R&D Tax Credits for Farms: How to Combat Shrinking Margins
How R&D Tax Credits Can Help Farms Generate Revenue While Commodity Prices Fall
Farms are facing one of the most difficult cost-price environments in recent memory. Input costs like labor, fuel, fertilizer, and equipment remain historically high, while commodity prices for major crops like corn, soybeans, and wheat have dropped significantly from their 2022 highs. Dairy farmers are contending with milk prices that don’t cover full economic costs, and egg producers are watching receipts normalize sharply after years of avian influenza-driven spikes.
In the middle of that squeeze, many farms are leaving a significant source of cash on the table: the Research & Development (R&D) tax credit under IRC §41D.
If your operation involves testing new approaches to feed, disease management, animal health, crop genetics, or soil management, you may already be doing work that qualifies. A recent U.S. Tax Court decision (George v. Commissioner, T.C. Memo 2026-10) confirmed for the first time that livestock and agricultural research qualify under the entire four-part test Section 41. The door is open. The question is whether your records can get you through it.
The Cost-Price Squeeze Is Real on American Farms
American farmers have faced a persistent “cost-price squeeze” over the past several years. After commodity prices surged in 2021 and 2022 on the back of supply disruptions and export demand, prices have come back down hard. Meanwhile, the costs of running a farm have remained stubbornly elevated.
The numbers tell the story:
• Corn, soybean, and wheat prices are well below their 2022 peaks, though the exact percentage declines vary by price series. Profitability per acre is projected negative for corn, soybeans, wheat, cotton, sorghum, rice, and peanuts on a total-cost basis.
• Farmdoc states that Illinois dairy farmers’ 2024 milk returns were $5,090 per cow against total milk production cost of $5,499 per cow, for a –$409 per-cow net return.
• Looking ahead, USDA projects milk receipts to fall $6.2 billion (12.8%) in 2026 as prices retreat from recent levels. Egg receipts are forecast to drop $17.3 billion (66%) as avian influenza-driven price spikes normalize.
• Labor costs hit record highs in dollar terms in 2024, rising nearly 7% year-over-year, while interest expenses, driven by elevated debt levels and high rates, climbed over 6%.
For operations already running on thin margins, finding additional cost savings isn’t just nice to have, it’s a survival question. R&D tax credits represent a real, unclaimed source of cash that many farms have never seriously considered.
What Is the R&D Tax Credit?
The Research & Development tax credit under IRC §41 is a federal tax credit available to businesses that engage in qualified research activities. The research credit has historically been associated with technology companies, pharmaceutical firms, and manufacturers, though many other businesses do qualify without even knowing it.
The Four-Part Test
To claim the credit, a research activity must satisfy all four of the following requirements as outlined by the IRS:
• Permitted Purpose: The activity must be aimed at developing or improving a product, process, technique, formula, or software.
• Technological in Nature: The work must rely on engineering, physical or biological science, or computer science principles.
• Technical Uncertainty: The activity must involve an attempt to resolve genuine technical uncertainty about how to achieve the goal.
• Process of Experimentation: Your team must be testing alternatives, evaluating approaches, and refining outcomes, not simply following a known, established method.
Qualified research expenses (QREs) include employee wages for research activities, supplies used in the research, and 65% of amounts paid to outside contractors conducting research on your behalf.
What George v. Commissioner Changed for Agriculture
George’s of Missouri, Inc. (GOMI) is one of the largest poultry producers in the United States, processing approximately 3.5 million birds per week. GOMI is a vertically integrated company, controlling nearly every step of production, from hatchery to processing plant.
Between 2012 and 2014, GOMI conducted a large range of R&D with the intent of improving health, efficiency, and performance in its flock. These included:
1. Vaccine efficacy trials comparing protocols on control and experimental flocks.
2. Antibiotic and probiotic studies to improve growth rates and survivability.
3. Genetic line selection experiments to determine best breeding lines to improve disease resistance and feed conversion ratios.
4. Disease prevention protocols to inhibit Marek’s disease, coccidiosis, and necrotic enteritis, and more.
GOMI claimed qualified research expenditures (QREs) for these, which included employee wages, supply costs, feed costs, and overhead. The IRS disagreed with GOMI’s claims, and escalated the case to U.S. Tax Court.
The outcome was:
1. Agriculture qualifies under the four-part test.
2. Controlled flock trials satisfy the process of experimentation.
3. GOMI’s broiler chickens are “pilot models” under the tax code.
4. Feed costs are upheld as qualified supplies.
5. The tax court awarded penalty relief.
What Qualifies on a Farm?
