Does Your Vineyard or Winery Qualify for R&D Tax Credits?

Does Your Vineyard or Winery Qualify for R&D Tax Credits?

Posted by Jeffrey M. Feingold on 10.03.17

Even though the wine making process is very established, winery owners constantly implement new technologies and unique approaches to make their cultivation and fermentation methods more efficient. Many businesses within this industry fail to claim the Research and Development (R&D) Tax Credit since they don’t know that these activities are considered qualifying research activities (QRAs). Many business owners in the winery industry aren’t aware that their daily activities, stated below, and the wages paid to employees involved in these activities qualify for the valuable tax incentive.

What are R&D tax credits?

R&D Tax Credits allow businesses to apply for a dollar for dollar reduction of tax for qualified research and development expenditures. R&D tax credits represent a significant financial advantage to businesses, allowing both reduced tax liability and cash back for reinvestment or other needs. Companies of all sizes qualify for the federal R&D tax credit and can benefit significantly. Additionally, 70% of states now offer specific state research and development tax credits. While more than 14,000 U.S. companies claim federal R&D credits annually, less than 33% of companies that qualify for the credits actually apply for them.

What are the qualifying criteria?

The tax definition of qualified research is broad and extends beyond traditional laboratory research. Any company that develops new or improved products and/or processes, or develops software for use in its operations, may be eligible for the R&D Tax Credit.

What actually constitutes R&D is wide ranging and can often be quite complex but includes the development or improvement of a wine or process. Each improvement of a wine or process must be a technological advancement within the industry.

This could be through an improvement to a piece of equipment or product that is currently available on the market, or alternatively the invention of a new piece of equipment or product altogether. It must also be demonstrated that there has been an attempt to resolve technological uncertainties. Such difficulties and challenges should be experienced by all wine makers, not just you personally.

Wineries conduct research and development activities in a variety of ways from new manufacturing processes to improving the quality and taste of their wines. These improved manufacturing processes, as well as developing new or improved beverages, can potentially qualify for the R&D tax credit.

It is important to remember that a project does not have to actually achieve its aims in order to qualify.

Some examples of qualifying research activities related to the wine industry include, but are not limited to, the following:

Optimal vineyard plots

  • Evaluating soil, water availability and ground slopes to assess the optimal grape cultivation
  • Evaluating and developing of soil and rootstock improvement processes
  • Designing and implementing trellis improvements
  • Developing plant irrigation systems

Developing new or improved bottling and packaging processes

  • Developing improvements to bottle labeling materials
  • Developing new or improved fermentation or bottling equipment
  • Developing testing of new or improved corks
  • Evaluating varied methods of filtration to prevent microbial spoilage to increase wine quality
  • Testing of new or improved products to ensure shelf life

Enhancing production mix

  • Evaluating conditions including humidity, lighting, ventilation, temperature and fermentation in barrels for wine production
  • Developing new or improved product formulations
  • Experimenting with new combinations of ingredients for a deeper, lighter, sweeter, more sparkling, drier taste etc.
  • Developing flavor or aroma profiles
  • Developing new or improved ingredient mixing methodologies
  • Developing new or improved product prototype batches
  • Developing new or improved quality assurance testing processes
  • Developing new or improved preservative chemicals
  • Testing of new or improved products to ensure consistency

Economic efficiency research to improve production

  • Improvements to the economic efficiency of the fermentation process
  • Experimenting with equipment to improve both efficiency and precisions of winemaking practices during fermentation
  • Developing improved strains of grapes
  • Testing of product ingredient mixtures for desired flavor or aroma profiles

Request a free assessment to determine qualifying R&D tax credit eligibility.

If your company conducts activities within the winemaking industry there is a strong likelihood that your company can take advantage of the R&D tax incentive. To learn more about the benefits of R&D tax credits from Tax Point Advisors, simply fill out the form on this page and a member of our team will be in touch with you. Or, you may call us at 800.260.4138 nationwide.

 

 

 


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