Fresh R&D Tax Credits for the Commercial Baking Industry

Fresh R&D Tax Credits for the Commercial Baking Industry

Posted by Jeffrey Feingold on 09.17.18

Commercial bakeries are in an excellent position to collect vital tax credits for Research and Development (R&D) from the federal government. Additionally, they can receive R&D tax benefits from more than 40 individual states, including Colorado, Ohio and Arizona. The commercial baking industry is continuously researching and developing new ways to make their products tastier, healthier and more visually appealing. They also aim to make their processes more productive and more efficient. Each of these activities could qualify them for the R&D tax credits. 

Let’s take a quick look at the healthier aspect of the commercial baking industry with regards to the R&D tax credit. It seems like everyone is counting carbs these days and finding ways to reduce sugar in their diet. Many people are also reducing or eliminating things like gluten and trans-fats from their diet. To keep pace with these types of consumer trends, commercial bakeries have to perform research, so that they can further develop their products to meet these demands. 

The R&D Tax Credit

The research and development tax credit was instituted by the federal government to stimulate the United States’ economy through innovation. The idea being that: by providing companies that were ready and willing to invest in improving their processes and developing new products with tax incentives, technology would progress and the nation would advance economically. In 2015, after many extensions on the temporary bills that would become the R&D credit, it was made permanent by the U.S. Congress and is now a dollar-for-dollar benefit against tax. These tax dollars theoretically pay for themselves as the U.S. continues to innovate and stay in the global race for the ultimate economy. 

Which Activities Qualify?

The following are examples of qualifying commercial bakery activities:

  • Development of improved processes
  • Development of improved products
  • Development of new products
  • New and better tasting products
  • New product recipes
  • More visually appealing products
  • Added nutritional value
  • Sugar free/reduced sugar products and processes
  • Gluten free products
  • Trans-fat elimination
  • Automation in processes
  • Developing new enrobing processes
  • Commercial oven technology
  • Increasing shelf life and stability
  • Improvements in packaging processes
  • Developing new packaging designs to provide enhanced functionality or improved product shelf life

Find Out if Your Business Qualifies for These Tax Saving Credits

The activities and associated expenditures (derived mostly from employee time, consultant expenses and related R&D supplies) of a company can qualify for the R&D tax credit if these activities meet the requirements of the four-part test established by the IRS:

  1. Qualified Purpose - increased performance, function, reliability or quality.
  2. Technological in Nature - must rely on the hard sciences, such as engineering, physics, chemistry, biology or computer science.
  3. Process of Experimentation - you’ve evaluated alternatives for achieving the desired result.
  4. Elimination of Uncertainty - about the development or improvement of a product or process.

Opportunities to claim R&D tax credits for the commercial baking industry are on the rise, particularly with recent trends in consumer tastes. The ability of a commercial bakery to meet these challenges through R&D will determine their future success.  The credit is an excellent way to maximize your earning potential and future prospects. It may provide just the cash you need to put your commercial bakery business on top of the competition.

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

Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, call us at 800-260-4138 or please leave us a message below.


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