R&D Tax Credits for U.S. Dairy Production and Processing Companies

R&D Tax Credits for U.S. Dairy Production and Processing Companies

Posted by Jeffrey Feingold on 04.27.22

Many companies in the dairy industry are missing out on substantial amounts of valuable tax credits. This is because many dairy production and processing companies do not realize the potential benefits that R&D tax credits have to offer for their type of operations. Frequently, business owners have the misconception that research and development is limited to activities conducted in a laboratory setting by scientists in lab coats.  That’s simply not the case for the R&D tax credit, however, as the broad definition of research embodied in the language of the credit is readily applicable to many aspects and activities within the dairy industry. As consumer preferences change with attitudes towards genetic modification, the use of growth hormones, and health trends, dairy producers increasingly carry out experimentation and evaluation of various alternative processes that constitute research and development in the context of the R&D tax credit. Qualifying research in dairy operations range from activities conducted on what the animals are fed to the processes involved in dairy production to the experimentation on how the milk is packaged and transported.

What are the benefits of the R&D tax credits?

  • The immediate benefit of the tax credits are a dollar-for-dollar refund on taxes paid or credit against taxes owed on a current year's tax form.
  • Credits are able to be carried forward for up to 20 years.
  • Credits can often be claimed going back three or four years, sometimes further depending on prior ability to use the credit.

Who do the R&D tax credits help?

These tax credits apply to many industries. At its core, the credit defines qualifying research broadly under a four-part test:

  • Does your company undertake activity intended to develop a new or improved product or process for yourself or your customer? Do you create a product, process, technique, formula or invention to improve performance, functionality, reliability or cost?
  • Is this activity by nature technical?
  • Does this activity seek to eliminate technical uncertainty?
  • Does this activity follow a process of experimentation?

Here are some examples of dairy production and dairy product processing developments eligible for R&D tax incentives:

  • Development of feed additives to improve health of animals and dairy output (e.g. whole-plant corn silage vs brown midrib hybrid silage as fiber and energy source for diets in lactating cows; also, vitamin E and selenium levels)
  • Optimizing productivity and utilization of dairy pastures
  • Evaluating and testing methods of remediation of heat stress on dairy cattle
  • Experimenting with methods to avoid antibiotic residues in milk         
  • Evaluating and implementing of odor control treatment methods
  • Developing new ways of packaging dairy products for sustainability and shelf life
  • Developing specialty products (e.g. GMO-free, rBGH-free, reduced fat, or protein-enriched)
  • Experimenting with various holding pens and bedding to reduce environmental strep and staph organisms present on udders
  • Experimenting with controls for mold or mycotoxins in feed
  • Experimenting with disease control methods
  • Developing or modifying pasteurization processes
  • Experimenting with milking practices (e.g. teat dipping, duration of dry cow therapy)
  • Experimenting with milking equipment and techniques (e.g. automation)
  • Improving facilities to improve the health of the herd
  • Researching genetics, hormones, and growth formulas
  • Experimenting with equipment (e.g. tracking chips on collars) to improve breeding or raising of livestock
  • Experimenting with the processing of waste products
  • Developing new or improved methods to minimize bacteria and other contaminants
  • Testing milk quality and antibiotic residue
  • Developing new gene transfer technologies

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

If you would like more information about how to proceed with taking advantage of these valuable tax credits and incentives, contact Tax Point Advisors. You can reach us at 800-260-4138 or leave us a message below. We offer free consultations to determine if you qualify and give an estimate of what your savings could be. Don't miss out on improving your bottom line with R&D Tax Credits!

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