Key insights
- The U.S. Tax Court confirmed on farm, production level testing can qualify for the R&D tax credit, and inputs like feed may count as qualified research expenses (QRE).
- Costs that feel routine can take on new significance when inputs are used as part of experimentation rather than standard operations.
- A short conversation before filing can help you understand whether what you’re already doing deserves a closer look.
Review activities that could support an R&D tax credit.
In George v. Commissioner, the U.S. Tax Court delivered an important message for the agriculture industry: Research and development doesn’t have to occur in a laboratory to qualify for the federal R&D credit.
For agricultural producers, innovation often occurs in barns, fields, and poultry houses, and the court confirmed real world, production-based experimentation can meet the requirements for the R&D credit.
Understanding how farm activities align with current guidance can help businesses make more informed decisions about whether, and how, to pursue a claim.
Who is George?
The case involved a large poultry producer engaged in applied research to improve broiler health, disease resistance, and growth rates. As is common in agriculture, the taxpayer tested hypotheses through live production cycles rather than controlled lab environments.
The IRS argued that because the research occurred in a commercial setting, the related activities and costs were part of routine farming operations. The court rejected that position, recognizing in agriculture, technical uncertainty is often resolved only through hands-on testing under actual production conditions.
What counts as a QRE?
QREs generally fall into three buckets:
- Wages — Pay for employees directly involved in research activities, supervise that work, or support it in a meaningful way.
- Supplies — Pay for employees directly involved in research activities, supervise that work, or support it in a meaningful way.
- Contract research — Certain costs paid to third parties to carry out research on your behalf.
Of particular significance to agricultural producers, the court held feed costs for experimental flocks qualified as supply costs eligible for the R&D credit under the pilot model rules. Because the animals were raised specifically to evaluate technical uncertainty, those costs weren’t treated as ordinary production expenses but as integral components of the research process.
The court also confirmed taxpayers aren’t required to claim every possible category of qualifying costs; electing not to pursue wage expenses doesn’t invalidate supply-based credits.
Example from the field
An agricultural producer set out to improve flock consistency after noticing uneven growth across production cycles.
Over several runs, the team adjusted environmental controls, timing, and inputs while tracking how those changes affected health indicators and outcomes. The effort wasn’t about routine upkeep — it was about answering specific technical questions without clear answers at the outset.
When those activities were documented alongside the decision‑making process, the work took on a different tax posture than standard operating costs.
What cracked the egg?
Where the taxpayer fell short was documentation of base period (prior years) research expenses. The court declined to accept unsupported estimates and instead applied the alternative simplified credit using the default 6% rate (when the taxpayer doesn’t have three prior years of qualifying costs).
For agricultural businesses, the message is clear: While the R&D credit is available for applied, production level experimentation, contemporaneous documentation still matters, even in industries where experimentation is embedded in daily operations.
Bottom line: George reinforces that agricultural innovation qualifies for the R&D credit. Experimentation conducted in barns, fields, and production facilities can meet the statutory requirements, and production inputs like feed can constitute qualifying costs when tied to research objectives.
Flexibility exists — but solid documentation remains essential to fully realizing the benefit.
Common questions producers are asking
What tends to cause issues on exam?
Documentation. Even when experimentation is ongoing, unsupported estimates or missing base‑period records can limit the credit available.
How early should we start thinking about R&D credit considerations?
Many organizations wait until tax season to ask whether activities qualify. In practice, the most useful conversations often happen earlier — when testing plans are being designed or refined — so research objectives and tracking methods align from the start.
What’s the difference between experimentation and routine improvement?
Routine adjustments are expected in agriculture. Experimentation typically involves testing alternatives when outcomes aren’t certain, evaluating results over time, and using those findings to inform next steps. The distinction often comes down to intent and how decisions are evaluated, not necessarily the complexity of the activity.
Do small or mid‑size producers need the same level of formality as large operations?
No. Documentation doesn’t have to be complex or academic. What matters is capturing the reasoning behind changes, what was tested, and how results were assessed. The level of detail should reflect the scope of the activity.
Can past activities still be evaluated for potential credits?
Sometimes. While contemporaneous records are always stronger, many producers already have operational data, production logs, or internal notes to help reconstruct how testing occurred. The key is understanding what’s usable and where gaps may limit the claim.
How does this affect risk tolerance around claiming the credit?
Court decisions like this one help clarify where the boundaries are, but they don’t remove the need for judgment. Understanding how activities align with current guidance can help businesses make more informed decisions about whether, and how, to pursue a claim.
When does it make sense to ask for help?
Producers often reach out when they’re unsure whether everyday testing crosses into qualifying research, when documentation feels informal, or when they want a second look before filing. In many cases, a brief review can clarify whether further effort is worthwhile.
How CLA can help with R&D tax credits
The takeaway for ag businesses: innovation in the field can qualify, but strong documentation unlocks the full benefit. Many organizations may already have qualifying R&D activity underway; the question is how it’s framed, supported, and reviewed before decisions are finalized.
CLA works with producers to evaluate how experimentation shows up in real‑world operations, how activities and costs are documented, and how current records align with IRS expectations.
Our goal is to bring clarity by helping you understand what may already qualify, where documentation could be strengthened, and how future activity can be captured in a way that reflects how the work actually happens.