The R&D Tax Credit Aspects of Nanotechnology

By Charles R Goulding, Seann Convey, and Andressa Bonafé

        Nanotechnology promises to benefit society in countless ways. Even though progress can already be seen in various domains, there is still room for substantial developments. To this end, significant R&D efforts are currently in place both in the academic and corporate worlds. This article will discuss the potential power of nanotechnology as well as the Federal tax credit opportunity available for eligible nanotechnology R&D activities.

The R&D 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 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.

“There is Plenty of Room at the Bottom”

        Nanotechnology is the science of manipulating matters on a molecular or atomic scale. In other words, what characterizes this branch of technology is its focus on extremely small dimensions and tolerances - less than 100 nanometers (billionths of a meter). Also referred to as “nanotechnologies” and “nanoscale technologies", it includes a broad range of activities and can be applied throughout all science fields, from molecular biology, microfabrication, and physics, to organic chemistry, engineering, and material science.
    
        Even though the idea of seeing and controlling individual atoms and molecules first appeared in the late 50’s, it wasn’t until the 80’s, with the invention of the scanning tunneling microscope (STM) and the atomic force microscope (AFM), that modern nanotechnology emerged.

        When compared to larger-scale systems, nanoscale ones present significantly different properties. They feature, for instance, higher strength, lighter weight, increased control of the light spectrum, and greater chemical reactivity. Nanotechnology has allowed scientists to take advantage of such enhanced properties along with the quantum effects that rule the particle’s behavior.

        The majority of biological processes take place at the nanoscale. As nanotechnology evolves, scientists have been able to envision ways to create new processes that can contribute to advances in various fields, such as materials synthesis, medicine, computing, imaging, etc.

        Even though “nano” is an increasingly common term, it is difficult to conceive the “tininess” we are talking about. 
 
Figure 1 below features some elucidating comparisons:

Nanotechnology Applications

        Nanotechnology can benefit society in various ways as it revolutionizes a wide range of industry sectors, such as energy, food safety, information technology, medicine, homeland security, environmental science, and transportation. The National Nanotechnology Initiative (NNI) presents an overview of rapidly growing benefits in five different fields.

1. Everyday Materials and Processes

        The possibility of tailoring materials’ structures at the nanoscale, has allowed scientists to awaken certain properties, such as strength, lightness, durability, reactiveness, electrical conductivity, among many others. More than 800 commercially available products rely on nanoscale materials and processes. The list includes, among many other examples:

• Lighter and more durable baseball bats, helmets, and tennis rackets
• Wrinkling and stain resistant fabrics
• Water-repellent, self-cleaning, anti-fog, and antimicrobial glasses
• Cosmetic products providing better coverage, cleansing, and absorption
• Nanosensors built into packaging to detect spoiled food

2. Electronics and IT

        The rise of Big Data  calls for enhanced storage and processing capacities. Nanotechnology has contributed to the production of faster and more portable systems, such as:

• Faster, more potent, and energy-efficient nanoscale transistors
• Nanometer‐scale magnetic tunnel junctions that enhance the capacity of magnetic random access memories
• Organic light-emitting diodes screens (OLEDs), nanostructured polymer films that depict brighter images with higher picture density, wider viewing angles, and longer life spans

3. Sustainable Energy

        Nanotechnology stands out as a central asset in the search for clean, inexpensive, and renewable sources of energy, as well as a means to decrease energy consumption and the environmental footprint.

• The production of nanostructured solar cells, through print-like manufacturing processes, is less costly than that of standard ones and results in easier to install, lightweight, and flexible panels
• Nanotechnology has been used to decrease fuel consumption in vehicles and power plants through improved combustion efficiency and reduced friction
• Nano-engineered batteries present higher efficiency and power density, along with the ability to hold electrical charge longer
• Windmill blades made from an epoxy containing carbon nanotubes are lighter-weight, stronger, and longer than others and therefore can generate more electricity.

