The world’s agricultural industry is constantly facing challenges in workforce availability, climate change, technology integration, and sustainability. Reports indicate that the world population will grow to 9 billion by 2050 and that agricultural businesses will need to increase production by up to 75% to accommodate the growing population.
To do this, farms across the U.S are incorporating new and innovative techniques to deal with issues of pesticides, fertilizers, contamination, spoiled produce, harvesting, and diminishing labor force. To help offset the risk and cost with these changes, federal tax credits are available for companies conducting research and development efforts to alleviate the current farming and produce challenges while enhancing better yields.
Research Tax Credit
The Research & Experimentation tax credit is designed to incentivize companies to invest in people and technology that can lead to growth in revenues and profitability and promote job retention and expansion. These credits focus on qualified wages, supply costs, and contract research. Research activities conducted by companies must meet the 4-Part Test to qualify for the R&D Tax Credit.
- New or improved business component (e.g. product, process, computer software, technique, etc.) for which the activity aims to develop or improve upon it in terms of function, performance, reliability or quality.
- The research activity is intent on eliminating technical uncertainty when developing or improving upon a business component.
- A systematic process of experimentation must be followed to eliminate the technical uncertainty by evaluating alternative solutions. This includes simulations, modelling, laboratory experiments, field studies, or pilot model prototyping.
- The research activity must be technological in nature and be based on the principles of a hard science such as agricultural engineering, agronomy or chemistry.
Examples of Qualifying Research Activities
It is important to keep in mind that failure to develop or improve upon a business component does not disqualify a company from being eligible for the R&D Tax Credit – the only requirement is that the 4-Part Test is met. Conducting computer modelling or simulations followed by field studies or trials to evaluate the models all qualify. What follows are but a few examples of potentially qualifying research activities within the urban agriculture industry:
- Development of techniques to restore the biology of soil using bacteria or fungi to help break down nutrients into usable formats and stop those nutrients from absorbing into the air or water.
- Studying the effects of aggressive herbicides on sensitive crop growth and yield, including the rate of degradation of chemical residues over time.
- Development of new formulations involving herbicide active ingredient (AI) combinations to design optimal loading levels, clay grind level and moisture content and their effects on dissolve rate, weed suppression, length of time weeds are suppressed, and incidents of granules clumping.
- Formulating and testing new combinations of herbicides of different groups (modes of actions) and carriers such as oils on suppression of different weed types, residual impact on crop growth, maturation, and crop yield.
- Manufacturing of geotextile membranes as growing mediums and testing of new growing mediums for green walls (e.g., super absorbent polymers)
- Investigating for optimal aqueous and mist environments for hydroponics and aeroponics and integrating other new smart farming technology in vertical farms (e.g., automated LED lighting)
The DST Advantage
DST’s technical team is comprised of engineers with specific experience in agriculture and agronomy. Coupled with our legal and tax team, we can construct a solid claim based on engineering facts, supporting legislation and regulations. Our team will explain the program in detail and explain how we can take you through the process of ensuring you maximize your legitimate Research Tax Credit claim.
Contact DST Advisory Group at 877-214-8920 for a no-charge assessment to confirm if your company can qualify for these credits.