Posted by Jeffrey Feingold on 09.06.23

Global consumers are currently spending close to $1 trillion per year on meat, and demand for the meat industry is expected to double in the next ten years. Clean meat and meat alternative products are rising in popularity across the U.S., as consumers look to eat a more sustainable and humane diet. The global market for meat alternative products has been forecasted to climb to $140 billion in 2029 from $14 billion in 2019. Meat alternatives are clearly having a moment in the spotlight and experimentation and development will determine if this is a fad or our future.

R&D Tax Credits 

The R&D Tax Credit, originally enacted as part of the Economic Recovery Tax Act of 1981, was designed to stimulate the economy of the United States. The credit is an incentive for businesses of all sizes to invest in research and development activities to increase technological growth and competitiveness. Examples include the development of new or improved products, processes, techniques, formulas, and software to increase functionality or reliability. This credit was made permanent in 2015, offering ongoing incentives for R&D investment and should be utilized if available. Activities that may seem basic to meat replacement companies can be excellent items to review for qualification toward the R&D tax credit.

Everyday Activities Can Qualify

Meat alternatives aren’t new. Veggie burgers have been available in grocery stores and restaurants across the globe for many years. What’s new is the “growing” of clean meat in labs and cell culture environments without the need to actually raise livestock. The marketing aspects facing these meat replacement producing companies has also changed dramatically. In the past, companies were marketing to vegetarians looking for their plant based proteins and meatless options. Meatless products on the market today are different in one important way; they are often a traditional, animal-based meat alternative being marketed to meat-eating consumers. The current goal of meat alternative companies is to produce meats, made from plants or in a lab, that are meant to taste like meat. These alternatives are now marketed to meat-eating customers and  aimed to replace some of those customers’ meat purchases. That’s what makes these meat replacements different from the veggie burgers of the past, which have typically been aimed mostly to vegetarians. The lab work for growing meat as well as the technical research being done are perfect examples of activities that can qualify a company for R&D tax credits this tax season.

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

Here are just a few of the qualifying research activities that meat replacement producers undertake that may translate into R&D tax credits:

• Development of a new or improved product or process
• Identification of components, such as heme, that contribute to characteristics such as flavor, texture, juiciness, and aroma that are typically associated with animal-based meats
• New or improved isolation and production methods for proteins from plants 
• New or improved tissue engineering and culture media methods and formulations
• Equipment improvements to processing facilities to increase efficiency or yields
• Hybridization or development of new strains of crops and plants
• Developing techniques that will reduce costs and/or improve product consistency
• Producing sample batches in a test kitchen or a pilot run
• Creating new methods for minimizing contamination, scrap, waste, and spoilage
• Creating new packaging to improve shelf life, durability, and/or product integrity
• Improving the taste, texture, or nutritional content of ingredient formulations
• Implementing new cultivation techniques
• Improvements to facilities to maintain environmental and safety efforts
• Experiments with human consumption and nutritional test batches

R&D Tax Credits Requirements

As the majority of state R&D tax credits align with the federal R&D tax credit requirements, the activities and associated expenditures of a company can often qualify for state R&D tax credit as well if the activities meet the same four-part test required for claiming any a Federal R&D tax credit: 

1. Qualified Purpose - The purpose of the research must be to create a new or improved product, process, or formulation, resulting in increased performance, function, reliability or quality. 
2. Technological in Nature – The research must rely on principles of the hard sciences, such as engineering, physics, chemistry, biology or computer science. 
3. Elimination of Uncertainty – Activities must overcome some unknowns, such as uncertainty as to capability, optimal design, or optimal methodology. 
4. Process of Experimentation – Experimentation can be demonstrated through test batches, simulations, systematic trial and error, or other methods of evaluating alternatives to achieve a desired result. 

The proper identification and documentation for qualifying research activities and associated expenditures towards the R&D tax credit requires a thorough review of a company’s personnel and projects undertaken. Companies engaging in meat alternative production often expend time and resources on qualified research that enables them to take advantage of the R&D tax credit. A qualified R&D tax credit professional can conduct a thorough R&D tax credit study to assess which activities meet the IRS’ four-part test to qualify for the credits. Tax Point Advisors currently partners with some of the most forward-thinking companies and continuously seeks to help additional companies take full advantage of the available credits in the most effective way. 

Tax Point Advisors provides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more about R&D tax credits from the experts at Tax Point Advisors, please call us at (800) 260-4138 or please leave us a message below.