Opinion: The new R&D tax credit provides a real opportunity for agriculture

In our neck of the woods, uncertainty isn’t new. It’s a fact of our lives. But lately, it’s been coming from every direction. Even as the disruptions of the COVID era ease, equipment, fuel and raw material prices continue to increase. At the same time, key international buyers are beginning to look elsewhere to purchase staples like soybeans and oilseeds. 

That’s why smart, practical policy matters more than ever. One of the most meaningful recent developments for the ag economy isn’t getting nearly enough attention: the strengthening of the R&D tax credit under the One Big Beautiful Bill Act. For many producers and ag-related businesses, this is more than a tax break; this is a real opportunity to reinvest, innovate and stay competitive.

For years, I heard from businesses that the requirement to spread R&D deductions over five years simply didn’t work. It inflated tax bills and discouraged investment at exactly the wrong time. In some cases, it even forced companies to scale back or shut down promising work.

OBBBA fixed that by restoring full expensing. Businesses can now deduct their entire domestic R&D spending in the year it occurs, bringing back the kind of certainty and liquidity that fuels innovation.

Even better, there’s a pathway to recover prior-year deductions. But there’s a catch: those filings must be completed by July 6. Miss that window, and those old refunds are gone for good.  

Agriculture is Innovative 

When people hear “Research & Development,” they often think of labs and tech startups. But in reality, agriculture is one of the most innovative sectors in our economy. 

If you’re experimenting with seed varieties, fertilizers, livestock vaccines or farming processes, there’s a good chance you’re already doing qualifying work. The same goes for manufacturers of equipment and agricultural chemicals.

Despite this wealth of qualifying activity, I still see ag businesses underclaim for several reasons:

1. Thinking they don’t qualify – Court cases have confirmed that the work farmers do to improve their crops and livestock can qualify. More below. 
2. Overlooking support/supervision roles – Employees supervising or assisting R&D work can also qualify, not just those conducting it.
3. Ignoring contractor costs – Third-party testing, labor or advisory support may be eligible. You must check before you dismiss. 
4. Undervaluing process R&D – Improving how you plant, harvest, or process crops can qualify – even if it’s not groundbreaking. 
5. Not engaging industry experts – R&D in agriculture sits at the intersection of science, engineering and real-world experience. You need advisors who understand all three. 

Courts are affirming what farmers already knew. The recent tax court decision involving George’s of Missouri has reinforced the legitimacy of agricultural innovation. The issue at heart was whether livestock operations qualify for the credit, specifically whether trying new things to improve poultry production, through feed, medication, breeding and disease-prevention qualified. 

The court was clear: activities to improve livestock can qualify. Along with a previous decision, which confirmed how row crop R&D qualifies, agribusinesses across the country should understand that Congress intended these incentives to also benefit the farmers putting food on our tables.

The AI Question is Everywhere

There is no doubt that, much like everywhere else, AI is going to deeply impact the agriculture industry. It’s already predicting crop diseases and analyzing farmland performance — but anyone who’s ever used it knows that AI still needs human oversight. 

I have recently been made aware that many “AI providers” have come out of the woodwork promising to replace human knowledge and judgement with AI. They’re preying on farmers by offering a shortcut to the complexity of the R&D credit. If using shortcuts with the IRS makes you nervous, it should. The IRS published a list of its top tax scams and flatly stated, “Taxpayers should not use AI for complex tax.” Nothing is more complex than the R&D credit, and I can assure you, in the ag space, AI isn’t currently capable of doing the credit.

As much as I want technology to make our lives easier, we must never think of replacing our judgement with something else’s. 

The bottom line is — despite the ongoing challenges, this incentive is one great, reliable opportunity for farmers and ag businesses. But policy only works if it’s used. Whether you’re running a farm, a processing operation, or an ag-related business, now is the time to take a closer look at what you’re already doing — and make sure you’re capturing every dollar you’re entitled to.

Heidi Heitkamp is the director of agriculture at alliant and the former U.S. senator, attorney general, and tax commissioner for North Dakota.