R&D Tax Credits Can Help Farmers Harvest Hemp Know-How

Written by Corporate Tax Incentives. Updated Aug 17, 2019.

RD_Hemp-FarmersHemp. Marijuana. Cannabis. Until a few years ago, most Americans packed these three words into one broad "pot" of usage.

Many folks – including lawmakers - who didn’t partake of the psychoactive plant marijuana, didn’t understand that a little chemical called tetrahydrocannabinol (THC) renders that plant unique from hemp. Marijuana and hemp are two visually similar – yet chemically distinct - species of the cannabis plant.

Marijuana contains brain-affecting levels of THC starting at a minimum of 5 percent; hemp holds a benign maximum of 0.3 percent1 – for comparison, the FDA allows 3 percent of your canned fruit to be “wormy.”2

Marijuana gets center stage for pain relief, relaxation, and a host of other physical ailments. Hemp yields copious uses, such as clothing, carpet, biofuel, paper, flour, bread, rope, insulation, seizure medication, and anxiety relief.

Colorado’s ground-breaking decision to legalize marijuana lit up a chain reaction of awareness that slowly wafted across the country. As more states decriminalized the drug, the Farm Bill’s historic revision – the Hemp Farming Act of 2018 - helped sow further understanding of the two plants – and a fruitful new crop opportunity for farmers.

Higher Education

While the country becomes more informed about industrial hemp’s characteristics and beneficial uses, farmers who elect to take on this new lucrative crop must build their knowledge base to reap hemp’s bounties.

Learn More: Farm Bill Sows Tax Breaks for Industrial Hemp

Before the early 1900s, farmers freely grew hemp in abundance. But then came Prohibition zealots who razed hemp’s legality with a sweeping arm of temperance.

For the better part of the 20th century and into the 21st, the plant remained ostracized under marijuana’s cloud of criminality and taboo. Now many farmers have much to learn of hemp’s attributes and farming requirements.

North Carolina State agriculture researcher Angle Post revealed that she now gets “tens and tens of questions each week” from aspiring hemp farmers. Things such as what varieties of hemp to use, which insects and weed will pose the trouble, how to plant, and how to grow a profit.3

Sowing the Seeds of Assistance

Of course, research calls for time and money. Good news: Farmers who want to cash in on the crop can look to the federal research and development (R&D) tax credit for assistance.

When a farmer sets to develop new or improve products, processes, techniques, or formulas, the R&D tax credit sprouts a dollar-for-dollar reduction in the taxpayer’s federal income tax liability. So the activities that surround knowledge gain for hemp cultivation have the potential to qualify for the tax credit.

The money recovered can then help fertilize further research or any other imminent expense.

To further sweeten the pot, the government allows small businesses, such as farms with less than $50 million in gross receipts to use the R&D credit to reduce their Alternative Minimum Tax (AMT).

Harvesting the Rewards

Now that the government has granted agribusinesses the green light to grow, hemp farmers could use an extra hand to offset the cost of research needed to produce a healthy, gainful crop.

The R&D tax credit can help industrial hemp farmers harvest substantial tax savings to refine their product, grow their business, and contribute to the economy.

If you’re a farmer intimidated by the complexities of tax credits or who wants to ensure you capture your maximum potential savings, combine your ambition with the expertise of a tax specialist.



What Can R&D Do For You?  Discover a practical approach to maximizing your federal research and  development tax credit. Download Guide

  1. Hemp vs Marijuana, Ministry of Hemp, 2018
  2. 9 Disgusting Things That the FDA Allows in Your Food, Live Science, 2016
  3. The Race to Re-Learn Hemp Farming, Undark, 2019

Topics: R&D Tax Credit

Corporate Tax Incentives

Written by Corporate Tax Incentives

CTI is a tax incentives specialty firm that secures greater tax credits for businesses with our proven project methodology and unparalleled personalized service. For almost 20 years, our elite tax professionals have proactively engaged clients to deliver unmatched value with transparency and efficiency thorough secure in-house software, comprehensive audit-ready deliverables, and 24x7 access to real-time dashboards. We are tax consultancy experts passionate about maximizing credits and incentives for powering the success of your business.