Rhode Island’s tax policies, geographic
location, and world class academic institutions like Brown and
the University of Rhode Island all contribute to spurring
innovation and in turn, to the overall broader economy.
The presence of a large, skilled workforce and its proximity
to Boston make it a practical business location. Many
innovative companies are developing technology in a broad
range of industries in the state of Rhode Island.
Digital marketing firm, Tribal Vision in Warwick, uses lean
and creative mass media strategies to reach consumers which
ultimately results in effective marketing at competitive
prices.
Automated Business Solutions, also in Warwick, creates
innovative, automated business solutions for a wide array of
industries.
Rhode Island food companies are also innovating. Blount
Fine Food in Warren not only develops innovative strategies to
enhance food quality and nutritional content, but also
implements cutting edge production processes in order to
deliver those ideas.
Innovative activities such as these are likely eligible for
R&D tax credits.
The Federal 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 19, 2014, President Obama signed the
bill extending the R&D Tax Credit for the 2014 tax year.
Rhode Island R&D Credit
Similar to the federal
credit, the Rhode Island state R&D tax credit, however
amounts to 22.5% of eligible R&D expenditures up to
$111,111 and 16.9% for remaining eligible R&D expenditures
over that amount. The credit is capped at 50% of a
company’s state tax liability.
Additional Rhode Island R&D tax
incentives include:
The R&D Property Credit
The Elective Deduction for R&D
Facilities
The R&D Sales Tax Exemptions
The Innovation Tax Credit
The Research and Development Property Credit provides a credit
of 10% of the cost of tangible, depreciable property that is
purchased for the purpose of research and development.
The Elective Deduction for Research and Development Facilities
allows the taxpayer to deduct from its entire net income the
cost of research and development facilities in lieu of
depreciation. That incentive can ultimately result in
huge savings from the time value of money.
The Research and Development Sales Tax Exemption is also
significant. That policy allows the taxpayer to avoid
paying sales tax on certain property used for qualified
research.
Rhode Island also has an Innovation Tax Credit. This incentive
is meant to encourage investment in high-growth innovation
industries. It allows investors a 50% credit on eligible
investments with a maximum credit of $100,000.
Rhode Island and the
Culture of Design
Rhode Island encourages a "Culture of
Design" - working with local schools and universities to brand
the state as strategically positioned to nurture and supply
talent and ideas in design and development. It accomplishes
this through the power of its economic policy and its local
universities.
Favorable Economic and
Financial Environment
Rhode Island's economic policy has
delivered results within the state that promote innovation. It
has the lowest corporate tax rate in the northeast at 7% (as
of 2015). Rhode Island’s academic policies also
encourage startups and economic vitalization through local
technological innovations. The Providence
Startup Map illustrates the location of Providence,
Rhode Island startups and their proximity to universities.
Rhode Island is ranked 3rd among
non-industry investment in research and development
funding. The state also ranks 2nd in academic R&D
dollars per capita as well as 1st for total R&D
expenditures per square foot of research space at academic
institutions. A 2012 government study also found that it
ranks 3rd in not-for-profit R&D performance in R&D and
7th in academic R&D performance.
In 2008 Rhode Island had 2.5% of total R&D spending as a
percent of its Gross State Product, a number recovering from a
sharp drop in 2006-2007. Pre-Recession levels were
around 4.3%, closely matching the New England region.
Trends indicate an increasing share of expenses for R&D as
a percent of GSP. Industry R&D spending as a percent
of GSP in 2009 was 1%.
Rhode Island's R&D Tax credit is the highest in the
Northeastern United States and has seen tremendous growth,
1427% in its 5-year percentage change in U.S. venture capital
dollars by state.
Universities and
Institutes
Brown
University
Brown is a leading university and considered both a local and
national research powerhouse with an endowment of 3.2 billion
dollars. Located in Providence, Rhode Island - Brown totaled
over $170 million in research expenditures in 2013 and is one
of the state's largest employers.
Brown has ranked 3rd in non-industry investment in research
and development funding and 2nd in academic R&D dollars
per capita. The university has also ranked 1st in
total R&D expenditures per square foot of research space
at academic institutions.
The Brown Entrepreneurship Program (BrownEP) serves as an
incubator and entrepreneurship education center for the Brown
and the Rhode Island School of Design. Brown is also a
contributor to the Founders League as well as The Rhode Island
Center for Innovation and Entrepreneurship, both of which
provide space for local startups.
Examples of startups incubated through
The Rhode Island Center for Innovation and Entrepreneurship
include:
• Microtissues,
Inc. - Providence, RI - specializing in 3D-cell
culture products for research labs.
• Advanced Image Enhancement, Inc.
- Providence, RI - Specializing in image processing
techniques for
cancer analysis and
treatments.
• NuLabel Technologies - East
Providence, RI - Uses activatable chemistries to create
innovative labels for
new and existing production
lines to cut waste and costs while being appealing to
customers.
Rhode Island
School of Design
The Rhode Island School of Design (RISD) is
located in Providence and is a strong companion to Brown in
Rhode Island's academic environment. RISD sees innovation with
Arts and Design included within Science, Technology,
Engineering and Mathematics (STEM) related fields. Including
an Arts component, STEM moves "STEM" to "STEAM", creating a
strong bond between RISDs Arts and Design elements and Brown
University's Engineering and Science process.
RISD works strongly with
Brown to allow students to obtain joint degrees from both
schools through the 5-year Brown/RISD Dual Degree Program.
Students can also cross-register for both schools.
RISD keeps itself on the forefront of design - for example -
making increasing use of cutting edge 3D-printers to implement
rapid prototyping and production of parts and designs. As 3D
printing becomes more prevalent in design and production
pipelines, RISD will be continuing to push forward in
innovating on an Arts and Design level.
University of Rhode Island
Located in Kingston, Rhode Island, The
University of Rhode Island has an endowment of $122 million
and obtained $80.8 million in sponsored program awards in
2013, $65.4 of which are from federal sources. The
University of Rhode Island estimated to bring its local
economy about $154.1 million in output for the fiscal year
2011, or $1.63 for every $1 spent.
Rhode Island Science and
Technology Advisory Council (RISTAC)
RISTAC created its Rhode Island Research Alliance (RIRA) in
2006 to promote collaboration across state research
organizations. It is sustained by legislative statue since
2006 to make innovation important to the state's leadership
agenda. RISTAC seeks to assist state leadership in increasing
R&D capacity, encouraging entrepreneurship, and fostering
innovation among organizations.
RIRA's goals include fostered collaboration between
researchers, improved science and technology infrastructure in
the state, and the facilitation of an R&D pipeline so
innovation can be turned into business.
RIRA has a Collaborative Research Award Program among other
grants for research proposals. RISTAC itself has a Innovate
Rhode Island Small Business Fund to assist eligible small
businesses in the life sciences and engineering sectors.
From 2007 through 2014, the program
awarded approximately $9.8 million to 65 teams throughout
Rhode Island. The funding has supported a diverse range of
projects including high-tech toy design for children with
cerebral palsy, the study of algae blooms, the development
of new nanotechnologies and improving the design of
prosthetic limbs.
Conclusion
Rhode Island's location, strategic
positioning, economic policy and academic strength all
contribute to a unique opportunity for innovation and R&D
in Rhode Island. By leveraging Rhode Island's academic
partnerships and taking advantage of statewide R&D tax
incentives companies in Rhode Island have unique opportunities
for funding innovation.