4. Environmental Remediation

        Nanotechnology applications can greatly contribute to more eco-friendly practices. A few examples include:

• Nanomaterials used in the production of clean water from polluted sources
• Nanotechnology-based air filters are already present in 80% of automobiles sold in the U.S. They perform a mechanical filtration that traps particles larger than its nanoscale pores.
• Recently developed nanofabric paper towels are able to absorb twenty times its weight in oil

5. Health Applications

        Medical tools and procedures can be made cheaper, safer, and more personalized through nanotechnology. Recent advances include:

• Nanoparticles have been used as platforms to increase the efficiency of cancer treatments  through the precise targeting of cancer tissues
• Nanoparticles are a tool in early Alzheimer’s  diagnosis and therapy as well as the early detection of atherosclerosis
• Semiconducting nanocrystals, the so-called quantum dots, provide up to 1,000 times better optical detection than traditional means.
• Still in the research and development stage, nanobots will theoretically be able to instantaneously detect, diagnose, and treat ailments within the body.

National Nanotechnology Initiative (NNI)

        Founded in 2000, the NNI is an interagency effort whose objective is to create a framework of shared goals, priorities, and strategies to foster and coordinate nanotechnology R&D throughout the United States. The NNI gathers 27 Federal agencies engaged in nanotechnology-related activities and aims at opening the way for “a future in which applications of nanotechnology will lead to a revolution in technology and industry that benefits society” .
The organization identifies critical R&D targets, which include:

• Fundamental Nanoscale Phenomena and Processes
• Nanomaterials
• Nanoscale Devices and Systems
• Nanomanufacturing
• Environment, Health, and Safety

        From 2001 to 2014, NNI’s investment will total around $20 billion – the proposed 2014 Federal Budget alone would allocate more than $1.7 billion to the NNI, numbers that in fact reflect the accumulation of member agencies’ nanotechnology R&D budgets. This amount supports various Federal grants and funding opportunities aimed at assisting businesses, universities, and research institutions in the discovery and deployment of novel nanotechnology information. Throughout the nation, there are more than 100 NNI agency research and education centers, and user facilities.

University Nanotechnology Efforts

        Major U.S. research universities are engaged in a wide range of nanotechnology R&D activities, as briefly summarized below:

Rice University
Created in 1993, the Smalley Institute for Nanoscale Science and Technology was the first nanotechnology center in the world. With the objective of “leading the world in solving humanity’s most pressing problems through the application of nanotechnology”, the center has focused on civilization’s “grand challenges”, namely, energy, water, environment, disease, and education. Recent achievements include the use of ribbons of grapheme (originally carbon nanotubes) to enhance the efficiency of batteries, the unveiling of a novel method for tailoring optical processors, and the creation of a new type of organic solar cells based on block copolymers. 

Massachusetts Institute of Technology
        For over ten years, the Institute for Soldier Nanotechnologies (ISN) has used nanotechnology to improve soldier protection and survivability. Working in partnership with the US Army and industry representatives, a team from MIT has researched materials, devices, processes, and systems, as well as the transition from theoretical advances to practical and affordable products useful to the soldier. ISN is focused on using nanotechnology to combine enhanced functionality, comfort, reduced weight, and improved blast and ballistic protection.  

University of California
        The California NanoSystems Institute (CNSI) gathers from UCLA and UC Santa Barbara around the common objective of enabling the “rapid commercialization of discoveries in nanoscience and nanotechnology”. CNSI’s 188,000 square foot state-of-the-art facility houses research on four targeted areas: Energy, Environment, Health-Medicine, and Information Technology. Recent advances include the development of a groundbreaking water treatment membrane for municipal and industrial wastewaters, including those co-produced during gas and oil extraction. The innovative polymeric-ceramic membrane is cheaper than conventional ones and allows for a high level of purity as its pores range from a few to a few hundred nanometers. 

Harvard University
        The Kavli Institute for Bionano Science and Technology (KIBST) at Harvard University aims at developing a deeper knowledge of the functioning of life and biology at the nanoscale. A variety of researchers, including biologists, chemists, engineers, physicists, and Harvard Medical School clinicians, work together to establish correlations between nanoscale structures and the operational features of biological systems. Ongoing projects include the fields of artificial intelligence, robotics, biomineralization, crystal engineering, biooptics, among many others.  

