Increasing crop yields generates R&D tax credits for American farmers.
Agriculture is one of the most diverse and exciting industries in the United States. From farming livestock to innovating packing techniques, the agricultural industry develops solutions to improve the lives of all Americans.
The Research & Development (R&D) tax credit helps companies conducting activities aimed at solving problems. Outlined in the Internal Revenue Service (IRS) Internal Revenue Code Section 41, this U.S. federal incentive allows companies with qualified research activities (QRAs) (i.e., qualified research expenditures or QREs) to offset present or future liabilities and reduce taxable income. The program encourages innovation by providing businesses with funds to invest in R&D projects that may spur growth and strengthen profits.
Let's review the four-part test that development efforts must pass to qualify for the R&D tax credit.
Qualified R&D activities must aim to develop or improve a business component (e.g., a product, process, software, technique, formula or invention). If the effort aims at improving one of these five business components, then the improvement needs to be functional, not aesthetic.
Example: An activity could be irrigation-system improvement to either better target crops, or use less water to achieve similar results.
At the outset of qualified R&D activities, there must be unknown information. This information must pertain to either capability (i.e., “Can we accomplish this project?”), method (i.e., “Do we know the process for completing this project?”), or appropriate design (i.e., “What is the correct or optimal design?”).
Example: An activity may seek to optimize new pesticide formulations, soil additives, or soil contents.
Answering technical uncertainties, qualified R&D activities must:
Example: Developing new organic pesticides, a company may design and test different combinations of materials and ingredients to formulate the best product. These activities would likely pass this test.
The process of experimentation must use scientific principles.
Enhancing crop diversity, durability, and yield, the agricultural industry spends time and money finding solutions that feed people in America and worldwide. Federal and state R&D tax-credit programs apply to not only innovative farmers, but also companies cooperating with farmers and ranchers. Companies in the agricultural industry that may qualify include farm-equipment developers, fertilizer manufacturers, livestock-feed developers, plant and seed companies, and many others.
Examples of agricultural activities that may qualify for the R&D tax credit include:
Acena Consulting builds the bridge between these activities and R&D tax-credit qualification that frequently increases cash flow.
Our streamlined process builds upon a solid foundation of proprietary technologies to document and support your qualified research activities.
We offer free evaluations of your activities and free consultations about potential credits available. Contact us today, and monetize your R&D activities!