The R&D Tax Credit Aspects of Alaska
Alaska
The Alaskan economy
is technologically advancing and innovation
driven. Major economic sectors include oil and gas, tourism,
aquaculture/fishing and professional services. Major
technological advances are occurring in each of these sectors. In
the oil and gas sector, innovative applications include the development
of novel drilling and fracking methods, intelligent data analytics and
the development of tools, drills and equipment. Tourism industry
advances include virtual reality applications, advances in the sharing
economy, biometrics and customer centric mobile applications such as
GPS, paperless boarding passes, automated itinerary generation,
etc. Aquaculture/fishing industry technological advances
include genetic engineering, preservation technologies and
state-of-the-art disease prevention measures. When Alaskan
businesses develop and integrate technologies such as these they may be
eligible for Federal Research and Development (R&D) Tax Credits
which are available to stimulate innovation.
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 U.S. employee wages, cost of
supplies consumed in the R&D process, cost of pre-production
testing, U.S. 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 for the first time,
pre-profitable and pre-revenue startup businesses can obtain up to
$250,000 per year in payroll taxes and cash rebates.
Oil &
Gas
The oil and gas
industry is the largest component of Alaska's
economy. Nearly 85 percent of the state budget is supplied by oil
revenues. The sheer quantity of oil and gas resources in Alaska
are enormous. Alaska's waters are believed to contain more
than 30 percent of the nation's known recoverable off-shore
resources. Alaska's oil and gas industry has produced more than
17 billion barrels of oil and 13 billion cubic feet of natural
gas. The petroleum industry supports one-third of all
Alaskan jobs, generating 110,000 jobs throughout the state.
Several Alaskan equipment,
supplies and tools manufacturers develop and engineer tools, drills and
equipment to support this massive economic sector. Some of these
companies with operations in Alaska are listed below.
Alaska
Instrument
Company,
LLC.
Alaska
Instrument Company, LLC. provides application
engineering in the field of industrial instrumentation, control, and
piping systems. Alaska Instrument is the largest manufacturer
representative in Alaska, currently representing over thirty
manufacturers of process control equipment.
Alaska
Rubber
and
Supply,
Inc.
Established
in 1980, Alaska Rubber and Supply, Inc.
in Anchorage Alaska provides access to numerous oil and gas
industry products such as industrial and hydraulic hoses, fittings,
accessories, conveyor belts, rigging supplies, and petroleum handling
equipment. They also provide a range of services including pull
testing, hydrostatic pressure testing, hose fabrications and
engineering and design activities. The Alaska Rubber Group has
locations throughout the State in Fairbanks, Wasilla, Anchorage
and Kenai.
Baker
Oil
Tools
Baker Oil
Tools in Deadhorse, Alaska designs and
engineers a full portfolio of energy products including software,
advanced analytics, controls and sensing, drillbits, piping, tubing,
etc. These products & services include an array of
applications in upstream, midstream and downstream oil and gas
production. Asa GE subsidiary company (NYSE:BHGE) they are the world’s
first and only fullstream provider of integrated oilfield products,
services and digital solutions.
Tourism
Tourism is a
significant contributor to the Alaskan economy. Over
2 million out-of-state visitors travel to Alaska annually. These
visitors spend over $2billion annually during their time in
Alaska. Southeast Alaska is the most visited part of the
state, with two-thirds of all tourists coming to the region.
These tourists contribute one-third of all Alaskan visitor spending, an
estimated $657 million in 2016.
Big data,
artificial intelligence and other
electronic technology applications have recently propelled the tourism
industry into the 21st century. e-Tourism can be defined as the
analysis, design, implementation and application of IT and e-commerce
solutions in the travel & tourism industry. Applications of
this technology on the consumer end involve GPS tour guides, mobile
application based mapping and tracking techniques, virtual reality
applications designed to provide travelers with a tour of preferred
vacation destinations which can be explored before arrival, security
applications at border crossings/airports (such as biometric scanning
technologies) and computer databases laden with passenger centric data
for instant analysis.
Virtual Reality
For many
travelers, the vacation experience starts
long before a traveler arrives--it begins with the first visit to a
location website, when a person sees photos of the location and gets a
sense of what to expect. Virtual reality applications can
also help convince customers to choose a location.
Other
electronic applications allow users to book
vacations, and plan itinerary details. Navitaire, a travel technology
company (owned by travel tech giant Amadeus) is currently developing
technology which allows users to view alternative airline routes and
pick their airline utilizing virtual reality based technology.
Once they’ve selected a flight, they can compare seats on the plane,
test out rental cars, pick up a virtual credit card (linked to a real
credit card) and pay for their entire trip. This all-encompassing
ability could provide a solution to real problems faced by vacation
planners.
According
to one study by Google, travel consumers
typically make 350+ digital touchpoints before booking a vaction.
