Article
Explore qualifying R&D tax credit activities for the nutraceutical industry
June 23, 2021 · Authored by Sean Kelly and Samantha Kaye
Throughout the COVID-19 pandemic, nutraceuticals have seen an increase in business — largely because people are looking for more natural alternatives to improve their health. It’s also because nutraceuticals and home remedies are convenient; they can be delivered to your house without a doctor’s prescription.
The nutraceutical industry is experimental and constantly evolving to support its customers’ overall health and wellness; however, many in the industry are unaware that developing new or improved products or processes can result in R&D tax incentives that can provide significant savings.
Qualifying activities for R&D credit center on innovative, new, and enhanced product formulation and process manufacturing. They could also include making improvements to existing products, testing, receiving feedback, and reformulating the product until it meets its intended health-giving or medicinal use.
To help break down this complex topic, here’s a list of common questions companies have about the R&D credit.
What is the R&D tax credit?
It’s a dollar-for-dollar tax savings that directly reduces a company’s tax liability. Available at both the federal and state level, there’s no limitation on the amount of expenses and credit that can be claimed each year for federal purposes and each of the eligible states have their own respective rules and qualification criteria.
If the R&D credit can’t be used immediately or completely, any unused credit can be carried forward for up to 20 years — or indefinitely for California R&D tax credits.
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 businesses may be eligible to apply the R&D tax credit against their payroll tax for up to five years starting in 2016.
For more information, including an overview of how to navigate the claims process, please see these additional resources:
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.