Posted by William Mehi on 03.15.23

U.S. Aquaculture businesses are growing fast and are vital for supporting our nation’s seafood and plant production, providing jobs, as well as enhancing our coastal communities. Aquaculture is the breeding, rearing and harvesting of animals or plants in all types of water environments. Many activities associated with aquaculture and fisheries can and do qualify for R&D tax credits. The open oceans, our coastal waters, and even tanks in land-bound states all invite opportunities to grow more fish, shellfish and marine plants. Ensuring this momentum continues and advances is key to create jobs and help build a safe, secure and sustainable U.S. seafood supply now and into the future.  Federal research and development tax credits (also known as R&D) are available for companies performing R&D activities aimed at advancing these farming technologies or processes.

R&D is essential to driving technological change in aquaculture, and many people working in the industry engage in R&D activities on a weekly basis. These activities could qualify for a significant tax credit that shouldn’t be passed up. R&D tax credits are given to businesses that are performing research or development that improve the product, processes involved in producing the product or technology.

Some R&D activities performed with fisheries and aquaculture include:

• Development of Filtration systems
• Site analysis
• Innovative feeding systems
• Genetics and life cycle research on pertinent aquaculture species
• State of the art nets
• Developing Recycling systems
• Disease Control and prevention techniques
• Containment systems
• Low impact production processes
• Improving Aquaponics systems
• Developing new and improved tests for mercury
• Improving or developing new waste removal systems
• Breeding research
• Prevention of parasites and pests
• Improving ecological impact
• Use of nutrients and vitamins

The activities and associated expenditures of a company can qualify for the R&D tax credit if the activities meet the four-part test established by the IRS:

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 the hard sciences, such as engineering, physics, chemistry, biology or computer science.
3. 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.
4. Elimination of Uncertainty – Activities must overcome some unknowns, such as uncertainty as to capability, optimal design, or optimal methodology. 

Companies in the aquaculture industries should not only take advantage of the federal R&D tax credits, but also investigate if their state is one of the many states that offer tax benefits as a means for promoting growth and development as well as creating new jobs. A qualified R&D credit professional from Tax Point Advisors can conduct a thorough R&D tax credit study to assess which activities meet the IRS’ four-part test to qualify for the credits. Companies in aquaculture industries are challenged daily to develop innovative technologies.

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

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.