trucks in 2016,
setting an annual automotive production record for the
State. Research and testing are central to this
industry. New product offerings drive car sales and parts
makers must engage in prototype testing and research and
development in order to keep the pace with original equipment
When companies develop such technologies, they might be eligible
for Research and Development (R&D) tax credits which are
available to help them grow.
The Research & Development Tax Credit
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 taxpayers 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.
Manufacturing is an enormously innovative industry in any
state. In Alabama, it is central to the state’s economy.
Manufacturers in Alabama account for 17.77 percent of the total
output in the state, employing 13.23 percent of the workforce.
The total output from manufacturing was $37.98 billion in 2018.
Also, there were 267,000 manufacturing employees in Alabama in
2018, with an average annual compensation of
$69,265. Those manufacturing employees made up a
larger share of the state's population than any other U.S.
Manufacturing is tremendously R&D intensive.
Developments in this industry include new products or product
improvements and process improvements. Discovering ways to
increase productivity, integration of new equipment, and design
of state-of-the-art facilities also involve research and
experimentation. Many of our manufacturing clients develop
new and improved processes just as much as they do new and/or
Chemicals are the most important products manufactured in
Alabama in terms of value-added. They are the number two
exported product in the state. Ground-breaking
projects in the U.S. chemical industry are central to our modern
standard of living. Chemical engineers use raw materials
such as oil, natural gas, air, water, metals, and minerals to
create products we use daily. Plastics, rubbers, fibers,
polymers, semiconductors, explosives, detergents, pesticides,
clothing, and even food products all involve some level of
R&D credits are also available for food science
manufacturing companies. The U.S. food industry is
undergoing monumental changes as it faces issues of genetically
modified ingredients , educating consumers, and shifting to a
larger focus on environmentally and nutritious products.
Product and process development in the food processing industry
involves changes to flavor, texture, temperature, customs, and
consumer price constraints. Many companies incorporating
healthier ingredients, such as organic ingredients , face
challenges in finding supplies of suitable ingredients and
successfully substituting them for the processed ingredients.
Companies are incorporating improved processes and techniques,
confronting the issues of whether the new processes and
techniques are safe for consumers and whether they can be
produced to scale.
Agriculture is also an important industry in Alabama. Alabama
farmers sell nearly $4 billion worth of poultry each year.
While most of Alabama's agricultural production is in livestock,
18% is in crops with greenhouse, nursery, and sod products
leading the way.
Poultry, which has a $15 billion economic impact and has
historically supported more than 86,000 jobs is growing across
the state. In 2015, the sector added 615 new or expanded poultry
houses, for a combined construction investment of $296 million.
That’s up from a $30 million investment in 2010, with the
numbers increasing gradually each year.
Pioneering in this industry involves everything from
state-of-the-art irrigation systems, to new machinery
development, to big data analytics and genome
research. According to the United Nations, the world
population is expected to reach 9.6 billion by 2050. In order to
meet this unprecedented demand, global food production will have
to increase by 60%, in relation to 2005/07 levels. Our
food processing and distribution clients are constantly seeking
to increase throughput and improve efficiency as well.
Climate change, water scarcity, and workforce and land
availability pose major challenges to this goal, putting the
agricultural industry under great pressure to remain
The aerospace industry in Alabama is more than 100 years old,
starting with the Wright Brothers’ establishment of a civilian
flight school in 1910. Today, there are over 300 aerospace
and defense companies in Alabama including Airbus, Sikorsky,
Lockheed Martin, Bell Helicopter, Boeing, Northrop Grumman, GE
Aviation, Airbus Military, GKN, General Dynamics, BAE Systems,
Goodrich, Teledyne Brown, Pratt & Whitney, and Raytheon.
The aerospace industry is one of the most competitive industries
. Cost reduction and innovation is a necessity in this
sector. You need not be Boeing to be eligible for the
R&D tax credit. All of the tier suppliers to these
large companies are excellent R&D tax credit
candidates. One of our mid-market aerospace/defense
clients, for example, is involved in various activities;
including collaborating with third-party vendors for IT
development as well as introducing more automation technology
into its manufacturing. In recent years, there has been a
major demand for new aircraft around the globe. This
demand has created a huge order backlog that has yet to be
fulfilled. Process improvements and efficiency projects on the
manufacturing floor are therefore critical. Research and
Development tax credits are available for these efforts.
Information technology is an extremely inventive industry.
In Alabama, information technology is particularly prevalent in
the Huntsville/Madison County area of the state with more than
300 international and domestic corporations operating in that
area. These companies develop a range of technologies such
as modeling and simulation technologies, cybersecurity , and
data centers. Their work ranges from the design and production
of electronics and computer-related technology to the
manufacturing of technology hardware to the making of sensors
and radars for advanced missile systems.
The future for this industry in Alabama couldn’t be
brighter. Computer systems design and management services
are projected to increase employment by more than 650,000 jobs
in the next five years. In North Alabama, Google began
building a $600 million data center in 2018. The state is
attractive to Google because state laws provide competitive
incentives for data center projects. Our clients have
R&D eligible clients ranging from database integration and
testing to coding and software development. Such
initiatives involve aspects of Research and Development.
The automotive industry is critical to Alabama’s economy.
Alabama ranks 5th in the U.S. in car and light truck
production. One-fourth of all passenger vehicles built in
the south are made in Alabama.
Today’s automobile is the most sophisticated technology
owned by consumers. From the early stages of planning,
automakers design innovations into new vehicles. Virtually
every aspect of the modern automobile is now high-tech, using a
high-tech material, or was developed through a high-tech
process. As a result, automakers rank at the top of lists
on most innovative companies, and automakers are recognized
leaders in R&D investments, in Alabama, the U.S. and
Progress and advancement are central to Alabama’s current
economic strategy. When companies develop products and
improve processes, they may be eligible for Federal R&D
credits which are available to stimulate growth and help
companies flourish in this economy.