[IMGCAP(1)]It may come as a surprise to many that activities typically associated with agriculture and farming can qualify for the research and development tax credit.
With advances in the food sciences and the challenge of feeding a growing population, those in the agriculture industry have the opportunity to claim and benefit from the popular tax credit.
Historically, the R&D tax credit has been claimed by large companies, mostly in the manufacturing, software, high-tech and pharmaceutical industries. While innovation may be recognized more in other industries, agricultural companies continue to refine their products and processes to stay competitive.
These investments help to identify, test and implement new and unprecedented solutions to farming challenges.
Farming and agriculture have a plethora of opportunities for experimentation, such as disease control, irrigation, new product development, more efficient harvesting techniques and soil development.
As farms continue to disappear each year, efficiency and new types of products occur as a result. These innovations can qualify for R&D tax credits that generate needed support for the critical work performed by taxpayers in the agriculture and farming industries.
Additionally, certain activities that are less obvious in terms of qualification can potentially make excellent candidates for the R&D tax credit. For example the farming industry invests in a number of technological advancements related to their products and processes to increase the yield of their products. Whether it is evaluating and testing soil additives, new irrigation systems, different lighting techniques or other approaches, the experimentation of each can qualify for R&D tax credits.
Here are some typical activities that the agriculture and farming industry engage in that may qualify for research and development tax credits:
Developing new or improved (hybrid) strains of crop, plants or livestock;
Process improvement to increase yield and production efficiency;
Developing new or improved technologies, techniques and processes to advance the harvest lifecycle;
Developing new or improved fertilizers, irrigation systems, soil development, etc.;
Developing new or improved feeds or feeding techniques;
Developing new or improved packaging techniques and processes to manage moisture, temperature, etc.;
Developing new or improved methods and techniques to protect crops from disease;
Developing new or improved shelf-life, dehydration, transport, etc., of food products;
Developing new and improved processes in product manufacturing that use principles of structural and thermal analysis;
Developing new or improved breeding techniques for livestock; and
Improvements to facilities due to environmental, health and safety efforts.
If you or a client has been involved in designing or developing new techniques in the agriculture industry they should examine the R&D tax benefits that are potentially available.
Kevin Zolriasatain is director of research & development tax credit services at KBKG. For more information, visit KBKG.com/research-tax-credits/rnd-qualify.
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