Tax Incentives Blog

Industry 4.0 Companies – What They Are and How R&D Credits Can Revolutionize Their Savings

Written by Angie Longacre. Updated May 7, 2019.

Industry40The first industrial revolution – still often referred to as simply the Industrial Revolution - altered the pace and face of manufacturing forever. Beginning in the 18th century, water and steam-powered machines took production out of human hands and galvanized the U.S. and Europe to manufacture materials and goods at volumes and speed never before attainable.

The advent of electricity ignited even greater mass production for the second industrial revolution between 1870 and 1914. The third industrial revolution transformed manufacturing with automation and computers. Now another revolution is upon us.

Upgrade to Industry 4.0

Welcome to the full automation nation – the fourth industrial revolution. Big data and analytics, the cloud, the Internet of Things (IoT), and machine learning are just a few of the technologies taking the computers and automated machines of the third revolution and advancing them to the next and ‘fourth’ level – or “Industry 4.0” as it’s been popularized.

These new technologies are driving a new level of efficiency, productivity, and ultimately cost-savings for manufacturers. This in turn ushers in potentially increased customization for the consumer, thus expanding revenue opportunities for businesses: No longer must identical products be mass produced for mass audiences. The cost of producing smaller batches of niche styles or products diminishes as companies adopt these advanced technologies.

Birth of the Smart Factory

Businesses that adopt these revolutionizing technologies have garnered the term ‘smart factories’ or ‘Industry 4.0 companies.’ So, while they’re saving money and increasing revenue through augmented performance, is there yet another way for companies to capitalize on Industry 4.0 technology and buffer their bottom line? Yes. With research and development (R&D) tax credits.

R&D tax credits present viable financial savings prospects for businesses. They’re obtainable by any organization for the design, development, or improvement of processes, products, techniques, formulas, inventions, or software. Companies that adopt Industry 4.0 technologies are improving their products, process, etc.…therein R&D credits are ripe for their picking.

Pop Quiz! What’s Your R&D Tax Credit IQ?

However, many businesses fail to take advantage of the opportunities, though the R&D credits can deliver significant savings: it’s a dollar-to-dollar match, the credit against the organization’s federal income tax liability.  For Industry 4.0 companies, revisiting their qualified R&D could mean a cache of returned revenue.

Here are just a few of the potentially qualified research activities (QRAs) that businesses adopting Industrial 4.0 technologies can potentially leverage to maximize their savings:

  • Developing functional enhancements and new capabilities for existing applications
  • Developing or testing automated processes
  • Designing innovative operational processes
  • Developing new tools, jigs, and fixtures
  • Developing components and sub-components for automation and robotics Experimenting with new alloys or other materials
  • Developing product and system solutions, including design engineering and mechanical fabrication
  • Incorporating new technologies into the design and manufacturing process, such as 3-D printing, or computational fluid dynamics

Technology companies make for superb candidates for R&D tax credits. Yet, any business or manufacturer evolving their processes and products through Industry 4.0 advances, possesses the potential to reap a surge in savings.


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Topics: R&D Tax Credit

Angie Longacre

Written by Angie Longacre

As a copywriter for CTI, Angie devotes her craft to promoting CTI’s valuable services and benefits for businesses. When she’s not commanding the keyboard, you can find her outside for a run with her dogs, searching for her next antique treasure, dreaming of her next trip to the beach, or lost in a good book.

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