As a CPA serving farm clients across Iowa, I’ve seen a sharp rise in marketing from companies promising big R&D tax credits for routine farming expenses. Recently, a firm that will remain nameless contacted me on behalf of a farm client claiming that seed, chemical, and fertilizer costs qualify as research and development because the farmer “hadn’t used those varieties before.”
This is a red flag. While legitimate R&D credits exist and can benefit some farms, many aggressive promoters (sometimes called “R&D mills”) stretch the rules in ways that often don’t hold up under IRS scrutiny.
Why “New to You” Seed, Chemicals, and Fertilizer Usually Don’t Qualify
The IRS has a strict four-part test for qualified research under Section 41. All four must be met:
- Technological in nature – Must rely on principles of physical or biological sciences.
- Purpose of discovering information – Designed to eliminate technical uncertainty about developing or improving a product or process.
- Process of experimentation – Must involve systematic trial and error, testing of alternatives, or evaluation with measurable data (not just planting and seeing what happens).
- Business component – Aimed at improving function, performance, reliability, or quality.
Simply trying a new commercial seed variety, fertilizer blend, or chemical product that you haven’t used on your farm before is generally considered ordinary business operations, not qualified research. Seed companies and chemical manufacturers already performed the actual R&D. Farmers using their products are in the commercial production phase—which is explicitly excluded.
Routine field trials without controlled experiments, hypotheses, detailed measurements, statistical analysis, and documentation rarely pass IRS review.
The Real Risks for Farmers
- Disallowed credits and audits — The IRS has flagged aggressive R&D claims as a high-priority area. If the credit is later disallowed, you’ll owe back taxes, interest, and penalties.
- Amended returns — Many promoters push quick amendments for 2023–2025. While the normal statute of limitations is generally three years, certain retroactive R&D/Section 174 relief has a hard deadline of July 6, 2026. Missing proper filing windows or documentation can be costly.
- Preparer and client liability — As your CPA, I must perform due diligence. I will not sign a return with questionable credits that lack strong substantiation.
Legitimate Opportunities Do Exist
Genuine R&D on farms can include:
- Developing new processes or equipment modifications
- Precision agriculture technology innovations
- Structured breeding or crop/livestock improvement experiments with proper controls and data
When done correctly with solid documentation, these activities can generate meaningful credits. However, they require far more than a sales pitch and a spreadsheet.
What Should Farmers Do?
- Verify everything — Never sign off on a credit study without reviewing the full documentation yourself or with your trusted CPA.
- Ask tough questions — Demand project-by-project details showing how the four-part test was met and exactly which costs qualify (not blanket percentages of your total input expenses).
- Work with reputable professionals — Be wary of firms that contact you out of the blue promising “found money” with minimal effort. Legitimate providers welcome CPA involvement and provide audit-ready workpapers.
- Contact your CPA first — If a company like Onshore reaches out, let me (or your own preparer) evaluate the proposal before proceeding.
At Green CPA, PLLC, our priority is protecting your farm and your compliance record. We’ll help you pursue legitimate tax incentives while steering clear of aggressive positions that could create problems down the road.
Final Thought
If it sounds too good to be true—especially when it involves reclassifying normal seed, fertilizer, and chemical costs as “research”—it probably is. Protect yourself by staying informed and working with trusted advisors.
Have you received one of these R&D credit solicitations? Feel free to reach out—I’m happy to review proposals for our farm clients.
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