The R&D Tax Aspects of Architectural Signage
Technology is changing the way marketers
reach consumers in the signage industry. In order to
stay competitive with online marketers, signage companies are
constantly developing their own innovations.
Engineers in the industry typically develop solutions to
improve visibility, flexibility, and energy efficiency in
electronic signs. LED signs for example, produce bright
clear images that use less energy than conventional light
bulbs. Some of these signs are recyclable, wireless, and
solar driven. Others are smarter than personal computers
with the ability to recognize faces, gender, and age.
Train stations and airports display arrival and departure
times on HDTVs. Kiosks use LCD monitors and the latest
touch screen technology to advertise and process orders.
As LCDs get cheaper, screens get flatter, technology gets
smarter, marketing techniques evolve as well. As this
technology gets more accessible, digital advertising will
become more pervasive. The signs of the future will
display dynamic messages and interact intelligently with their
Signage providers who bring this technology to market should
be aware that what they do strengthens the local and national
economy. In order remain competitive in a
technologically advancing global market, the federal and state
governments provide substantial R&D tax incentives to
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
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 startup businesses
can utilize the credit against payroll taxes.
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
LED technology is changing the way
manufacturers make signs in several ways. It is affordable,
efficient, clear and bright. According to the U.S.
Department of Energy, LEDs produce more lumens per watt than
incandescent bulbs and their efficiency is not affected by
shape and size, unlike traditional fluorescent light bulbs or
tubes. Different sign companies offer their own
unique versions of LED systems for sign and electronic board=
lighting. Some companies offer LED “cluster” fixtures that can
generate millions of color changes randomly or by control to
create various colored lighting effects.
Other companies produce signs that adjust energy usage
depending on light conditions so that a sign will brighten
during the nighttime and dim during the day. However,
using more electricity to brighten a sign at night also means
higher costs at a time when traffic is minimal.
Therefore, the latest signs must be smart enough to sense
light conditions and adjust brightness while considering the
amount of potential viewers at any given hour. This
often involves complex algorithmic calculations which often
means research and development expenses.
Organic LED Signs
OLEDs are an offshoot of conventional LED
technology. Rather than an array of individual LED
bulbs, OLED uses a series of films to emit light. This allows
the technology to produce brighter light while using less
energy than traditional LED technology. In addition, since
these light-emitting films are composed of hydrocarbon chains
rather than semiconductors that contain heavy metals, they are
referred as organic.
Using the organic version of LED’s
provides the following benefits:
Although OLED technology has much potential, it is not without
significant challenges. Particularly challenging is the
way blue color is produced. The material used to create
it degrades at a much faster rate than the materials used to
create other colors. This eventually leads to a color
imbalance which affects the quality of the picture.
great deal of research has been performed in pursuit of
solving this problem by improving the efficiency and lifespan
of blue OLED. Manufacturers who spend time and resources
trying to solve these and similar challenges are eligible for
federal and state R&D tax credits.
- Lower Power Consumption –
OLEDs use less energy than regular LEDs in part because of
the way they project black light. Traditional LEDs produce
black simply by fully closing the pixel shutter.
However, the light behind the shutter is actually still
shining. OLED technology, on the other hand,
projects black light by shutting off the light source
entirely which produces energy savings.
- Better Picture Quality –
OLEDs produce better picture quality than regular LEDs
because they incorporate their own color filters which can
produce deeper blacks and a wider color gamut array.
- Durability and Lighter Weight
- Because OLEDs produce black light differently,
manufacturers can replace the heavier, shatter-prone glass
substrates often used in LED displays with lighter,
stronger plastic substrates.
- Price Point - The ability
to print out OLEDs as you would a piece of paper means the
cost of production is only going to continue decreasing.
Not all LED signs are mounted the same
way. Some mounts involve unique designs that allow for
flexibility, accessibility, and durability. Others must
be made so that they can hold up the sign effectively without
causing damage to the wall or supporting structure behind
it. One vendor has created a sign that uses the sides of
a letter to hold a prong that plugs into an electronic wall
outlet. The lightweight design of the sign actually
allows it to be supported by the electrical outlet -- similar
to a nightlight supports itself by its plug.
Other mounts allow the sign to be fastened to a wall with a
suction cup or a certain glue element. However, those
methods must take into account the type of material that a
sign will be fastened to along with the weight and size of the
sign. This requires varying glue or suction strength.
