The commercial fishing industry, often viewed through the lens of tradition, is a rapidly evolving sector driven by technical innovation. From advancing sustainable aquaculture practices to engineering sophisticated vessel technology and improving seafood processing efficiency, research and development (R&D) occurs across all segments of the marine value chain.
Despite this technical complexity, many companies remain unaware of a powerful financial tool directly rewarding these efforts: R&D tax credits. These incentives can mitigate rising operational costs and provide essential capital to maintain a competitive edge in the global seafood market.
R&D Tax Credits: The Financial Instrument
The R&D Tax Credit, officially known as the Credit for Increasing Research Activities, is a federal and, in many states, a state-level tax incentive designed to encourage U.S. businesses to conduct qualified research. Established under 26 U.S. Code ยง 41, the federal R&D tax credit can be applied against income tax obligations.
The credit is more advantageous than a standard deduction.
- A tax deduction reduces a company's taxable income.
- A tax credit directly reduces a company's final tax liability, offering a dollar-for-dollar offset against tax owed.
Eligible Innovation: R&D Activities Across the Marine Value Chain
A business does not need formal laboratories or white-coated research personnel to qualify. If a company is tackling a technical challenge by applying principles of hard science, the activity is likely eligible.
Diverse R&D efforts that frequently qualify include:
- Aquaculture Systems and Health:
- Creating new feeds, disease prevention strategies, or water quality management systems to improve farmed fish health and sustainability.
- Data Analytics and Navigation:
- Developing new software to track fish populations, predict migration patterns, or optimize fishing routes for efficiency.
- Harvesting Efficiency:
- Designing new, selective fishing gear, such as refined net designs or lure technologies, to increase yield and minimize bycatch (i.e., incidental capture).
- Processing and Preservation:
- Improving methods for high-precision filleting, freezing, packaging, or extending the shelf life of seafood products.
- Vessel Technology:
- Engineering more fuel-efficient engines, developing advanced sonar and navigation systems, or creating specialized on-board processing equipment.
Substantiation: The Four-Part Test for Qualified Research
R&D activities and their associated expenditures must pass the IRS' Four-Part Test to transition these incurred costs into qualified research expenses (QREs).
The taxpayer must document that the activity and its QREs meet all four criteria:
- Permitted Purpose:
- The activity must improve a new or existing business component's function, performance, reliability, or quality.
- Example: Developing a new sonar system to identify specific fish species more accurately.
- Technological in Nature:
- The experimentation must rely on the hard sciences: biology, chemistry, computer science, engineering, or physics.
- Example: Using fluid dynamics principles to design a more efficient fish pump for aquaculture harvesting.
- Elimination of Uncertainty:
- The effort must attempt to address technical questions about the development or improvement of a business component.
- Example: Experimenting with different compositions for biodegradable fishing nets to ensure they maintain strength while degrading properly.
- Process of Experimentation:
- A systematic evaluation process involving iteration, trial and error, the scientific method, or other means must be employed.
- Example: Testing various propeller designs on a fishing vessel to optimize fuel efficiency and maneuverability in different sea conditions.
QREs: The Costs That Convert to R&D Tax Credits
R&D tax credits typically apply to three main categories of expenses:
- Wages: A portion of the wages paid to employees directly engaged in, supervising, or supporting qualified research activities (QRAs).
- Supplies: Costs of materials used and consumed in the research process (e.g., materials for prototype nets or feed compositions).
- Contract Research: 65 percent of amounts paid to U.S.-based third parties for conducting qualified research on the company's behalf.
- Computer Lease: Payments for the right to use computers in conducting qualified research, often claimed as cloud computing services (e.g., renting U.S.-based server space to run complex predictive algorithms for fish migration patterns).
Strategic Imperative: Securing Future Profitability
Marine sector companies should immediately leverage R&D tax credits to convert essential, cutting-edge investments from costs into capital to achieve a decisive, sustained financial advantage.
Many marine businesses mistakenly believe R&D tax credits are only for massive corporations. This assumption is incorrect. Small and medium-sized businesses that invest in innovation are prime candidates for these valuable incentives. R&D tax credits can significantly reduce a company's tax liability, free capital for external or internal re-investment, and accelerate the adoption of sustainable and competitive technologies.
Connect, Learn, and Maximize Your R&D Tax Credits
Optimize your tax strategy. Schedule a free consultation with Randy Eickhoff, CPA, Acena Consulting's Founder & Head Coach, for expert guidance.
Register for our free monthly webinar, next on Oct. 21, 2025: Cracking the (Tax) Code for R&D.
- This workshop provides one CPE credit for professionals who are keeping up with continuing education.
- Learn more about qualifying and documenting R&D activities for tax incentives.
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Edited by Laura Whittenburg, MSBME, Sr. Technical Writer at Acena Consulting. Photo courtesy of Boston Public Library on Flickr.