This case study shows the application of key legislative requirements for qualifying R&D activities as they apply to relevant activities in the water industry.
Re-Water Corporation provides consultation, design, construction, and process optimization to the water and waste-water industry. The organization now provides recycled-water validation services for new and existing water-reuse schemes across America.
Design and develop analytical sensors to monitor, detect and extract data related to the chemical properties of contaminations in waste-water streams—the focus will be mainly on storm water.
Develop a human machine interface (HMI) and control parameters to control the hardware components of the system—this needed to also allow users to switch between various screens related to equipment setup and the various accessing of data logging.
Design and develop programmable logic controller (PLC) as part of control parameters.
Develop the programmable coding for the PLC, which can be manipulated by users depending on site requirements and water data–monitoring requirements.
Design and develop electrical components—to be low voltage across various circuit boards.
Re-Water needed to determine the eligibility of its proposed R&D activities in order to know if they qualified for the Research and Experimentation Tax Credit. It had to be certain that its "qualified research" met four main criteria, known and developed by Congress as the Four-Part Test. Re-Water's qualified R&D activities included the following.
Background research to evaluate current knowledge gaps and determine feasibility (background research of the water-quality plant system).
Market analysis and review, including competing products, bench marking of best available solutions.
Consultation with key component/part/assembly suppliers to determine the factors they consider important in the design, and to gain an understanding of how the design needs to be structured accordingly.
Design and development of a series of prototypes to achieve the technical objectives (design of the water-quality plant system).
The hypothesis for the design phase of Re-Water's project was designing a water-quality system with improved hydraulics, user-friendly PLC, and seven analytical sensors will produce a system that more accurately detects the contamination substances (type and chemical properties) in storm water and, therefore, allow operators to prevent spillage and flow offsite.
Major changes to the design of the plant/system and its components resulted from the finding that the organization could use the information generated in the water samples taken to conduct various other activities. Re-Water designed many versions of components and the overall system as a whole to avoid potential technical issues in the development phase; however, to prove that its theoretical concepts can operate in the intended application, it needed to develop and construct prototypes for chemical testing.
Trials and analysis of data to achieve results that can be reproduced to a satisfactory standard and to test the hypothesis (prototype development and testing of the water-quality plant system).
The sensors on the prototype were found to have made more sense (regarding the data obtained) when combined as opposed to when they were operating independent of each other. That is, they provide clearer indication about contamination physical properties and chemical values, which therefore allows Re-Water to more accurately identify the type of contamination within the storm water.
Ongoing analysis of customer or user feedback to improve the prototype design (feedback R&D of the water-quality system).
Ongoing development and modification to interpret the experimental results, and draw conclusions that serve as starting points for the development of new hypotheses.
What records and specific documentation did Re-Water keep?
By having these records on file, Re-Water confirmed that it was "compliance ready" — meaning if it was audited by the IRS, it could present documentation to show the progression of its R&D work, ultimately proving its R&D eligibility.