The following are examples of on-farm activities that may qualify for the R&D tax credit, provided they meet the four-part test and are properly documented. Working with a research credit expert is highly recommended.
Livestock Operations
• Testing experimental vaccine protocols on control and treatment groups
• Studying the impact of probiotics, antibiotics, or feed additives on growth rates, mortality, or feed conversion ratios
• Genetic line selection experiments to improve disease resistance, carcass quality, or reproduction rates
• Disease prevention protocol development for conditions such as Marek’s disease, mastitis, respiratory illness, or coccidiosis
• Feed formulation trials aimed at improving animal health outcomes
Dairy Operations
• Testing new milking protocols or cow health initiatives
• Studying the effect of diet changes (including protein ratios, forage types, and supplements) on milk composition and production
• Developing and evaluating herd management practices to improve reproductive efficiency
• Evaluating treatment protocols for common health conditions under controlled conditions
Crop and Row Crop Operations
• Field trials comparing hybrid or variety performance under different soil, water, or input conditions
• Testing experimental application rates or timing for fertilizers, herbicides, or fungicides
• Developing or refining precision farming techniques, including variable rate applications
• Soil biology studies, including cover crop research and no-till transition experiments
What Doesn’t Qualify
Not all farm activities qualify, and it’s important to distinguish. Routine vaccinations using established protocols, standard feeding programs, ordinary quality control inspections, and established production practices without genuine technical uncertainty do not meet the four-part test.
The OBBBA Window: Retroactive Relief for Smaller Farms
In addition to the ongoing §41 credit, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, created an additional opportunity for qualifying small farm operations.
New IRC §174A reinstated immediate expensing for domestic research and experimentation (R&E) expenditures for tax years beginning on or after January 1, 2025. Prior to this, the Tax Cuts and Jobs Act of 2017 had required businesses to amortize domestic R&E expenses over five years beginning in 2022 — a cash-flow problem that hit innovative small businesses particularly hard.
Who Qualifies for Retroactive Relief?
If your operation averages $31 million or less in annual gross receipts under IRC §448(c), you may be eligible to elect retroactive application of §174A, amending your 2022–2024 returns to expense rather than amortize qualifying research costs. The gross receipts thresholds are $29M for 2023, $30M for 2024, and $31M for 2025.
Important: The election requires amending all three years (2022, 2023, and 2024). Businesses may not cherry-pick specific years.
The Deadline
The filing deadline under Rev. Proc. 2025-28 is the earlier of July 6, 2026, or the claim for credit or refund due date under §6511 for that year. It is important to consult with your CPA and research tax credit advisor to determine which tax years are open for amended returns.
Why Documentation Is the Difference Between a Credit and a Missed Opportunity
The George case demonstrated that qualifying activities are only half the battle. Without adequate records, the IRS cannot verify your claims, and the Tax Court cannot award full credits. The burden of proof is on the taxpayer.
The IRS now requires specific information when filing a refund claim involving the Section 41 research credit. Per IRS guidance effective June 18, 2024:
• Identify all business components to which the credit claim relates
• For each business component, identify all research activities performed
• Provide total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year
For ongoing credit claims and exam preparedness, thorough contemporaneous records are essential. They do not need to be overly scientific, and a qualified R&D tax credit expert can help you organize your notes into a claim.
The distinction between qualifying research and routine production is real and matters. Standard feeding protocols, established vaccination schedules, and ordinary production methods don’t qualify. The research has to involve genuine uncertainty, genuine alternatives being tested, and genuine data collection. If you’re making it up as you go, you’re not experimenting, and if you’re systematically testing alternatives to resolve a real question about your operation, you may well be.
What RK Partners Can Do For Your Operation
R&D tax credits are highly fact-specific, and the rules governing them (across §41, §174, and now §174A) are technical and detailed. The agricultural sector is newer to this space, which means the potential for unclaimed credits is significant, and the margin for error in how claims are prepared and documented is real.
RK Partners is a niche firm focused exclusively on this area of tax law. Our team of tax attorneys, CPAs, and consultants has helped companies across industries, including livestock operations, identify and claim credits they didn’t know they had.
We can help your operation evaluate whether your activities meet the four-part test, identify the records you should be keeping, assess whether you qualify for retroactive relief under §174A before the deadline passes, and prepare a claim that is positioned to hold up to IRS scrutiny.
If your margins are being squeezed from every direction, this is worth a conversation. Contact us for a no-risk consultation today.
