Industry: Custom Food Product Development
Number of Employees: 500+
Commonly Qualifying Tasks:
- Develop recipes and formulations for new food products and flavorings
- Develop new methods to improve the shelf life of existing products
- Conduct various testing for flavoring, texture, FDA compliance, etc.
- Develop new production process for new products or improve production efficiency
A food processing company that creates custom food products and mass produces a wide variety of products was unsure of whether or not their activities would qualify for the credit. They had been in operation for decades but had never evaluated the possibility of generating a research and development tax credit up until that point. The company had roughly 500 employees who ranged from scientists that developed new products, all the way down to temporary line laborers who operated the production process.
Initial interviews were conducted to determine how their overall product development process worked. During these interviews, it was revealed that the company had three distinct development paths. The first was client-driven private label product development projects. These projects were those generated through client requests in which customers delivered requirements and specifications to the company and the company was responsible for developing a product that met those guidelines. In addition to this development path, the Company also had internal development efforts that revolved around the development of retail products under the numerous branded products that they produced for retail. Finally, there were development efforts that were purely process improvements centered around automation and making their automated storage and inventory infrastructure more efficient and reliable.
On the food production side, the company was able to qualify a wide range employees at varying positions including lab personnel that included food scientists all the way down to production operators that ran first run articles to validate and verify results of new production processes or modified ones. This represented the vast majority of their qualifying research expenses accounting for roughly 70% of their total qualified costs.
Of their 500+ employees, the company was able to generate a credit by qualifying roughly 30% of their workforce. Their credit resulted in a $400K net benefit at the federal and state level.