The R&D Tax Credit Aspects of RAPID Institute
RAPID-Institute
Formally established in 2014, the National Network
for Manufacturing Innovation aims to secure the future of U.S.
manufacturing through innovation, collaboration, and education. Also
known as Manufacturing USA, the program was designed to enhance
competitiveness of U.S. manufacturers and restore U.S. leadership in
advanced manufacturing. Its main goal is to create a robust and
sustainable R&D infrastructure for the development and
implementation of game-changing technologies.
Manufacturing USA connects industry, academia, and
federal partners in a network of 14 advanced manufacturing institutes
specializing in different technology sectors. Collectively, the
institutes gather 1,300 partners, including two-thirds of Fortune 50
U.S. manufacturers as well as over 360 small manufacturers and eight of
the 10 top-ranked research and engineering universities in the country.
The institutes are funded by private-public
partnership, with federal funding level typically between $70-110
million, matched or exceeded by private industry and non-federal
partners. Each of them carries out regular funding competitions
designed to support projects that prototype technologies and make sure
innovations become commercially applicable across industries.
Launched in 2017, the Rapid Advancement in Process
Intensification Deployment (RAPID) Institute is the 10th Manufacturing
USA Institute. It aims to enable the development of breakthrough
technologies to boost energy productivity and energy efficiency of
manufacturing processes, especially in energy-intensive industries,
such as oil and gas, pulp and paper, as well as various chemical
manufacturers.
RAPID focuses on overcoming process barriers and
supports initiatives designed to make manufacturing companies leaner,
cleaner, and greener as well as more compact, modular, and productive.
According to its 2017 annual report, the institute welcomed 56 members
in its first year of operations.
Manufacturing
USA Institutes – Regional Hubs with National Impact
MCPI for
Enhanced Competitiveness
One of RAPID’s main goals is to advance modular
chemical process intensification (MCPI) as a strategy to support energy
productivity. MCPI strategies include combining multiple process steps
into single, more complex and intensified processes. In addition to
potentially reducing capital costs, these efforts can also
significantly improve energy and process efficiencies. RAPID’s Roadmap
Overview refers to four guiding principles of process intensification,
according to Van Gerven and Stankiewicz (2009):
I. Maximize
effectiveness of intramolecular and intermolecular events;
II. Provide all
molecules the same process experience;
III. Optimize
driving forces at all scales and maximize the specific surface areas to
which they apply;
IV. Maximize
synergistic effects from partial processes.
RAPID argues that both advances in hardware and
control strategies as well as the application of enhanced chemical and
physical driving forces are important concrete approaches to
implementing the principles above. Examples include enhanced mass and
heat transfer, combinations of different unit operations in
single-process equipment, use of non-traditional energy sources, as
well as the application of external force fields.
Despite major potential in enhancing competitiveness
of energy-intensive industries. MCPI strategies may not be easy to
implement. As pointed out in RAPID Institute’s website, there are
numerous challenges to the deployment of MCPI in energy-intensive
industries, namely:
- Capital costs and RAM
(reliability/availability/maintenance) risk involved in committing to
new processes;
- High complexity of an
intensified, modular system, without simplifying standardization
techniques;
- Insufficient software and
design tools and data to develop intensified processes;
- Technical and economic
challenges involved in developing standardized design and manufacturing
protocols for a complex new technology space at an early point in its
technical and commercial development;
- Limited understanding of
design and operation of MCPI technologies across a broad range of key
industry participants.
RAPID
Focus Areas
Aiming to overcome these challenges, RAPID’s R&D
activities focus on the following areas:
- Chemical & Commodity
Processing
- Natural Gas Upgrading
- Renewable Bioproducts
- Modeling and Simulation
- Intensified Process
Fundamentals
- Module Manufacturing
Innovation has long been considered a cornerstone of
growth and profitability for chemical companies and a prerequisite for
long-term performance. The Department of Energy’s latest
Quadrennial Technology Review points out certain focus areas for
process intensification (PI) R&D within the chemical industry,
namely:
PI Equipment: involving improved physical
hardware and optimized operating parameters for improved chemicals
processing environments and profiles, such as novel mixing,
heat-transfer, and mass-transfer technologies;
PI Methods: including improved or novel
chemical processes (e.g., new or hybrid separations, integration of
reaction and separation steps, improved heat exchange) or phase
transition (multifunctional reactors), the use of a variety of energy
sources (light, ultrasound, magnetic fields), and new process-control
methods (intentional non-equilibrium-state operation);
PI Supporting Practices: such as improved
manufacturing processes for new equipment and improved systems
integration, common standards and interoperability, modular systems
design and integration, supply chain development and flexibility,
workforce training, and financing.
