Tax Incentives Blog

‘Money Grows in Rows’ for California Agriculture with the Help of R&D Tax Credits

Written by Ted Marquardt. Updated Jan 30, 2019.

AgricultureCalifornia, the most populous state in the nation, is home to Hollywood stars, Silicon Valley technology, Disneyland amusements, sunny coastline beaches, and majestic National Parks. Since becoming a state nearly 170 years ago, California is one of the country's wealthiest and most socially and politically influential.

And the influence doesn’t stop there. Another area in which the Golden State’s prosperity is prominent is agriculture. With about 77,500 farms, California agriculture produces more than 400 commodities, including over a third of U.S. vegetables and two-thirds of U.S. fruits and nuts.  About one-quarter of what California produces is exported around the world.1

Check out this case study about how CTI helped a California peanut producer determine eligible research expenses for R&D tax credits.

It is the sole U.S. producer (97 percent or more) of several crops, including almonds, walnuts, pistachios, artichokes, garlic, olives, and avocados.2 Additionally, dairy, grapes, strawberries, and cattle are top 10 commodities for the state.3

And with those top-10 grapes, more than 17 million gallons of wine are made in California each year. If California were its own country, it would be the fourth largest wine producing nation globally.4

Yields despite adversity through innovation

Remaining an agricultural powerhouse has not been easy for California. While it’s one of the wealthiest states, it is also one of the most disaster-prone due to wildfires, landslides, earthquakes, and more.

Even more detrimental in its direct impact to California agriculture is the backdrop of drought that it has dealt with during protracted periods of significantly below-average precipitation in the last two decades.

With how much the U.S. and world depend on California for the commodities it produces, the agricultural community has been able to answer the demand, in part, by being at the vanguard in scientific and engineering advances.5

Through research and development, farmers and ranchers are managing inputs with ever increasing precision, developing new techniques and materials to increase yields, prevent infestation, and delay putrefaction, as well as discovering ways to improve soil quality.

R&D tax incentives help farmers grow

To bolster the efforts of California’s farmers, as well as all U.S. farmers, federal and state governments have created tax incentives to recognize experimentation and advances that drive the economy. In 2018 alone, $80 billion in government tax incentives was rewarded to agricultural businesses and companies from many industries to spur continued growth.

Don’t let the label of “R&D” mislead you. Truth is, much of the analysis, design, and systematic trial-and-error testing you perform to advance agricultural output likely meets the broad definition of research from a legal tax perspective and qualifies as research activity.

If your company has worked to produce a new or improved agriculture-related product, process or technique recently, you might be able to realize significant tax savings from your research and development activities.

Partner with CTI’s elite tax professionals, allowing our team of attorneys, CPAs, engineers, and scientists with ‘Big 4’ experience to identify which activities are eligible for the credit and what expenses can be used to maximize tax savings for your agriculture-related business.

 

Download Free Guide

1. https://www.mercurynews.com/2017/07/27/california-farms-produce-a-lot-of-food-but-what-and-how-much-might-surprise-you/
2.  https://data.ers.usda.gov/reports.aspx?ID=17843#P93a23935472049bba732ffd592dcb8f7_10_79iT0R0x5T0
3.  https://www.cdfa.ca.gov/Statistics/
4.  https://www.goldmedalwineclub.com/blog/post/how-many-gallons-of-wine-does-california-produce-annually-213
5.  https://www.cdfa.ca.gov/statistics/PDFs/2016Report.pdf

Topics: R&D Tax Credit

Ted Marquardt

Written by Ted Marquardt

Ted develops the marketing content strategy for CTI. Through cross-functional collaboration with Sales and Services teams, he plans content campaigns to continually evolve the CTI brand. Working with a superstar Marketing team of writers and graphic designers, he strives to provide customers and prospects with valuable educational content that attracts and excites.

Email Updates