By combining photos, videos, 360 images as well as purchase and booking
functionality into a single experience, a traveler can now access all
the information they need in one interface resulting in significant
planning and time savings.
Data Analytics
Big Data
provides numerous applications in the
tourism sector. Airline operators use it to understand passenger
behavior, analyze traveler trends, create tourism profiles and direct
marketing efforts. Tourists use predictive analytics to make
decisions based on weather and traffic patterns, available lodging and
to compare price offerings. Which hotel is the most
pertinent for a young couple who just booked their flights for next
summer holidays? Which alternative route contains the least
traffic?
Mobile Applications
Mobile
based tools and applications are beginning to
dominate the travel booking sector. A recent survey by eMarketer
shows that travel-based mobile apps are the 7th most downloaded mobile
application category and that 60% of smartphone users prefer travel
apps for planning their leisure tours. Tourism mobile apps help
users for planning travel, accommodation bookings, ticket bookings, cab
booking, route mapping, and more.
The Alaska
app is an Alaska based tourism mobile
application which helps users find nearby attractions, create trip
itineraries, view weather forecasts and provides over 350 audio guides,
500 videos and over 10,000 Alaskan photos.
Aquaculture/Fishing
Alaska is
heavily dependent on aquaculture and
fishing. Alaska's fish catch is the most valuable among the 50
states. Large catches of cod, flounder, pollock, rockfish,
sablefish, salmon, and smelt drive the industry. Each year nearly
6 billion pounds of seafood are harvested. Alaska is the number
one producer of wild salmon in the world and has the only salmon
industry certified as "sustainable" by the Marine Stewardship Council.
Innovations
in this sector include fish farms,
aquaponics, innovative fishing nets, development of antibiotics,
genetic engineering and an almost endless list of additional technical
advances. Electronics for fish finding, satellite-based
technology for navigation and communications, onboard conservation and
increased use of outboard engines have all contributed to the major
expansion of fisheries and aquaculture in recent decades.
Technical advances have generally led to more efficient and economical
fishing operations, reduction of the physical labour required per unit
of output and improved access to resources.
Kodiak Seafood and Marine Science Center
The Kodiak
Seafood and Marine Science Center in
Fairbanks promotes the sustainable use of Alaskan fisheries through
collaborative research, application, education and information
transfer. Recent R&D initiatives involved the development of
safe handling and preservation techniques, the research of spoilage
prevention measures, enhancing nutritional content, the effects of
capture, handling and processing procedures, by catch reduction, offal
discharge management and energy efficient processing developments.
Professional Services
Engineers,
architects, lawyers, accountants,
business managers, and other professionals account for sixty percent of
the professional services sector in Alaska. Local firms provide
services for a wide variety of public and private projects and
organizations throughout Alaska. Many of these projects are tied
to the heavily anchored Alaskan oil and gas industry. The rise and fall
of professional and business services employment over the past decade
has followed the same trend as oil prices and revenues, which peaked in
the 2012-2013 period. Mining projects throughout the State
typically require significant engineering, planning, and social science
research, as well as administrative support services.
Technology advancements in this sector largely involve artificial
intelligence, data analytics and other digital applications.
Automation
Many of the
routine and less
sophisticated professional services tasks are being automated in an
effort to drive efficiencies and stay competitive. By automating
routine tasks, technology is freeing people to focus on solving
higher-order problems.
Solve It in
Anchorage
provides, professional services to the small and micro businesses in
the Alaskan community. Services include network management, IT systems
integration, cyber security, automation, etc.
Cloud Servers
Cloud
servers provide a
location for electronic data storage much like a dedicated and physical
server. However, instead of being hosted on physical hardware that’s
solely used by one business or individual, they reside in a shared
“virtualized” environment that’s managed by a cloud hosting provider.
Users benefit from the economies of scale by sharing hardware with
other users. The benefit is that users only pay for the exact amount of
server space used allow businesses to scale resources up or down,
depending on demand, so that they’re not paying for idle infrastructure
costs when demand is low. This type of data storage is becoming
increasingly popular and utilized by many successful services.
Communication
Advances in
business and
professional services communication technologies allow companies to
operate efficiently across large geographical distances.
Communication advances include video-based tele-conferences, social
media, server virtualization and mobile based applications which
provide real time updates on incoming e-mails, text messages and other
electronic notifications. Technology has changed business in many
ways, but its affect on communication is arguably the most significant.
Technology allows individuals to communicate and carry on a business
relationship without ever meeting face to face, so people in all parts
of the world now have the chance to interact with a company in a rural
part of the United States. This is particularly relevant for
Alaskan businesses whom often have deep relationships with mainland
based U.S. colleagues and must interact daily across geographical
distances thousands of miles away.
Conclusion
The Alaskan
economy is
innovative and technology driven. Major economic sectors include oil
& gas, tourism, aquaculture and professional services. Federal
Research and Development tax credits are available to stimulate
innovation in Alaska.
