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George decision impacts on-farm R&D | Baker Tilly
Article
Tax court validates on-farm R&D, but denies credits when records fall short
March 4, 2026 · Authored by Travis Riley, Josh Harbin
Agricultural producers innovate every day, often out of necessity.
Producers consistently engage in research such as:
Responses to disease pressures
Evaluation of feed additives
Seed variety testing
New production techniques to improve yield and quality
A U.S. Tax Court decision, George v. Commissioner, confirms qualified research can happen in barns, fields, and production facilities, not only in laboratories. The Feb. 3, 2026, decision also shows that legitimate, valuable R&D tax credits can be lost without adequate documentation.
Now is the perfect time for agricultural companies to reassess whether their activities qualify, put basic documentation practices in place, and ensure they are not leaving credits on the table.
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The message was clear: producers should maintain detailed, contemporaneous records linking those activities to specific, identifiable costs.
Overview of the case
In George v. Commissioner, a fully integrated poultry company that controls breeding, growing, processing, and distribution claimed research credits under Internal Revenue Code (IRC) Section 41 for seven research trials conducted between 2012 and 2014.
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The trials sought to develop an improved poultry product by testing various treatments, feed additives, and probiotic regimens under commercial growing conditions.
The poultry industry distinguishes between breeders and broilers, genetically similar birds raised for different purposes. With profitability driven by razor-thin margins, small variations in feed conversion, mortality, or weight gain can have substantial financial consequences.
Though the IRS disallowed the claimed credits, the Tax Court disagreed in part, recognizing that meaningful qualified research had occurred. However, the court ultimately denied a substantial portion of the credits because the taxpayer failed to substantiate certain activities and expenses with contemporaneous documentation.
The research credit under IRC Section 41 requires that research satisfy a four-part test.
Four-part test
To constitute qualified research, the research must:
Relate to developing or improving a product or process
Be technological in nature
Involve uncertainty regarding capability, method, or design
Involve a process of experimentation intended to resolve that uncertainty
The court's analysis in George applied each of these elements to on-farm poultry trials with implications that extend well beyond poultry.
Key takeaways for agricultural producers
For many agricultural producers, the court’s findings validate the day‑to‑day experimentation that has long taken place on farms but has often gone unclaimed for tax credit purposes. The court’s clarity highlights the opportunity for agricultural businesses to benefit from research credits they may already be eligible to claim.
Applied commercial-scale experimentation can qualify as research for tax credit purposes. Producers who test new treatments, additives, or methods, should view this case as both validation and warning. Strong documentation, careful tracking of experimental groups, and clear allocation of related expenses are essential. The work happening on the farm or in the field may indeed be R&D, but only well-documented R&D earns and sustains the credit.
For agricultural businesses, this decision signals a meaningful opportunity. Producers who experiment with new treatments, feed strategies, seed hybrids, irrigation methods, or production techniques may be missing out on valuable credits.
1. On-farm testing can constitute qualified research
The court drew an important distinction between laboratory research conducted by vendors and applied research performed under commercial production conditions.
The IRS argued there was no uncertainty because the drugs and treatments were commercially available and widely used. However, both parties’ expert witnesses agreed that vendor research conducted in sterile laboratory environments does not necessarily translate to commercial scale operations.
As the court observed, laboratory experiments “are performed in sterile laboratory environments to control and eliminate” external variables. While those tests are “a good starting point,” they may not demonstrate how products will perform in real-world farm conditions. Even between two seemingly identical farms, treatment effectiveness may vary due to temperature fluctuations, disease pressures, microbial populations, and other environmental variables.
Further, the court concluded that this was not routine quality control. Rather, in the George case, “the vendor research did not resolve the uncertainty,” and that uncertainty “could only be resolved through applied research on commercial farms.”
For agricultural producers, not just poultry, this confirms that testing commercially available inputs under actual production conditions can qualify for the research credit when genuine uncertainty exists about how those inputs will perform in a specific operation's environment.
2. Supply costs for pilot model broilers
In the George case, the taxpayer claimed supply costs, specifically feed costs associated with raising broilers in experimental flocks. The IRS challenged those costs arguing that the feed expenditures are not deductible under IRC Section 174 and that some additives were not even administered through the feed.
The court sided with the taxpayer and held that the experimental broilers constituted pilot models because the uncertainty could only be resolved by testing the broilers after they reached their end weight. As a result, “the costs to develop the broilers, including feed costs, would qualify as research and experimental expenditures.” The court emphasized that feed was “a necessary expenditure in developing the pilot model broilers and resolving the uncertainty.”
Further, the court rejected the IRS' argument that supply expenses can’t be claimed unless wage expenses are also claimed, noting that nothing in the statute or regulations requires such pairing.
For producers, this underscores that input costs, whether feed, seed, fertilizer or other agricultural inputs, when directly tied to qualified research, can constitute eligible expenses.
3. Documentation remains the deciding factor
Despite several favorable rulings, the taxpayer ultimately lost a substantial portion of the credits due to inadequate documentation. In some instances, the court acknowledged that a project “appears promising,” but denied credits because contemporaneous records were missing, inconsistent, or insufficient to connect specific activities to particular experimental flocks in the relevant tax year.
In other situations, the court agreed that qualified research had occurred but found that the taxpayer failed to substantiate the amount of the qualified expenses where the taxpayer could not identify the specific experimental flock for a given project and the associated cost. The message was clear: producers should maintain detailed, contemporaneous records linking those activities to specific, identifiable costs.
The good news: these documentation challenges are avoidable.
With straightforward recordkeeping to identify qualified activities, document trial activity, and track associated costs, agricultural companies can position themselves to substantiate future claims.
