Food Processing Companies Can Leverage the R&D Tax Credit

3 Minute Read
Posted by Randy Eickhoff on Jan 30, 2020 7:53:34 AM

Most people assume that research and development activities are relegated to technology and science companies. While it's true that many qualified research expenditures (QREs) are performed at businesses in the technology and science verticals, this lucrative tax benefit is available for operations across over forty industries. From automobile and aerospace to machinery and manufacturing, there is a broad spectrum of organizations that can leverage their operations to tap into the cash flow opportunities provided through the research and development tax program.

Food Processing Organizations Often Miss out on Innovation Tax Credit Benefits

One potentially surprising industry that often conducts eligible research and development operations is food processing. Unfortunately, many food processing companies don't realize they have expenses that qualify for the innovation tax credit. However, food production businesses perform an extensive range of R&D strategies, such as developing new or improving existing products that: 

  • Reduce costs
  • Refine organic products
  • Improve food safety measures
  • Reinforce dietary guidelines

Additionally, many of the employees within these organizations have roles that inherently lend to research and development practices. Nutritionists, dietitians, engineers, and even food scientists at these companies are often tasked with creating or improving products or processes that elevate innovation within the industry. These job functions that help advance quality measures or boost efficiencies within the processing plant may all be considered a qualified expense under the research and development program.

Other Food Processing Operations That May Qualify for the Innovation Tax Credit

Does your food processing company qualify for the research and development tax benefit? Recognizing a few specific tasks and operations that are often categorized under the R&D umbrella can help you determine if you should consider pursuing the credit for your organization. Some authorized processes may include:

  • Experimenting with mixing times and specific cooking temperatures
  • Creating new or improved packaging designs
  • Devising new recipes for food products
  • Enhancing food formulas for increased nutritional yield
  • Adjusting formulations on analytical tests including pH levels, sodium levels, and acid content
  • Generating prototype product samples for new recipes
  • Establishing innovative processes that drive efficiency, time to delivery, total hours to develop, and overall waste
  • Designing new technology, software, and/or equipment for food product testing and production
  • Boosting existing production protocol efficiencies

The R&D Tax Credit Benefits Companies of Every Size

Best of all, the innovation tax credit is available to all qualifying companies, regardless of size. Put simply: you do not need to be a large enterprise to reduce your final tax burden. Companies can claim any activity that meets the requirements of the four-part test outlined by the IRS:

  • Qualified Purpose
  • Technological in Nature
  • Elimination of Uncertainty
  • Process of Experimentation

Once a qualified research expenditure (QRE) is identified, food processing companies may be able to claim a diverse range of associated expenses, such as employee salaries, supply costs, testing charges, and even contract research fees.

Is your food processing company missing out on the benefits of the R&D tax credit? Acena Consulting can help you optimize your return and lower tax risk. Contact us today to discuss your operations with our team of tax professionals.


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Randy Eickhoff

Randy Eickhoff

Acena Consulting President Randy Eickhoff, licensed CPA, has partnered with more than 200 companies during more than 20 years of experience securing tax credits and other government incentives. His corporate partners range from multinational technology firms to smaller, privately held manufacturing, sports, and technology enterprises.