Making food healthier is a frequently overlooked method of claiming R&D tax credits. R&D tax credits are dollar-for-dollar credits from the federal government which encourage organizations to invest in research and development. Congress created R&D tax credits in 1981 in response to declining investment in research and development throughout the 1970s, setting aside millions of dollars for companies that innovate in their products or services.
While many people associate R&D with scientists in lab coats, there are several sectors outside the sciences that perform research and development on a regular basis. Fortunately, the IRS has a broad definition of research and development, and multiple ways of improving nutritional value will count as qualified research activities (QRAs). We discuss several steps food companies can take to make their food more nutritious and save money.
Reducing sugar
Reducing sugar consumption has numerous benefits, including lowering the risk of obesity, type-2 diabetes, tooth decay, and high blood pressure. As a result, many food companies are eager to tout products with reduced sugar. However, it can be difficult to reduce sugar content without compromising on taste. Businesses often must invest in R&D to taste-test new versions of food to determine its suitability for their consumer base. Luckily, lowering sugar content counts as a QRA and can be used as part of an R&D tax credit claim.
Another method to reduce refined sugar in products is to use healthier substitutes such as honey, agave nectar, and stevia. These sweeteners have several benefits, including fewer calories per serving, antioxidants, and more nutrients. Using naturally derived sugar substitutes has a host of benefits, including preventing blood sugar spikes and potentially satisfying sugar cravings.
Replacing conventional beef with grass-fed
Grass-fed beef is sourced from cattle that are only fed grass and other foraged foods while being allowed to graze in the open throughout their lives. Small amounts of antibiotics from cows make their way through the food chain and end up being consumed by humans, which can lead to antibiotic resistance and increase vulnerability to infectious diseases. Businesses can make their beef healthier by sourcing it from cows not raised with antibiotics.
In addition, choosing products made with grass-fed cow milk is another area food companies can make their products healthier. Opting for beef and dairy products sourced from grass-fed cows is an excellent way to improve cattle-derived products for consumers while counting as a QRA for an R&D application.
Swapping artificial ingredients with natural alternatives
Many consumers are becoming more health and label-conscious, allowing companies to capitalize on this trend by switching artificial preservatives, colors, and flavor enhancers with naturally derived products. While many people would prefer to eat “real food,” companies can face challenges in making their food appealing with natural alternatives.
Companies must often engage in R&D to find suitable ingredient combinations that balance appeal and healthfulness. By making food with as many natural ingredients as possible, businesses may improve consumer confidence in their products while saving money on the development process.
Conducting R&D to make food healthier can be an excellent way to improve your company’s lineup while reducing its tax burden. However, claiming R&D tax credits can be a complicated, time-consuming endeavor. At MainStreet we help your food company through the complex process of claiming R&D tax credits to save you money on Tax Day. Contact us to help your business save money!