Article
Four things to know about R&D tax credit opportunities for the seafood industry
Aug. 23, 2020 · Authored by Star Fischer, Nick Frank
The seafood industry, especially compared to others, is often overlooked when it comes to its reputation for enhancements in technology and developing new products or processes. However, the seafood industry is no stranger to innovation.
Due to this misperception, companies that have invested time and energy keeping the seafood industry modernized often leave lucrative tax credits on the table. Additionally, credits may be available related to many investments made to ensure food safety during these unprecedented times. One of the biggest missed opportunities is the R&D tax credit — a significant incentive available to companies that develop new products, processes, formulas, inventions, software, or techniques.
But first, what is the R&D tax credit?
The R&D tax credit is a dollar-for-dollar tax savings that directly reduces a company’s tax liability. There’s no limitation on the amount of expenses and credit that can be claimed each year. If the R&D credit can’t be used immediately or completely, any unused credit can be carried forward for up to 20 years.
In addition, previously filed tax returns can typically be amended for up to three years to claim the R&D credit retrospectively, providing an avenue to recoup previously paid taxes.
New or small business may be eligible to apply the R&D tax credit against their payroll tax for up to five years starting in 2016. The R&D credit is available both at the federal and state level, with approximately 40 states offering an R&D credit to offset state tax liability.
To help break down this complex topic, here’s a list of common questions seafood companies have about the R&D credit.
How much can a company in the seafood industry save with R&D tax credits?
There’s no limit to how much a company can claim for the R&D credit. However, there are several factors that can impact tax savings. The amount of tax credit available depends on how many qualified costs a company incurs during a specific tax year. See below for details on qualified costs.
In general, a company has the ability to save 7%–10% of annual R&D costs for federal purposes. The savings could be even greater if that company has an income tax filing obligation in a state that also offers an R&D credit.
Many business owners or management of seafood companies think, ‘Well, we aren’t a technology company, so what are we doing that could qualify as R&D?’ There are in fact several different areas in the seafood industry that can qualify for this tax credit.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.