Posted by Jeffrey Feingold on 05.03.23

Your gluten free food business could be eligible for research and development (R&D) tax credits. Gluten is a family of proteins found in grains like wheat, rye, spelt and barley. People every day are deciding to remove gluten from their diets. Sometimes this is due to Celiac disease or to a less acute gluten sensitivity.  Others just want to eat healthier or stay current in diet trends.  Some people say that they just feel better after eliminating gluten from their diet. Whatever the case, as the demand for gluten free products grow, so does the opportunity for the manufacturers of these foods.  

There is a great deal of research and product development that goes into making foods that are gluten free. Finding substitute ingredients that have similar properties to gluten ingredients for cooking and baking is a complex and time consuming process. It requires researching new recipes and processes, as well as a great deal of trial and error. Daily activities performed by chemists, scientists and nutritionists in the gluten free food industry are eligible for the R&D tax credits offered by the federal government and by 40 separate states. Both large and small businesses that attempt to develop their products and/or services in new and better ways are eligible for the credit.  

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. 

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.

Which Activities Qualify?

Many activities in the gluten free foods industry will qualify for the R&D tax saving credits, including:

• Developing new food product recipes
• New processes for creating gluten free foods
• Using new chemical compounds to improve the gluten free products
• Inventing new machinery or equipment to improve the processes of making gluten free products
• Improvements to existing processes, recipes and equipment for the production of gluten free foods
• Better flavor to the gluten free foods
• Added nutritional value
• More visually appealing products
• Automation in processes
• Improvements in packaging processes
• Developing new packaging designs to provide enhanced functionality
• Developing new packaging designs to improved product shelf life
• Producing prototype product samples for testing and validation of new recipes
• Conducting sensory evaluations of prototype samples
• Software programs to maintain and organize results
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The market for gluten free food is growing every day. It’s time for your business to start collecting these often lucrative tax credits from the federal government if you are not already.  Past years’ taxes can also be deducted and forty individual states have their own additional R&D programs to consider.

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.