Cornell University
        Cornell’s School of Applied & Engineering Physics has engaged in significant nanotechnology research efforts. R&D activities focus on different fields, particularly, the electronic properties of nanoscale structures, nanomagnetics, nanoelectromechanical systems, and nanocharacterization. The nanoscience and nanotechnology research programs have access to state-of-the-art facilities, such as the Cornell Nanofabrication Facility, the Cornell Center for Nanoscale Systems, and the Nanobiotechnology Center. Current projects include the attempt to enhance the capabilities of electronic technologies through the study of Silicon and carbon-based nanoelectronic systems, and the development of groundbreaking approaches for ultra-high-resolution materials processing and nanolithography.

Corporate R&D Examples

        The considerable amount of ongoing university nanotechnology research has driven an ensuing wave of corporate nanotechnology R&D aimed at making theoretical discoveries into commercially available products. Businesses engaged in nanoscience-related R&D efforts, particularly the application of ground breaking information into marketable alternatives, are likely to qualify for significant Federal R&D tax credits. The following paragraphs present remarkable examples of corporate nanotechnology R&D. 
   
        The development of targeted drugs, for instance, has caught the eye of pharmaceutical companies.     Pfizer Inc. has recently announced payments of at least $160 million per drug developed in partnership with BIND Therapeutics. This is part of a collaboration aimed at using nanotechnology to design targeted medicines. The company is currently working on Accurins, a group of targeted and programmable drugs for cancer, heart disease, and inflammatory disorders. Still in its early-stage testing, Bind-014 is expected to adhere to a specific protein found in cancer cells and to vessels that feed tumors. The drug would then liberate the chemotherapy medicine Docetaxel. 
   
        When it comes to electronics, potential for advances due to nanotechnology is massive. An interesting example comes from IBM, who has been engaged in developing carbon nanotube chips. Scientists expect that silicon transistors will soon reach their minimum size, calling for alternative materials. The company believes that carbon nanotubes will allow for the creation of extremely small semiconductors, which will also be faster, more powerful, and more energy efficient than silicon ones. IBM’s Watson Research Center, in Yorktown Heights, NY, currently houses intense R&D activities focused on creating the first high-density, self-assembling carbon nanotube computer chip process.
   
        Lighting is yet another field that can be revolutionized by nanotechnology. Sony, for instance, already has a range of televisions that use quantum dots – miniscule crystals of semiconductor material measuring just a few nanometers. These tiny devices have proved to yield significant performance enhancements, including the depiction of more vivid and purer colors than liquid-crystal displays (LCDs). For now, quantum dots are used in combination with conventional light-emitting diodes (LEDs), which provide backlight. R&D efforts are currently underway to allow them to be used directly as the colored pixels on screens. 
   
        LEDs themselves can also be transformed by nanotechnology. The start-up company LumiSands, founded by researchers from the University of Washington, claims that LEDs can be made cheaper and greener to manufacture. The answer would be the use of silicon-based nanoparticles, silicon quantum dot phosphors, which constitute a cost-effective and eco-friendly alternative to phosphors derived from rare earth elements (REEs), conventionally used.  REEs are expensive and hazardous to extract and process. In addition to reduced costs and environmental footprint, LumiSands’ solution would also result in a softer light, similar to sunlight. 
   
        BESS Technologies, from Albany, NY, is another example of a start-up company engaged in nanotechnology R&D. Their goal is to improve energy storage and charging capacity of lithium-ion batteries through a silicon-based anode design. Created by students from the University at Albany’s College of Nanoscale Science and Engineering, the company was recently awarded a $218,000 grant from the New York State Energy and Research and Development Authority. 

Conclusion

        Nanotechnology can change the way the world works. Potential benefits are plentiful and range from everyday materials to health, IT, and environmental applications. University nanotechnology efforts have set the basis for innovation and opened the way to an ever-growing commercial R&D wave. Federal tax credits are available to support eligible nanotechnology R&D activities.

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