Tax Court Decision Boosts Farmers with Real-World On-Farm R&D Tax Credits

Key Insights

• The U.S. Tax Court recently confirmed that real-world, production-level experimentation on row-crop farms and in livestock operations can qualify for the federal R&D tax credit.

  
  

• Input costs such as feed for experimental herds, the seed, fertilizer, and crop protection products used on row crop plots — can qualify as supplies for purposes of the R&D tax credit. 

  
  

• One quick conversation can help you understand whether what you’re already doing on your farm operations deserves a closer look.

  
  

The George Case: Real-World Research Gets Its Day in Court

In George v. Commissioner (T.C. Memo 2026-10), the Tax Court reviewed a poultry producer’s efforts to improve bird health, growth rates, and disease resistance through live production testing. The IRS argued that because the work occurred in a commercial setting, it was simply routine farming and didn’t qualify.

The court disagreed. It recognized that in agriculture, technical uncertainty is often best resolved through hands-on experimentation under actual production conditions — not in a laboratory. The decision sends a strong signal to the entire ag industry: on-farm research conducted with a clear experimental purpose can meet the requirements for the R&D tax credit.

For ag producers growing corn, soybeans, wheat, or running livestock operations, this matters. Your variety trials, input response tests, soil health experiments, and precision ag adjustments are exactly the kind of applied research the court validated.

What Counts as a Qualified Research Expense (QRE) in Agriculture?

Qualified research expenses generally fall into three categories:

Wages- Compensation for employees (or the owner’s allocable time) who are directly performing research, supervising it, or providing meaningful support. This can include extra scouting time, data collection on test plots, yield analysis, or designing and monitoring trials.

Supplies- Tangible items that are used up or consumed during the research process. In the poultry case, feed for flocks raised specifically to test hypotheses qualified. For crop producers, this often includes the seed, fertilizer, crop protection products, or biologicals applied to dedicated test strips or replicated plots.

Contract Research- Amounts paid to third parties to perform research on your behalf. Common examples include payments to soil testing laboratories for specialized analysis tied to trials, university extension researchers, or consultants helping evaluate new practices or technologies.

Important note: You don’t have to claim every category. Many successful claims focus primarily on supplies or wages. The court confirmed that electing not to pursue one category doesn’t invalidate the others.

Example from the Field: A Soybean Operation

Consider a producer who noticed uneven emergence and yield variability across different soil types and management zones. Instead of making whole-farm changes based on gut feel, the team set up replicated test plots comparing:

• Different seed varieties and treatments

  
  

• Variable fertility or biological input programs

  
  

• Adjusted planting timings or populations

  
  

They used yield monitor data, stand counts, and scouting notes to track performance. Each season they refined the approach based on what the previous year’s results showed. The goal wasn’t routine maintenance — it was answering specific technical questions: “Which combination delivers the most consistent, profitable results under our local conditions when we don’t have a proven playbook?”

When those activities are documented with trial maps, input logs for the test acres, data summaries, and notes on why decisions were made, the allocable costs (seed and inputs on the trial plots plus the extra labor for monitoring and analysis) can qualify as research expenses. The recent Tax Court decision supports treating this kind of boots-on-the-ground work as legitimate R&D.

Documentation Still Matters

While the court delivered good news on the qualifying nature of production-level research, the taxpayer in George ran into trouble substantiating expenses from prior years. Without adequate base-period records, they had to fall back on the Alternative Simplified Credit (ASC) method, which applies a default rate when full historical data isn’t available. The lesson for every producer is clear: the credit is available, but you still need to show your work.

Contemporaneous or well-organized records — trial designs, what was tested, data collected, how results drove changes — make all the difference. Farm data systems you already use become powerful when pulled together into a coherent story. Estimates without support get challenged. Structured documentation turns “we tried some different things” into a defensible R&D claim.

Common Questions Producers Are Asking

What kinds of on-farm activities tend to qualify?

Systematic testing where you face genuine technical uncertainty at the outset, evaluate alternatives through a process of experimentation, and use the results to improve a product, process, or practice. Common examples include variety and seed treatment trials, input rate or timing studies, new biological or precision ag validation, and pest or disease management experiments under your specific conditions.

Can input costs like seed, fertilizer, or crop protection really count?

Yes — when those inputs are consumed as part of the experimental process on dedicated test areas. The key is allocation: only the portion used for research qualifies, not your full production run. The George decision confirmed this principle with feed costs for experimental flocks.

How much documentation do I really need?

It doesn’t have to be lab-grade. What matters is capturing the reasoning, the test design, the data, and how results informed next steps. For most operations, a reasonable level of detail that reflects the scope of the work is sufficient.

Even if my trials feel pretty informal. Do I still have a chance?

Many strong claims start informal. The question is whether you can demonstrate the experimental intent and process. Current and future seasons are the easiest to document well. Prior years can sometimes be reconstructed from existing operational data, but the stronger the records, the better the outcome.

Does this only apply to large operations?

No. The principles apply across farm sizes. Smaller and mid-size producers often have more flexibility in documentation style — it simply needs to be appropriate to the scale and nature of the testing.

When should I start thinking about R&D credits?

The best time is when you’re planning trials or input programs, not when you’re filing taxes. A short conversation early can help structure activities and tracking so the credit potential is maximized from the start. Retroactive reviews are possible, but proactive planning delivers the strongest results.

How We Can Help Producers Capture R&D Tax Credits

We help you:

• Spot qualifying activities that are often already happening (variety trials, input testing, precision ag experiments, soil health work, and more)

  
  

• Accurately quantify QREs across wages, supplies, and contract research

  
  

• Build clear, audit-ready documentation — often in the form of detailed

  innovation portfolios that tell the story of your farm’s continuous improvement

  
  

• Integrate data you already collect

  
  

• Prepare and support Form 6765 and various state Forms.

The recent Tax Court decision reinforces what many of you already know: meaningful innovation happens out here in the fields and barns. Our role is to make sure that work is recognized for the tax benefit it deserves — without adding unnecessary complexity or risk to your operation.

Whether you’re just beginning to formalize on-farm testing or have years of trial data ready to organize, we can help turn that effort into meaningful tax savings while keeping everything aligned with current IRS and State guidance. 

Let’s See What Your Farm’s Innovation Is Worth

If you’d like to explore whether your testing, input trials, or process improvements could support an R&D tax credit, we would be glad to start with a no-obligation conversation. A short review of your recent seasons often reveals opportunities that are easier to capture than most producers expect.

Ready to review your activities? Reach out to schedule a time to talk. We are here to help farmers make the most of the work you’re already doing.

Aaron Schmelzle, CPA

785-268-0234

This article is for general educational purposes and does not constitute tax advice. Every operation is unique. Please consult with a qualified tax professional regarding your specific situation. The outcome of any tax matter depends on its specific facts and circumstances.