The phrase “Rise of the Machines” has become a ubiquitous slogan that is often invoked when one embarks on a discussion about technology and its increasing presence in both our public and private lives.
Some welcome “The Rise” with open arms for the personalization, efficiency, and convenience that technology makes available to us, enabling entrepreneurship, personal connections and a global oneness not encumbered by geography.
Others though see “The Rise” as a foreboding dark specter where robots and AI (artificial intelligence) eliminate the need for humans in a dystopian future where sentient machines eventually rebel against their creators.
Learn about Tax Savings Programs for Manufacturers
Where the reality about “The Rise” will ultimately land between these opposite views is hard to say, but for now, there is no denying the significant impact that technological advances and automation are having on productivity for manufacturing companies in Texas.
Rising Star
In 2017 alone, the total output from Texas manufacturing was $226.16 billion1, an amount larger than the entire economy of Portugal!2 From 1997 through 2016, Texas’ real manufacturing GDP rose by 94 percent, more than double the U.S. manufacturing gains of 40 percent.3
Despite these staggering numbers, Texas’ manufacturing job count fell by 19 percent in the 20 years up to 2016. This divergence between jobs and output is largely due to productivity gains realized with process improvements from automation.4
While employment did diminish before 2016 because of “The Rise,” the employment trend is beginning to show recovery. In 2017, Texas added almost 25,000 manufacturing jobs in the state.5 A key reason for the changing trend is manufacturers recognizing the need to augment, or up-skill people to support continued productivity gains.
The skill mix of manufacturing workers is shifting due to automation, requiring a strong, steady employment growth plan in parallel with the use of technology. Manufacturers are not pushing automation for automation’s sake. Essential to successfully implementing intelligent automation as a tool is to augment the workers who manage the machines.6
Rise to the occasion..with tax incentives
For Texas manufacturing companies, or any business anywhere really, implementing automation and augmenting staff requires capital to fund these initiatives. The efforts to increase productivity with new or improved processes necessitate expenditures…and this is where tax credits can help.
Since 1981, companies of all sizes have benefited from the federal R&D Tax Credit, with companies in the manufacturing industry accounting for over 60% of the annual credits claimed by taxpayers.
Many manufacturers have incremental improvements and modifications to existing manufacturing processes that can be qualified research activities, such as:
- Designing and implementing automated processes
- Testing of new or improved computer systems and controls
- Designing new robotics automation for manufacturing
- Development and modification of manufacturing processes to eliminate manual steps
- Development of new or improved fabrication of manufactured components
The largest qualified expenditure related to these activities is the wages paid to in-house engineers, scientists, technicians, production employees and other technical personnel who perform research activities for their company. Additionally, contract research expenses for third parties may qualify too.
Rise above with CTI
For better or worse, the “Rise of the Machines” appears to be inevitable. Like manufacturers in Texas, staying ahead of the competition and increasing the bottom line compels you to pursue the productivity gains that automation can deliver. Use tax credits to help fund “The Rise”!
The R&D Tax Credit is one of the largest incentives available to manufacturers and can possibly save your company hundreds of thousands of dollars annually. Talk to CTI about claiming the R&D credits you deserve.
With offices in Houston and Dallas, look to CTI’s experienced tax professionals, allowing our team of attorneys, CPAs, engineers, and scientists with ‘Big 4’ experience identify which activities are eligible for the credit and what expenses can be used to maximize tax savings for your manufacturing business.
1,5. Texas Manufacturing Facts, National Association of Manufacturers, Oct 2018
2. Texas Manufacturing Snapshot, Texas Comptroller's Office, Oct 2017
3,4. Manufacturing in Texas: An Overview, Texas Comptroller's Office, Feb 2018
6. Manufacturing Is Thriving in North Texas, D Magazine, Aug 2017