3D
Printing
Yet another important area for PI R&D is
additive manufacturing. As technology advances, 3D printing solutions
boast considerably lower costs, improved speeds, as well as the ability
to process a growing range of materials. 3D printing can be an
innovative alternative to overcome challenges involved in the
large-scale manufacture of PI technologies. For instance,
in 2017, the European Federation of Chemical Engineering (EFCE) Process
Intensification Award for Industrial Innovation was given to French
company Air Liquide, creator of a 3D-printed, milli-structured heat
exchanger reactor was designed to improve the efficiency of producing
hydrogen by steam reforming natural gas. Compared with existing
technologies, the innovative 3D-printed solution reduces operation
costs by 20% and CO2 emissions by 12%.
Members of the RAPID Institute may take advantage of
R&D tax credits to support their process-intensification efforts,
particularly as they strive to improve productivity and efficiency, cut
operating costs, and reduce waste. The following sections explain how
innovative companies working to overcome existing obstacles to MCPI
strategies can benefit from R&D tax incentives.
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 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.
The
Patent Safe Harbor
Due to the cutting-edge nature of research conducted
within RAPID’s scope, there is a considerable probability that patents
will be pursued. The IRS considers the issuance of a patent as
“conclusive evidence that a taxpayer has discovered information that is
technological in nature that is intended to eliminate uncertainty
concerning the development or improvement of a business
component.” This is known as the “patent safe-harbor”.
Although the R&D tax credit is available for an
assortment of expenses that are unrelated to patents (i.e. improving or
modifying an existing product or improving a manufacturing process,
making a product cleaner, quicker, greener, less expensive, etc.),
companies that seek patents are usually very strong candidates for the
credit. In other words, patents are excellent indicators of R&D tax
credit eligibility. Additionally, certain expenses in connection with
the production or perfection of a patent can themselves count towards
the tax credit.
State
Research & Development Tax Credits
In addition to the federal R&D Tax Credit, many
states have their own supplemental R&D Tax Credits for work
performed in their state, which can match or exceed the federal R&D
Tax Credit. The details of the credit vary by state, either in the
amount of the credit, the calculation method, or whether it is
refundable or nonrefundable. Some states base it either on employee
quantity or expenses, some have limitations for certain types of
corporations, and some require an application process before taking the
credit.
Delaware and Virginia both have lucrative R&D
Tax Credits that were recently updated and made more beneficial to
companies. The Delaware credit has the same criteria as the federal
credit, and awards a state tax credit for 50% (100% for small
businesses with less than $20 million in annual gross receipts) of the
qualifying federal credit for any R&D activities conducted in
Delaware. Effective in 2017, companies qualifying for the Delaware
R&D Tax Credit can now receive a refund for any credits generated
in excess of their tax liability. In 2016, Virginia increased
their state R&D Tax Credit to equal 15% of the first $300,000 (up
from $234,000) of eligible R&D expenses performed in the state by
12/31/2021, a maximum of $45,000 per company.
RAPID
2018 Projects
RAPID recently announced its 2018 project selection.
The eight newly selected initiatives will add to their current
portfolio of 25 projects, which will collectively receive over $30
million in funding. Awarded organizations are listed below.
Academic
Institutions:
- Auburn University
- University of Connecticut
- University of Illinois at
Urbana-Champaign
- Carnegie Mellon University
- University of Pittsburgh
- Texas Tech University
- University of Arkansas
- Texas A&M University
- University of Pittsburgh
- University of Texas at Austin
- Oregon State University
- University of Arizona
- University of Texas at Austin
- Iowa State University
- Georgia Institute of Technology
Companies:
- IntraMicron
- Scientific Design
- Mattershift
- Archer Daniels Midland
- Flint Hills Resources
- Siemens
- Lubrizol
- Apache
- W.L. Gore
- U.S. Clean Water Technology
- Chemstations, Inc.
- Dow Chemical Company
- Easy Energy
- Praxair
Non-profit and
National Laboratories:
- MATRIC
- Fraunhofer USA
- Pacific Northwest National Lab
2018 projects include using a carbon nanotube (CNT)
membrane to selectively extract biofuel from a broth stream;
developing, testing, and demonstrating a continuous-flow, scalable,
nonthermal, nonequilibrium liquid separation for the test case of
ethanol + water that uses ultrasound, and avoids the heat transfer
losses and azeotropic bottleneck of distillation; and demonstrating
demand separation of multicomponent and multiphase water oil mixtures
using 3D-printed membranes.
Conclusion
There are many potential benefits to process
intensification, ranging from a smaller footprint to energy and cost
savings along with higher product quality. However, energy-intensive
companies face numerous challenges in implementing MCPI strategies.
Thankfully, both the RAPID Institute and R&D tax credits are
available to support innovative efforts that enhance competitiveness
through intensified processes.
