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AI R&D is Booming—Ensure Your Organization Invests and Claims Tax Credits

Elon Musk once said, “The pace of progress in artificial intelligence (I’m not referring to narrow AI) is incredibly fast. Unless you have direct exposure to groups like Deepmind, you have no idea how fast—it is growing at a pace close to exponential.” The truth is that Musk is hardly wrong in this remark. AI has quickly become the future of tech development and human progress, and the extent of its impression on our society is immeasurable, as the future implications AI will likely have on our daily lives has a very high ceiling.

According to the 2019 Artificial Intelligence (“AI”) Index report: AI world research is seeing an all around growth and is poised for a logarithmic growth in the coming years as well. With AI and Machine Learning (“ML”) increasingly becoming part of every company’s future proofing strategy, companies are investing heavily into development and have the opportunity of claiming R&D tax credits. In fact, AI and ML development meets the definition of Qualified Research Activities (“QRAs”), allowing businesses to claim Research and Development (“R&D”) tax credits on your investments and be compensated for your contributions to our modern society not just as a business owner but as a team.

To understand how AI ties into R&D tax credits, let’s take a closer look at what aspects of AI are considered QRAs and why it is so prevalent in the tech industry today below. In doing so, we can gain a better perspective as to the viability of these tax credits not just in the status quo, but in newly-developed industries as well. 

How Well Does AI Fit in Under Qualified Research Expenses

Artificial Intelligence development is the essence of QRE. AI development almost always will meet the four-part test requirements:

1. Permitted Purpose

Businesses that are involved in developing a product or process forAI software to improve their services or products can claim R&D credits on the development expense. For example, a company creating an AI Customer Support software to better serve customers can claim the development as a QRE.

2. Technological Uncertainty

Any work done to resolve technological uncertainty will likely translate to a QRE. Technological uncertainty exists if the publicly available knowledge and information is insufficient or lacks depth. AI research readily qualifies for the R&D credit as developers & engineers encounter technological uncertainty regarding the optimal design or development methodology due to AI’s relative infancy in the marketplace.

3. Process of Experimentation

Software developers in AI R&D are constantly refining their existing code or writing new software from scratch. However, no one knows what that looks like at the beginning of a project, so there has to be planning, reviews of various coding methodologies, trial and error and testing to evaluate whether the design meets the functional/performance intent.

4. Technological in Nature

The steps taken to achieve the desired software, product, or process must fundamentally rely on principles of the physical or biological sciences, engineering, or computer science. Computer Science is the root of AI development and passes the process of experimentation test needed toualify the associated development  expenses.

Why AI?

Now that we’ve broken down how AI and R&D go hand-in-hand, you may still be wondering why AI is so popular and useful in our modern businesses. To put it simply, artificial intelligence is the key to streamlined workflows, innovation elevated, and increased bottom lines for companies. AI allows businesses to expand upon their ideas and grow as a team, all while providing the best customer service possible without running into bottlenecks or becoming overwhelmed. 

With all of this said, it’s no wonder why AI is so common nowadays and why it should most certainly be considered when filing for R&D tax credits as well. Invest in AI technology today and make an immediate impact on your brand all while cutting costs significantly with an R&D tax credit analysis. Identifying areas where AI can help is crucial for any business today and, with Strike Advisory on your side, the process just got a whole lot easier. Learn more about our team and our tech experience here.

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