Does My Farm Qualify for the R&D Tax Credit?

A traditional farm may qualify for the federal R&D Tax Credit when it performs technical work to develop or improve a product, process, technique, formula, or other business component through experimentation.

That can include work involving crop-production methods, irrigation, livestock processes, equipment changes, growing systems, or other farm operations. But ordinary farming activity does not automatically qualify.

The IRS applies the federal four-part test separately to each business component being evaluated. Qualified research generally must involve domestic research expenditures, technological principles, development or improvement of a business component, and a process of experimentation related to function, performance, reliability, or quality.



Since 2004, RCG Tax Partners has completed more than 25,000 R&D tax credit studies and identified over $750 million in tax savings. RCG evaluates technical activities, qualified research expenses, and supporting documentation for Ohio businesses claiming federal and state R&D Tax Credits.

A Farm Qualification Checklist

For a traditional farm or agricultural operation, these questions are more useful than simply asking whether “farming qualifies.”

Did you try to improve a farm product or process?

Potentially relevant projects may involve improving crop production, irrigation, livestock handling, feeding methods, environmental controls, equipment performance, or another operational process

Was there technical uncertainty?

There should be uncertainty about how to achieve the desired result, not simply a decision about which commercially available product to purchase.

Did you test alternatives?

Qualified research generally involves evaluating alternatives through trials, testing, modeling, systematic observation, or another process of experimentation.

Did the work rely on science or engineering?

Farm Activities That May Need Review

For traditional farms, the strongest potential R&D areas are usually tied directly to improving the farm's own production methods or operations.

Crop-production trials

Testing different planting methods, growing conditions, nutrient approaches, or production processes may need review when the farm is trying to resolve a technical question.

Irrigation improvements

Developing or refining water distribution, pressure, controls, drainage, or irrigation methods may involve qualifying experimentation.

Livestock and feeding processes

Testing technical changes to feeding, handling, housing, monitoring, or environmental systems may warrant review when uncertainty and experimentation are present.

Farm equipment modifications

A farm may modify or develop equipment, attachments, controls, or operating methods to improve performance, reliability, or production capability.



Growing and storage processes

Projects involving temperature, humidity, drying, storage, handling, or other production variables may need analysis when the farm evaluates competing technical approaches.

These activities do not qualify merely because they are new to the farm. The underlying technical process matters.

What Generally Does Not Qualify?

A useful R&D tax credit for farmers guide should be equally clear about routine activity.

The IRS excludes activities such as research after commercial production begins, duplication of an existing product or process, certain adaptation work, surveys or studies, and research performed outside the United States or U.S. territories.

For a farm, ordinary activities may also need to be separated, including:

• Routine planting and harvesting
• Normal equipment maintenance or repair
• Standard production work
• Purchasing and using existing farm products without technical development
• Routine quality checks
• Ordinary operational troubleshooting
• Market or consumer research

A change that saves time or improves operations is not automatically qualified research.

Which Farm Costs May Be Relevant?

Qualified research expenses include in-house and contract research expenses, but the underlying research itself must first satisfy the applicable requirements.

The farm should not start with payroll or supply totals and then attempt to make the activity fit the credit..

What Documentation Should a Farm Keep?

Traditional farms may already have useful records even if they do not maintain formal R&D files.

Supporting documentation can include:

• Field trial records
• Production logs
• Equipment modification records
• Test results
• Crop or livestock performance data
• Technical notes
• Employee time records
• Supply invoices
• Contractor agreements
• Records showing what alternatives were tried and what changed



RCG's R&D process includes technical narratives, project summaries, qualified expense analysis, and documentation prepared for the taxpayer and CPA.

Farm R&D Tax Credit FAQs

Review Specific Farm Projects, Not Farming in General

The strongest farm R&D tax credit analysis starts with individual projects.

Ohio farmers should identify where they encountered technical uncertainty, tested alternatives, documented results, and incurred expenses directly connected to that work.



RCG Tax Partners supports Ohio farms and agricultural businesses with R&D Tax Credit studies, technical activity analysis, qualified expense review, and detailed documentation for federal and state claims.