cocoaMany of us enjoy the tasty, chocolate covered cupcakes and cookies found on the shelves of their local grocery store. However, most of the manufacturers that actually engineer, design, and fabricate the food processing equipment to make these wonderful chocolate treats have no idea that R&D tax credits for the labor, contractor expenses, and supplies consumed during development may be claimed. alliantgroup recently worked with one of these small, food processing equipment manufacturers and identified over $800,000 in federal and state R&D tax credits!

To put these credits in a real world context, let’s look at cocoa. Cocoa beans that are harvested in South America must go through significant processing before appearing on grocery store shelves. During the design of the equipment, engineers must account for the characteristics of the food to be processed. For example, when cocoa beans are harvested in South America and transported to the final destination, vibrations generated during transport often cause the cocoa beans to become very compacted and brick like.

It is food processing equipment manufacturers who are tasked with developing machinery that will fluidize and separate the solids from the cocoa in preparation to become tasty chocolate treats. Also, due to the relatively high fat content of cocoa, equipment designers have to account for processing speeds and the resulting temperatures. If the cocoa is processed too rapidly, the oil may separate from the beans resulting in potentially clogged processing equipment due to the separated and oily mixture.

Not unlike this cocoa example, many times, the development of food processing equipment results in uncertainty regarding the ultimate design, the appropriate configuration, and ideal equipment to be integrated within the overall food processing system. To overcome these challenges, designers may utilize computer modeling software to run engineering calculations and to analyze alternate dimensions to ensure that the system will operate as desired.

Given all of this customized design and development work, tax paying food processing equipment manufacturers may incur additional expenses associated with the development of the equipment. This development process mirrors and reflects the exact legislative intent behind the R&D tax credits. These credits were specifically enacted to incentivize and reward U.S. based R&D activities. The result is not only tasty, chocolate treats lining our pantries and grocery store shelves, but also a financial flexibility that permits small food processing equipment manufacturers to reinvest in future R&D activities.

If you would like to learn more about how your company may be eligible for the R&D tax credit and other valuable tax incentives, please contact alliantgroup today at 800.564.4540 or contact@alliantgroup.com.