The demand for the development and production of both medical and recreational cannabis has increased across the United States since the legalization of cannabis passed in certain states. With this demand comes the need to perform research and development to quality products that the market is trending toward.
What many cannabis companies may not know is that they are potentially missing out on lucrative tax credits for performing certain types of activities. The most common activities that cannabis companies perform that qualify them for R&D tax credits is cannabis strain identification and plant breeding/strain creation which requires extensive research and resources.
The Cannabis Genetic Identification and Breeding Process
The process of breeding cannabis and strain identification is very demanding. Developing strain variation is important because this allows companies to create purified and strengthened strains, combine strains with desired or needed traits, or enhance specific characteristics such as higher yields, aromas, potency or other added benefits. The practice of successfully breeding these plants can be highly technical, especially on a commercial scale.
It requires time and resources to determine specific genetics that both male and female plants carry which is done by conducting multiple tests and analysis. These tests range and can be quite extensive depending on what the cannabis will be used for. For example, pharmaceutical companies use rigorous testing and maintain strict growing conditions in order to keep everything regulated and controlled.
The creation of these homozygous cannabis plants takes several rounds of cross-breeding to ensure that consumers will receive the same plant every time. And this consistency is important to the success of cannabis companies and the products they are giving their consumers.
Another important factor to consider about the breeding process is the amount of work that goes into maintaining the environment these plants thrive in. A lot of cannabis companies are required to construct indoor growing/breeding faculties that are optimal for cannabis cultivation.
There are a number of outside factors such as finding the perfect temperature and moisture balance inside a room, treating the threats of black mold, mildew and pests, and making sure the water has the correct pH balance also plays a huge role in making sure cannabis plants live in the perfect environment suitable for breeding.
How R&D Tax Credits Plays a Part
This entire strain identification and breeding practice not only takes a lot of time and precision but also requires companies to purchase and provide a lot of resources in order for it to be successful.
The cost of labor, lab equipment and tests, and other additional items to give these plants the ideal growing conditions can add up and qualify companies for significant research and development tax credits. These are dollar-for-dollar credits that help to offset the cost companies put into creating cannabis strains which incentives cannabis companies to keep testing and developing new strains that will benefit the general public.
Having a team of tax experts to help you organize all the proper paperwork and identify what activities would qualify your companies for these tax credits is an important step. Start your process at National Tax Group and call our team of certified tax specialists at 561.257.3436 to help you today.