The R&D Tax Credit Aspects of Recycled Water

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        This article will discuss innovation and new technologies in the recycled water industry. It is one of a five part Water Tap series including Water Analytics, Water Recycling, Desalination, Advanced Water Technologies, and The U.S. and Singapore Water Tap Comparison.

        Water purification provides a partial solution to the growing, world-wide water shortage issue. The problem is a large one.  Inadequate water sanitation directly affects 2.5 billion people across the globe whom are exposed to serious and often deadly water-borne diseases.  What’s more, is the effects are not limited to health concerns.  Farmers are less productive, crop production is curtailed and manufacturing companies suffer from inadequate access to safe, clean water.  Imagine the economic effects from one-third of the world’s population not having access to the most important resource on earth.  Indeed, the consequences are far-flung.

        As worldwide awareness of the issue spreads, innovative thinkers are turning to purification technologies for a practical solution.  Large, underutilized water sources exist across the globe. Salty groundwater, impaired rivers, and post-consumer, reclaimed waters provide an abundant, untapped, potential source of suitable, fresh water.  While technologies for purifying and recycling these resources exist, substantial innovation is necessary to make them cost-effective so they can be brought to market on a large, global scale.  Federal and state R&D tax credits are available to support the efforts.

The Research & Development 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, 2014, President Obama signed the bill extending the R&D tax credit for the 2014 year.

Water Recycling

        Water recycling involves a process by which water can be used more than one time before being returned to the natural water cycle .  Typically, water utilities use engineered technologies to speed up or mimic the natural process. For example, wastewater discharge from communities alongside rivers upstream often becomes the drinking water for other communities downstream.  First, however, the wastewater must be filtered and treated in the recycling process.  This involves innovative water recycling technologies which are often repeated several times before reaching the final end user downstream.  Aside from this, however, recycled water is most commonly used for non-potable (not for drinking) purposes, such as agriculture, landscape, public parks and golf course irrigation.  It is also used to replenish groundwater sources or create and enhance wetlands.  The potential benefits from recycled water are enormous.  If the technology can be made cost effective it could potentially solve many global health and economic issues.

        The visual below demonstrates one way in which water recycling is typically utilized:

Sustainable wastewater management practice

The Global Water Sanitation Issue

        The lack of access to clean, sanitized water is large global issue.  Worldwide, 780 million people do not have access to an improved water source (one that is protected from outside contamination, usually fecal matter). In very poor countries, people often walk several miles to fetch water from a dirty well or stream.  Others who are not so fortunate collect mud from ponds which have been trod by animals and other people.  Many more obtain their drinking water from improved but still inadequate and microbiologically unsafe sources.  As a result, about 6,000 of these people die every day – most of them children.  Another 2.5 billion people lack access to adequate sanitation.   Because of this, an additional 280,000 people die every year from preventable cases of diarrhea. These issues however are not inevitable.

        Providing clean, safe, drinking water on a global scale would provide many universal benefits.  Water sanitation has the potential to prevent at least 9.1% of the global disease burden and 6.3% of all deaths. Investments in better water could mean 170,000 total fewer deaths a year while basic sanitation would cut 80,000 deaths, mostly from infectious diarrhea.

        The benefits of providing accessible, sanitized water world-wide substantially outweigh the costs.   Universal access to basic drinking water would cost $14 billion a year until 2030 but would yield estimated benefits of about $52 billion, or about $4 for every $1 spent, according to a recent study by Reuters .  According to a similar study by Reuters, building toilets to eliminate outside defecation in rural areas would cost $13 billion a year until 2030 but give benefits of $84 billion, a return of $6 for every $1 spent.

        Water and sanitation have long been U.N. priorities. In the past 25 years, more than two billion people of a world population now totaling about 7.3 billion have gained access to better water and almost two billion to sanitation.  Still, the world has a long way to go before the potential benefits from clean, safe water can be fully realized.  Innovative water recycling technologies will contribute significantly to the efforts.  Some of these technologies are described below.

Water Purification and Recycling Technology

        There are various different uses for recycled water. Potable, reused water is used for drinking. Non-potable reused water is used for irrigation and industrial purposes. Direct, reused water is put directly into pipelines through systems. Indirect, reused water is delivered in a way that blends it with other supplies on its way to its destination (such as the downstream wastewater example).

        There are different methods for purification.  Many times a combination of two or more methods is used to treat the water in stages (As described in the diagram below).  Four leading purification technologies commonly used in these stages include:

  1. Reverse osmosis method - one of the more prevalent methods for purification. This process forces pure water under pressure out of the source and into a high concentration through a specialized membrane.
  2. Microfiltration method - used mostly in pre-treatment to remove pathogens without the use of chemicals which may not work on many of those pathogens. Here water is put under pressure through a semi-permeable filter. Pathogens and particles are not small enough to pass through the filter, while water moves on to further treatment.
  3. Ultraviolent light method – here the light is commonly used as a disinfectant as water flows through tubes. UV treatment leaves nothing extra in water, sometimes requiring additives to be used in treatment.
  4. Carbon filter methods - uses pellets, powders or grains of activated carbon to trap contaminants and metals to purify water for drinking. Carbon filters of this sort are abundant and easy to use.

        In general terms, water purification plants of various types take in water of various levels of lower quality and convert them to water of various levels of higher quality for the uses described above. Systems are designed principally around the water sources used, the intended use of purified water and the costs involved to install and maintain, the technologies. While many of these technologies have been identified, substantial innovation is necessary to make them cost effective to generate sanitized water on a large scale.

