The R&D Tax Credit Aspects of Educational Technology (EdTech)
Edtech
Education, one of the industries most
resistant to change, can severely benefit from technological
innovation. Educational Technology (EdTech) has become one of
the most popular sectors in Silicon Valley and beyond. It has
been gaining recognition partially due to the fact that money
has been pouring into it from multiple sources. In the first
half of 2015 alone, private investors poured $2.5 billion into
EdTech companies . EdTech innovation is likely to accelerate
in the coming years due to educational institutions now
accepting the introduction of new technologies.
Innovative technology will offer more personalized approaches
to education. Some benefits of incorporating innovative
technology into education would be a more adaptive delivery of
curricula, improvement of outcomes, and that it will better
prepare students for tech-driven workplaces . With the
national concern of the price of higher education, people are
hopeful that innovative technology could reduce these costs.
Additionally, the Research and Development (R&D) tax
credit is available for companies that innovate in educational
technology.
The R&D 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 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 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.
Computer Science for All Initiative
Currently, only 25% of the K-12 schools in the U.S. offer
computer science with programming and coding . According to
the White House, only 28 states allow those courses to count
towards high school graduation requirements.
As
a result, President Barack Obama has called for more than $4
billion in funding for states and $100 million specifically
for districts to ensure that every K-12 student has access to
computer science curriculum. President Obama is referring to
this movement as the “Computer Science for All Initiative.”
In addition to the
funding for states and districts, Obama’s proposed initiative
calls for $135 million to become available from the National
Science Foundation and the Corporation for National and
Community Service. The money would give states and districts
the resources to train new and existing teachers to teach
computer science, and build out the curriculum to make it
strong and effective. The initiative has been gaining support
from cities all across the U.S. in additional to support from
big tech companies such as Google, Salesforce, and Microsoft.
Massive Open Online Courses (MOOCs)
Massive Open Online Courses (MOOCs) are challenging the
notions of traditional education. They provide low or
often no cost access to what many people see as quality
education to a broad range of people, many of whom cannot
otherwise access education.
MOOCs attempt to provide a solution to the rising costs of
education by creating a forum for large numbers of learners to
participate in educational online courses. Education
providers effectively leverage the internet, ICT
infrastructure, digital content, open licensing, and social
networking to create access to education on a massive scale.
The benefit lies in the ability to create large economies of
scale in which students from all over the world are able to
listen to lectures and engage in active learning methods such
as blog posts, discussion posts, video responses, articles,
tweets and tags. Even in Gaza where electricity is only
available for six hours a day, students log on during that
window to access learning services not otherwise available.
Some examples of MOOCs are as follows:
Udemy: Online Courses
Udemy, Inc. is an open, online marketplace where anyone can
upload or share a class varying in price from around $20-$100.
It was founded in 2010 with the goal of democratizing
education. The classes on Udemy teach skills that ranging from
learning to use Microsoft Excel to teaching people how to
develop an iOS app. Some individual classes sell more than
150,000 enrollments. Furthermore, Udemy has become a platform
for corporations, such as Goldman Sachs, to create customized
training courses.
Udemy is part of the growing MOOC movement available outside
the traditional university system, and has been noted for the
variety of courses offered.
Udacity
Udacity, Inc. was founded in 2011 by Stanford professor
Sebastian Thrun. Udacity’s platform offers free courses as
well as paid nanodegree programs. These programs and
classes teach skills that tech employers require. These paid
programs offered (or “online universities”) cost a fraction of
what it would cost to attend a traditional school. Shernaz
Daver, the CMO of Udacity, spoke of how this startup has been
already highly benefitting students : “[an e-commerce company]
is hiring Nanodegree graduates as Android developers without
interviews, simply based on their Udacity profiles and
projects, a move they dubbed ‘interviewless hiring.'”
New R&D Tax Credit for Startup
Payroll Taxes
For the first time, a qualifying startup can use the credit
against $250,000 per year in payroll taxes beginning on
January 1, 2016. The credit is available
for startups with less than $5,000,000 in gross receipts in
the current tax year and no gross receipts in all years prior
to five years ago.
This new provision is particularly helpful for tech and life
science startups with engineers, scientists, and software
developers that are not yet profitable.
EdTech Startups
There are many startup companies that continue to drive EdTech
innovation forward :
Future League
Future League provides students in grades K-8 robotics
and engineering workshops. The goal is to expose children to
coding and engineering skills at an early age so they can be
experts in these programs by the time they are older and go to
college. The classes that Future League provides are hands-on
and project-based that use design thinking concepts adapted
from Harvard and Stanford’s education and computer science
departments. These workshops give students a great deal of
project building experience in robotics and engineering.
ByteKnack
ByteKnack uses storyboard-style online lessons to teach
students computer science. Powered by Artificial Intelligence,
it serves as a learning assistant for students where the
software can assess, in real time, what students are
learning and when they run into stumbling blocks.
