George v. Commissioner: What the Tax Court’s Ruling Signals for R&D Credits and Why Documentation Matters

Many agricultural businesses assume the R&D Tax Credit doesn’t apply to them. Others have been told that nearly everything they do qualifies. The truth lies somewhere in the middle.

A recent Tax Court case, George v. Commissioner, provides important clarity. The case involved a large poultry producer that claimed significant R&D Credits related to feed additives, vaccination methods, disease mitigation, and flock management techniques. The court allowed some of the credits but disallowed most of them. Here are the key takeaways for agricultural businesses and the CPAs who advise them.

Yes, Agricultural Businesses Can Qualify for the R&D Credit

Farming can qualify for the R&D Credit, but there must be research and experimentation rooted in the hard sciences.  While agriculture is science-driven, not all science-driven activities qualify.

The Four-Part Test Must be Clearly Met

As with all claims under Section 41 of the Internal Revenue Code, the court evaluated projects against the four-part test found in the tax code:

• Business Component – There must be a clearly identifiable new or improved product, process, technique, formula, or invention that is being created.  The business must also own or retain rights to the business component so it can use the results in its operations going forward.
• Technological in Nature – The activity must be rooted in the hard sciences, such as biology, chemistry, agronomy, genetics, or related sciences.
• Technical Uncertainty – There must be genuine technical uncertainty about whether something will work or which method will succeed.  The uncertainty can either be in the capability, method, or appropriate design.
• Process of Experimentation – Tests must be conducted to eliminate uncertainty. These tests should include evaluating alternatives, measuring results, and evaluating outcomes.  Because agriculture must involve structured experimentation to qualify, there must be personnel capable of conducting scientific research. This typically means employing STEM professionals, such as scientists, nutritionists, veterinarians, or agronomists, to conduct the trials and evaluate the results.

The court reviewed each project individually and allowed credits only when all criteria were met. Projects based on assumptions or post hoc analysis were disallowed. Additionally, once something is determined to work, continued use is considered production and not research.

The takeaway is clear. Claims fail at the project level, not the credit level.

Supply Costs will be Scrutinized

Agriculture involves significant supply costs, including feed, seed, fertilizer, and medications.  In the court case, feed used in experimental flocks was permitted under certain conditions. However, broad inclusion of normal production costs without clearly defined experimental groups was not supported.

If supply costs are included, companies must clearly identify which flocks or fields were experimental, the testing period, and how supplies relate to the experimentation.

Contemporaneous Record Keeping is Essential

The main reason the poultry company lost most of its claimed R&D Credits was weak documentation. The court repeatedly questioned whether certain “trials” were genuine experiments—that is, methodical investigations designed to discover new knowledge—or if they were later reconstructed from normal production data to support a tax claim.

To support an R&D Credit in agriculture, a company should have records showing:

• What uncertainty was the company trying to resolve
• What variables were tested
• How results were measured
• When the project began and ended
• Which costs were tied to the experiment

If it isn’t documented, it may not count.  It is important to note that the documentation does not need to look like a pharmaceutical clinical trial, but it must show that real experimentation occurred.

Why This Matters for CPAs and Their Clients

Agricultural businesses can qualify for the R&D Tax Credit only when they conduct real, documented experimentation to resolve scientific uncertainty.

Before pursuing a claim, companies should ask:

• Are we solving a technical or biological uncertainty?
• Are we running structured experiments?
• Can we prove it with documentation?
• Can we clearly tie costs to those experiments?

If the answer is yes, there may be a legitimate opportunity.

If the activity is routine farming, it likely does not qualify, even if it is highly data-driven. The recent Tax Court decision doesn’t close the door on agriculture but emphasizes science-based, well-documented experimentation.

McGuire Sponsel Approach

At McGuire Sponsel, we support CPA firms nationwide by operating behind the scenes on complex tax matters in which precision, documentation, and defensibility matter most. Across property tax, R&D credits, and other specialized incentives, the pattern is consistent. The strongest outcomes come from disciplined processes established early and supported throughout the lifecycle of the claim.

Our relationship-driven approach ensures that our technical expertise is always delivered with collaboration and trust. By standing alongside the CPA, we help protect client relationships, reduce risk exposure, and ensure that legitimate value is preserved through documentation and audit-ready results.

For CPAs advising agricultural clients engaged in innovation, the message from George v. Commissioner is clear. Structured experimentation, contemporaneous documentation, and specialist support are crucial.