Industry spotlight – R&D and the Food and Beverage Industry

Portrait of senior factory worker checking production process at food plant standing by conveyor belt in modern clean workshop, copy space

Now more than ever is a good time for food manufacturers and production labs to take advantage of this tax credit as they face challenging times.

Competition in the food production industry has always been heavy, as food laboratories, production labs and manufacturers have needed to constantly evolve to clear new hurdles and keep up with the changing demands of their clientele. Many business owners operate with a constant eye on the bottom line because there’s a never-ending competition and challenge from others in the industry.

However, the 2020 tax extension has presented an opportunity for more food and beverage companies to apply for the Research and Development tax credit for the 2019 tax year and find opportunities otherwise overlooked. Businesses investing in new recipes, packaging, formulas or processes can reward themselves with this lucrative cash flow infusion for activities that they are already doing. Companies that develop and improve food and drink products, packaging and processes can apply for a dollar-for-dollar reduction in their tax liability.

Qualifying research activities include:

  • Improving the shelf life, taste, or nutrition of the food or drink
  • Updating processes to comply with new legal and regulatory changes
  • Modernizing lab equipment to improve the safe handling of food products
  • Executing more energy-efficient processes that save water, fuel, and utilities
  • Packaging food or drinks in more sustainable ways

More and more customers are opting for online shopping in the twenty first century, and this provides new opportunities for food and beverage industries to implement technology. For example, creating a mobile app may not only qualify businesses for R&D tax credits, but can also give them an advantage over competitors. Presence in the mobile space provides easy communication between businesses and their clientele. Other examples of food and beverage companies using technology are new software implementations, technology consultations with a firm or professional, and automation of various processes.

To sum up, the Research and Development tax credit has a broad definition and provides many opportunities for food producers, packers, and processors to receive a generous tax credit. If you think your business qualifies for R&D tax credits, contact our expert tax professionals at (561) 257-3436 to schedule your free initial assessment.

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