The reason this startup company uses more of a storytelling
approach rather than a gaming approach is because their goal
is to get more girls interested in computer science. They have
found that gaming-style lessons have proven more popular
amongst boys than to girls. Therefore, they are hoping that
these storytelling online lessons will encourage more girls to
become interested in computer science.
ClassTag
ClassTag is a tool to increase parent-teacher
communication in the classroom. On a safe and secure platform,
the startup’s app connects classroom parents and children to
faces and names to create an atmosphere where parents,
students, and the teacher get to know one another better. A
student’s success in the classroom typically goes hand-in-hand
with parent participation.
Instead of sending permission slips, class activity
information, upcoming test notifications, and classroom
reminders in paper form, ClassTag brings classrooms the most
up-to-date technology for calendar integration and automated
technological reminders. It enables teachers to, for example,
more easily track which parents have read homework and test
announcements electronically. Overall, ClassTag allows
classrooms to build communities and form relationships between
teachers, parents, and children.
Time Machine Tours
Interestingly enough, founder Kyle Hudson launched Time
Machine Tours with his winnings from the television show “Who
Wants to be a Millionaire?” His goal is to visually get
students as close to time travel as possible. Time Machine
Tours is an app that utilizes GPS technology and historical
images to enable people to virtually travel through time
to see what a particular place or location looked like in the
past. It enables students to learn by experiencing history
rather than simply reading about it. The app originally
started utilizing QR (Quick Response) code (barcode)
technology, but now runs off Hudson’s proprietary GPS
technology that allows users to pinpoint, within feet, where a
photographer was standing when taking a photo.
Through their schools, local museums, or libraries, students
can build historical tours of their hometowns by using
historical photos and the Time Machine Tours app. These tours
can be shared through the Time Machine Tours community to
share with other users. Additionally, Time Machine Tours
offers a free iOS app that allows students to virtually “walk”
through the streets of popular cities such as New York,
Chicago, and Washington D.C.
Minecraft Education Edition
Microsoft announced earlier this year (2016) that it would be
expanding its investment in Minecraft, a popular game for
children and young adults. Previously acquired for $2.5
billion in 2014, Microsoft announced that a new version called
“Minecraft Education Edition” will become available in beta
format starting in May 2016 . Microsoft plans on running a
beta program with over 100 schools throughout 30 countries.
These schools will be able to test this software in their
classroom and help Microsoft by offering detailed feedback in
relation to working out the kinks. This will allow Microsoft
to make improvements ahead of a broader rollout.
Microsoft will then debut an “early access” program in June,
allowing educators to download Minecraft Education Edition for
free (in exchange only for feedback). By then, this software
will spread to 41 countries and be offered in 11 languages. It
will continue throughout the summer while Microsoft teams with
early adopters to build out lesson plans, share learning
activity ideas, and create re-usable projects.
Many schools are already using the game as part of their
curriculum. As Microsoft noted in January, teachers in over
7,000 classrooms in more than 40 countries worldwide use
Minecraft with their students today. Minecraft Education
Edition is a tool for learning that can be used to teach
anything from STEM subjects to arts and poetry . The
purpose of Minecraft Education Edition is to help students
learn by encouraging them to create, explore, and discover in
the classroom.
LearnSprout
Apple acquired the EdTech startup LearnSprout, which creates
software for schools and teachers to track students’
performance. This will allow students to see interactive
lessons, track their progress, and share tablet computers with
peers. Apple is currently working on education tools for the
iPad.
The San Francisco startup has raised more than $4
million from investors, including Andreessen Horowitz and
Formation 8 . The startup’s technology is being used in over
2,500 schools, 200 school districts, and 42 states across the
country, to date.
IBM and Sesame Street Collaboration
Sesame Street will soon use IBM Watson’s cognitive
computing technology to personalize preschool learning
experiences. This will be a three year collaboration that will
utilize the knowledge and experience from teachers,
researchers, and technologists to determine how Watson’s
natural language processing, data mining, pattern recognition
and other advanced capabilities would best offer preschoolers
deeply engaging learning experiences.
Research and development
for this collaboration is currently in progress. IBM and
Sesame Workshop have been testing interactive learning
platforms and interfaces before releasing prototypes to key
education and technology leaders.
Sesame Street has spent more than 45 years researching
children’s’ brain development to help them learn to
their utmost potential. The company CEO, Jeff Dunn, says that
the IBM partnership will take it even further. He stated:
“Television reaches every kid with the same programming in the
same way… but we know that kids learn differently from one
another and that they need — and deserve — a new approach that
takes each one of them into consideration.” This
Watson-enabled learning platform seems to be the solution that
will propel Sesame Street’s program into a meaningful,
personalized education platform for children.
Conclusion
The education industry can severely benefit from technological
innovation. People who foster EdTech development could take
advantage of the R&D Tax Credit by using the savings
generated from the credit to further fund their research and
advance their companies.
