Agriculture companies may be eligible for the research tax credit if they engage in product development research related to the design, prototyping, and development of new or improved products — or if they are experimenting with new or improved techniques, processes, and capabilities.
What qualifies?
The definition of research and development (R&D) in the tax sense is broader than the definition scientists and chemists use in a laboratory. Qualifying activities may include:
- Gene transfer and larger scale genetics research
- Implementation of equipment intended to make breeding, raising, or harvesting more effective or efficient
- Development of technical process improvements or automation techniques
- Experimentation surrounding disease control methodologies
- Nutrition experiments involving new or improved feeds and/or feeding techniques
- Innovative waste control experimentation
- Development of climate resilient fruits and vegetables
- Development of new or improved breeding practices
- Nutrition experiments involving new or improved seed structures
- Seed and crop yield storage and maintenance technique development
- Improved nutritional attributes
Markers for R&D credit potential in agricultural businesses
- Significant R&D payroll (i.e., PhDs, agronomists, botanists, microbiologists, geneticists, and other researchers)
- Frequent use of sample or test crop beds, plots, plantings, or breeding techniques
- Onsite lab, clean rooms, and dedicated research facilities
- Outsourced lab support and testing services
- Machinery and equipment design and construction
- Scaled production processes
- Numerous patents, formulas, and trade secrets
Create opportunities with CLA
We have helped businesses in many different industries identify and document their qualifying research activities to help enhance their credit potential.
Identification of qualifying research activities is not a tax or accounting exercise. It requires an in-depth understanding of agricultural operations and the involvement of scientists and operations personnel.
Research and experimentation (R&D) tax credit services
CLA’s tax professionals can help determine if your organization qualifies for a research and experimentation tax credit. Based on our experience, the following industries often generate tax credits:
- Agribusiness processors
- Dairy
- Family farm producers
- Family ranchers and cattle producers
- Farm supply/seed distributors
- Feed and grain
- Fertilizer/chemical dealers
- Fisheries
- Fruit/nuts/vegetables/row crops
- Implement dealers
- Livestock/poultry/hogs
- Vineyards
- Cooperatives