At this time, most people considered orange juice a libation reserved solely for morning consumption. The company’s campaign intended to dissolve that reputation to spur more people to drink the beverage more often – thus squeezing out more money for the brand. And really, why would anyone sequester juice to the a.m. hours only?
Federal research and development (R&D) tax credits carry a similar kind of pigeon-holed reputation: Only heavy-research oriented industries, such as pharma and hi-tech can cash in on the credits. Not true.
To capture R&D credits, a business must merely set out to develop new or improved processes, products, techniques, formulas, or software.
The fresh developments need not be ground-breaking inventions, only new to that business to qualify. But the words “research and development” often divine narrow notions of highly advanced organizations working to revolutionize the world with new medicines, technology, or the like.
Recent Court Ruling Emphasizes Need for Effective R&D Claim Documentation |
However, the mere challenge to provide for a growing consumer base and answer their demands lines up food and beverage (F&B) manufactures to capture R&D credits.
The burgeoning trends for healthier food options - such as gluten-free, low-sodium, low-sugar, no preservatives - and eco-friendly, non-toxic packaging are pushing F&B companies to develop new and improved products.
Qualifying R&D Activities for F&B Manufacturers
Of course, the research and subsequent new or revamped products, ingredients, manufacturing processes, packaging materials, etc. come with a price – one that R&D credits can help offset substantially.
The R&D tax credit calibrates a dollar-for-dollar reduction in a manufacturer’s federal income tax liability. The business can roll the resulting money back into further R&D efforts or any other business cost.
Ultimately, the more research and development a F&B manufacturer conducts, the more money they may be able save – because R&D tax credits are not just for pharma or tech anymore.
As with many tax incentives, the R&D credit process is filled with intricate regulatory pulp. The aid of a tax specialist can help strain out the confusion and complications to ensure food and beverage companies package all potential credits.