Posted by Jeffrey Feingold on 06.02.22

The growing public interest in better nutrition means there has never been a better time for companies conducting research in nutritional science to learn about and start taking advantage of the R&D tax credit that the IRS offers. Consumers are beginning to recognize that proper nutrition can not only help prevent diseases, but can also improve the quality of life for people of all ages and even cure specific ailments. Nutritional science studies the connection between diet and health. Diet plays a crucial role in the cause, treatment, and prevention of many diseases. Understanding the science behind nutrition creates an opportunity to improve the health of entire communities.

Companies utilizing nutritional science across the U.S. in the fields of food processing, laboratories, hospitals, health food producers, vitamin and dietary supplements are just some candidates for the R&D tax credit. Most of these companies have activities, processes and costs that would make them immediately eligible for federal and state R&D tax benefits, which were created to promote growth and innovation throughout the United States.

Who Qualifies for R&D Tax Credits?

There is a four-part test to determine who qualifies to claim the research and development tax credits.

1. The purpose of the project must be to create new or improved functionality, performance, reliability, or quality of a business component or method or process that the taxpayer plans to hold for sale, license, lease, or actual use in the taxpayer's trade or business.
2. The taxpayer must intend to find information that would eliminate doubt concerning the development or improvement of the component.
3. The results of the process must be uncertain at the beginning of the process.
4. The process of experimentation used to discover information must fundamentally be technological in nature, relying on principles of the physical or biological sciences, engineering, or computer science. 

Nutritional science draws upon chemistry, biology, and the social sciences to understand complex relationships among human health and wellbeing. To satisfy continuously evolving customer expectations such as products without artificial colors/flavors, preservatives, hydrogenated fats, or genetically modified ingredients (GMOs), research and development is required.

Examples of nutritional science innovations eligible for R&D tax incentives include the following:

• The study of molecular targets and variability in individual responses to nutrients and dietary patterns
• Developing the interplay between nutrition and the microbes
• Study the transaction between genetics, gene expression and dietary intake
• Development of innovative web-based technology to reach parents with nutrition and health messages to prevent child obesity
• Developing the cellular and molecular biology of various nutrients
• Developing new machinery and equipment for the production and testing of nutrients
• Producing prototype product samples for testing and validation of new recipe formulations
• Improving existing product formulations to achieve specified nutritional requirements, including sodium content and caloric value
• Improving existing product formulations to achieve specified analytical requirements, including those related to pH level, brix level, and acid content
• Developing new or improved agricultural or chemical materials that go into the products
• Improving existing product formulations to enhance sensory qualities including flavor, appearance, and texture
• Conducting sensory and or patient evaluations of prototype samples

R&D tax credits can immediately benefit a company as a significant source of cash for reinvestment. They also provide a significant reduction to current and future tax liabilities. Tax Point Advisors has been able to help companies claim significant tax credits ranging from tens of thousands up to millions of dollars. As you can see, R&D tax credits offer a tremendous opportunity to companies for activities they perform on a regular basis. At the same time, determining which activities qualify and then completing the necessary documentation can seem daunting. A qualified R&D tax credit professional can guide you through this process by conducting a thorough tax credit study.

If you are a business owner who is unsure if your activities qualify, make sure to check out our e-book: "The Business Owner’s Guide to R&D Tax Credits"

How Do You Claim the R&D Tax Credit?

Again, a qualified R&D tax credit professional can help you claim all of the R&D tax credits for which you are eligible through a tax credit study. Federal and state filing requirements vary, so be sure to work with your tax credit expert on supplying the required documentation to each government entity. 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.