Alliantgroup Finds Federal Funds for AICC Members

Federal Funds for AICC Members

By: Tyler Noesser, Director at alliantgroup

Quarantine has completely changed how business is done around the world. As our country adapts and begins to re-open, the packaging industry has become a critical part of the U.S. economy. With so much of the workforce working from home, ecommerce adoption has accelerated across the board. UPS reports that since March, the shipping titan has been inundated with packages, at a volume likened to the Christmas season except the numbers have not subsided.

Before the coronavirus pandemic, ecommerce was expected to grow at an annual rate of 15 percent but since lockdown the growth rate is expected to be 20 percent. At the center of all this growth is the packaging industry and our country has federal tools and programs to help the sector scale and adapt to the changes ahead.

Tax Credits Instead of Loans for Packaging Businesses

During the Covid-19 crisis, the federal government has introduced several relief packages to sustain the economy. Now, as the country re-opens, congress is looking for more options to address many of the concerns that were exposed by worldwide quarantine, especially widespread supply chain disruption.

The much maligned Paycheck Protection Program (PPP) has most likely given many in congress reason for pause, however. While the CARES Act was largely focused on low interest loan programs like PPP, the next relief package may be more focused on leveraging credits and incentives. By putting money directly into the hands of main street businesses through tax credits, there is less of an oversight burden on the government and there would be no questions for the business owner as to whether money would have to be paid back.

Of the tax credit programs being considered that are most applicable to the packaging and corrugated cardboard industry, the R&D Tax Credit is the one Congress seems most interested in enhancing. There are several bills being considered that look to increase the value of the credit or broadening its scope to apply to more companies.

The credit has a long history of bringing jobs back to America and increasing our country’s ability to adapt to recessions. For instance, in the 1980s, the credit helped bring jobs back to the automotive industry. Peak unemployment during the recessions of the 80’s for the industry hit 24.7% but dropped to 6.5% two years after the introduction of the credit. Similarly, Congress now has thoughts of retooling the credit to encourage businesses to bring supply chain jobs back to the United States and reduce our dependence on cheap labor overseas.

The R&D Credit for AICC Members

While a good portion of the packaging industry is already claiming the R&D Credit, there are still many in the sector that are unaware that they may already qualify. So, it’s worth explaining how the credit works. Put simply, the credit broadly applies to businesses that employ technical talent to create new products or processes or improve existing products and processes.

For packaging businesses that could mean any number of things. Using computer software to design new packaging solutions that reduce waste, improve shelf life of products, or increase shipping

efficiency are activities that qualify. Implementing new machinery or modifying existing machinery to increase efficiency and reduce manufacturing costs would also qualify. Developing packaging prototypes for testing qualifies as well.

This is not an exhaustive list of qualifying activities but it should give AICC members an idea of why this credit applies to them. Why they should claim it is down to the fact that the value of the credit to packaging businesses is significant. Depending on the size of the company, packaging companies are regularly seeing six figure credits. For comparison, the average R&D Credit is more than five times the average PPP loan.

A typical example is a packaging product manufacturing company that we recently helped obtain a $522,000 credit. The company qualified based on its everyday activities such as creating custom dies, creating new graphic printing plates and for making improvements to their manufacturing process to improve efficiency and functionality. Another packaging product manufacturing company was able to realize an $876,000 credit. The company qualified by designing and creating new packaging and display solutions.

While it is unclear how Congress will tackle the next round of relief for businesses, the R&D Credit is a proven funding tool that is already available for AICC members. For more information on how much the credit can be worth to your company reach out to alliantgroup for a gratis assessment.