Water from Sewage Systems 

        Water from sewage systems contains sediments and waste that needs to be filtered and removed before moving on to the refinery for additional filtering processes.  Once enough filtering has been completed, the water can be made suitable for potable and non-potable uses.  One example of a new and advanced wastewater treatment system is the Janicki Omni Processor from Janicki Bioenergy of Sedro-Woolley, WA. Funded by the Bill and Melinda Gates Foundation in 2013, at a cost of $1.5 million, the Omni Processor takes in sewage andeffectively boils it, in order to create potable drinking water.  Even more astonishing is the plant’s ability to cycle waste back into the system in order to power itself, which sustains the power requirements for the entire plant.

       So, what's the process? Another company that is creating innovations to treat sewage while capturing more benefits than just water is Pilus Energy of Cincinnati, Ohio. Pilus' technology creates water and electricity from sewage while also generating Methane and a compound called Isoprene, which is used to create synthetic rubber.  Pilus hopes to create socially rippling effects as a result of the savings and innovative re-use of the bi- products involved in the process.   Other innovators around the world are making substantial progress as well.

        Singapore has been developing innovative water recycling technologies. Their NEWater treatment plant comprises one of Singapore's four principal water "taps" in its four tap program and fits into our own 5 water tap series as part of this article. NEWater closes the loop on the traditional water cycle, aiming to take in water of any quality and output water of various better qualities -- either to the sea or to further refineries -- to be made suitable for drinking. NEWater makes up 30% of Singapore's total water production, and the country is aiming higher, hoping to achieve 55% of water demand through the program.

Recycling Greywater

        Greywater is generally any water that is discharged from sinks, showers, and washing machines (Typically grey in appearance, hence the name). Greywater that is treated is usually still rich in nutrients, allowing for suitable applications in irrigation. By capturing and targeting grey water utilities may be able to also capture nutrients and other helpful products while lowering the burden on and simplifying the processes of other treatment plants.

Water from Existing Systems and Reclaimed Industrial Wastewater

        Water can also be produced from heating and cooling systems as a result of energy generation.  As water condenses on or inside the equipment, it can be captured and refined for use. These sorts of systems can be innovated to create multiple products at once, as described below with Boston, Massachusetts' Cambrian Innovation and their EcoVolt system.  One of the leading innovations that is being developed involves the design and implementation of machines that take in wastewater and non-potable water and generate more than just waste.  Wastewater from industrial processes can be captured and reclaimed. This water can then be filtered and recycled back into the industrial process that used it or purified and sent to local reservoirs for other use such as potable purification.

        Cambrian Innovations' Ecovolt does just this - Cambrian deploys their modular Ecovolt systems to capture and use wastewater to generate biogas energy while purifying the water. The Ecovolt unit is contained within an ISO 40-foot container and easily deployable as a turn-key asset in treating industrial wastewater for recycling while generating biogas electricity at the same time.   Some other innovators recycle water using more simplistic but nonetheless innovative methods.


        Vestergaard Frandsen, a Danish textile company that supplies water filters to worm infested areas and mosquito-killing plastic tarps to refugee camps, has come up with a new invention meant to purify dangerous water for drinking purposes. The invention is called Lifestraw, a plastic tube with seven filters.  The filters include graduated meshes with holes as fine as 6 microns (a human hair is 50 to 100 microns), followed by resin impregnated with iodine and activated carbon. It is typically worn around the neck and is practical for those who live in regions were large scale purification technologies are non-existent. Lifestraw filters out at least 99.99 percent of parasites and bacteria, the cause of most fatal cases of diarrhea .

University Research

University of Queensland Australia Advanced Water Management Centre:
The University of Queensland's Advanced Water Management Centre has a water recycling research program that investigates recovery of wastewater, storm water and drinking water. The centre has a few major research initiatives, including a strategic 5-year collaboration between the university  Veolia Water , Australia and Seqwater. The collaboration seeks to research and improve advanced water treatment plants producing purified recycled water.  It has a budget above $3 million.

University of Missouri Water Research Center:
A researcher at the University of Missouri has created a horizontal loop geothermal system for agricultural heating and cooling uses. The project is partially funded by the U.S. Department of Energy under the American Recovery and Reinvestment Act. Most Geothermal systems require deeply dug vertical holes for their piping loops, but horizontal loop systems are 30% less expensive to install. The energy savings costs of replacing propane heaters for livestock brooding houses and similar agricultural structures would be 70% to 90%.

Rice University - Houston, Texas:
Rice University has studied three gas reservoirs created by Hydraulic Fracturing (Fracking) and has identified contaminants, potential hazards and made recommendations for treatment in order to reuse that water. Hydraulic fracturing uses millions of gallons of water per well, and capturing the waste water for storage or sending it into the ground is not sustainable in the long term, especially through existing and potentially harmful chemical treatments for waste well water. 

State of Washington Water Research Center (SWWRC):
Supported by The National Institutes for Water Resources and Washington State University, the SWWRC's mission is to oversee and conduct water-related research, foster education and training, and act as a hub for the academic community to publish information to managers of water resources across the nation.


    Worldwide water shortage is a large global issue.  Recycled water technologies provide a partial solution.  Nonetheless innovative technology must be developed and brought to market in order to make the technology practical on a large global scale.  Federal and State research and development tax credits are available to support this end.

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Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Adam Starsiak is a Tax Analyst with R&D Tax Savers.

Michael Wilshere is a Tax Analyst with R&D Tax Savers.