Many times engineers test an assortment of products before
arriving at a suitable one. This usually involves cash
outlays which may be considered as qualified research expenses
(QRE’s) towards the R&D credit.
The way an electronic sign is powered is
often a real concern for signage users. Many of these
end users erect multiple signs in small areas. For that
reason, typical wall connectors are not always
practical. Other users are concerned with safety and
environmental hazards. One solution to this is a solar
powered sign. This type of power source is often very
feasible because many signs are outside. Electronic billboards
for instance, are installed where there is no electricity, or
the nearest electric supply is some distance away. Rather than
spending thousands on trenching and electrician costs, solar
powered signs provide an easy to install solution.
manufacturers know how to create signs at competitive
rates. That is because they invest their own time and
money brainstorming and developing innovative cost efficient
solutions. There is always a way to develop a workable
sign using a slightly different material, packaging it in a
slightly different container, or subtracting a certain
component part. However, sometimes there is uncertainty as to
whether the product will still perform as intended. When
companies are willing to take these risks, there is often a
process of experimentation involved. Achieving a low
cost solution requires an investment in supplies, employee
time, and sometimes outside contractor costs. These
expenses drive the R&D tax credit.
Smart signs are revolutionizing the way
marketers reach their audiences. Not only do the latest
signs grab more attention from users who look at them but they
actually look back as well. What’s more, they are smart
enough to realize which of their messages generate a positive
reaction from the consumer. They pick up on facial clues
like smiles, eye contact, or a pointing finger. The sign
can then generate a rating for that message and store it into
a database. This way the ineffective messages can be
weeded out from the effective ones. That technology
helps brick and mortar establishments to better compete with
their online competitors.
Some signs can recognize whether the viewer is male or female
and present offers for products more likely to appeal to
them. Other signs can pick up data from nearby smart
phones in order to learn the customers interests. Once
the sign has customer information, it can send an appropriate
advertisement or send the customer an electronic coupon.
There is a large, growing market for
digital signage producers. The technology is
dynamic, effective, and easy to use. It adds customer
experience, optimizes store processes and provides another
entry point to the POS. Unlike traditional signs, users
can change the content on the ad very easily from their
personal computers in order to display not only letters and
words but pictures and graphics designs as well. It can
be not only informational but interactive as well.
The technology is particularly effective in places where
people tend to congregate and have long dwell times such as
airports. These settings provide great opportunities for
digital advertising because consumers are more likely to
respond enthusiastically when they have nowhere to go and
nothing better to do.
Digital signage is the advertising of the future. The
next generation of this technology will likely involve even
more consumer interactions. Imagine holographs that pop
up out of thin air and respond to inquiries by consumers,
helping them to explore merchandise while recording data and
feedback, reading customer reviews and viewing past customer
Starwood’s Design Lab
Starwood Hotels & Resorts Worldwide
recently opened a new design lab with many resources earmarked
for digital signage development. The new 46,000 square
foot facility which is located in Manhattan’s Garment District
is referred to as “Starlab”. It features mirrors which double
as digital screens and a chandelier that includes a news
ticker. Mike Tiedy, Senior VP of global brand
design and innovation at the company states, "Starlab serves
as our rallying cry for innovation, a proving ground for new
ideas, and a way to encourage collaboration among our design,
digital and brand teams." The collaboration he is
talking about is the latest emerging philosophy in all
innovative industries. Innovative businesses collaborate
not only by assembling people from cross-sectors of their
business operations but also by working with other innovative
businesses, academic research labs, and trade organizations.
InfoComm International is the trade
association representing the professional audiovisual and
information communications industries worldwide. They
serve their members and the industry through education,
providing resources, and creating social gathering
events. They recently created a popular webinar,
“Digital Signage in Food Services”, which describes how
digital signage is being applied in the food services
industry. Fast casual restaurants, food courts,
concessions, cafeterias, cafes, coffee shops, take-out
restaurants and bars are one of the highest growth markets for
digital signage. The webinar is intended for those
operating food service establishments and provides insight to
the economics of digital signage investment.
Technological innovation is changing the
way marketers reach consumers in the signage industry.
Engineers typically develop solutions to improve visibility,
flexibility, and energy efficiency in electronic
signs. Companies involved in architectural signage
innovation should be aware of the federal and state R&D
tax credits available to help stimulate the efforts.