Agriculture and farming operations — companies that produce crops, livestock, or other agricultural products — may perform activities that warrant analysis under the federal R&D tax credit. This page explains what development work may be relevant. It is educational and is not individualized advice. For the foundational framework, see our page on qualified research.
What R&D May Look Like in Agriculture and Farming
Agricultural development may involve crop and soil development, irrigation, equipment modification, precision systems, and process development. Work directed at resolving genuine technical uncertainty in these areas may warrant review. Routine farming, ordinary field operations, and standard practice do not, by themselves, constitute qualified research.
Industry-Specific Examples of Technical Development
- Developing crop varieties, formulations, or treatments to achieve a specified yield, quality, or resistance target where the appropriate approach is uncertain.
- Developing soil or nutrient management approaches to achieve a specified target where the appropriate method is uncertain.
- Developing irrigation or water-management systems to achieve a specified efficiency or performance target where the appropriate design is uncertain.
- Modifying or developing equipment to achieve a specified performance or efficiency target where the appropriate design is uncertain.
- Developing precision-agriculture systems or approaches to achieve a specified target where the appropriate method is uncertain.
- Developing processes to improve quality, reduce loss, or improve efficiency where the method is not established.
Technical Uncertainty Examples
- Whether an alternative crop approach can achieve a specified yield or resistance target in a specific environment.
- Whether a modified irrigation system can achieve a specified efficiency target without unacceptable cost.
- Whether a custom equipment modification can achieve a specified performance target.
Process-of-Experimentation Examples
A process of experimentation may involve conducting field trials with alternative approaches and measuring results, testing alternative irrigation configurations and measuring efficiency, or testing alternative equipment modifications and measuring performance.
Potential Business Components
Potential business components may include a new or improved crop or treatment approach, a new or improved soil or nutrient management method, a new or improved irrigation system, a new or improved equipment modification, or a new or improved precision-agriculture system.
Employee and Contractor Work
Employees whose work may warrant analysis include agronomists, agricultural engineers, equipment engineers, and process engineers. Contractor work may include outside testing laboratories, equipment suppliers, or consultants performing development work on behalf of the operation.
Activities That Generally Require Caution or May Not Qualify
- Routine farming and field operations following established practice.
- Ordinary quality control or inspection.
- Simple seed or input substitutions without a technical development question.
- Routine equipment operation and maintenance.
- Ordinary troubleshooting without an identified uncertainty and evaluative process.
Documentation That May Help
Records that may help include trial or experiment records, field-test data, equipment modification records, and records connecting personnel and materials to specific development projects.
Example Hypothetical Project
The following is a hypothetical example for illustration only.
A farming operation is developing a precision-irrigation approach intended to achieve a specified water-efficiency target while maintaining yield. The technical uncertainty is whether an alternative combination of sensor placement, control algorithm, and application method can achieve the specified target. The team conducts field trials with alternative approaches, measures water use and yield, and evaluates the results. Professional review is still needed.
Questions to Ask Internally
- What specific approach, system, or process was being developed or improved?
- What technical uncertainty existed at the outset?
- How does this differ from routine farming?
Relationship to the Four-Part Test
The four-part test applies the same way as in any industry. The work must satisfy all four elements: permitted purpose, technological in nature, elimination of uncertainty, and process of experimentation. Note that research in the social sciences, arts, or humanities is excluded under Section 41(d)(4); the analysis focuses on activities that fundamentally rely on the hard sciences, engineering, or computer science.
Key Takeaway
Agriculture and farming operations may perform activities that warrant analysis under IRC §41 — particularly work involving crop and soil development, irrigation, equipment modification, precision systems, and process development. Routine farming does not automatically qualify. Because these determinations are fact-specific, professional review is appropriate. For related industries, see food manufacturing and oilfield equipment and energy services.