Issue link: http://read.dmtmag.com/i/369547
w w w. v w m m e d i a . c o m S e p t - O c t 2 014 | V I N E YA R D & W I N E RY M A N A G E M E N T 7 5 what activities qualify as research, what expenditures qualify for the credit, and/or what documentation sufficiently supports their research. CAPTURING R&D COSTS Qualifying R&D activities are pervasive in the wine industry, but many companies fail to claim the tax credits to which they're enti- tled. Understanding the IRS defi- nition of qualified research is the starting point for any company look- ing to claim the credit. Any com- eligible if the same services were performed in-house. A f t e r i d e n t i f y i n g q u a l i f i e d research, it's critical to document the activities and create nexus between your new or improved products or processes and your eli- gible expenses. Chances are your company already documents its R&D efforts; it may just be a mat- ter of increasing the records you keep or making small adjustments to your recordkeeping processes to ensure that you capture the docu- mentation necessary to support the credit. It's important to note that tracking R&D efforts that fail is just as important as tracking efforts that succeed. Sometimes failure illustrates the technical uncertainty (one of the criteria in the IRS's four- part test) encountered in a develop- ment process. The importance of documenta- tion cannot be overemphasized. Meticulously tracking qualified pany that encounters and resolves technological challenges may be eligible. That said, eligibility large- ly depends on whether the work you're conducting meets the cri- teria established by the IRS's four- part test: 1. Elimination of uncertainty. You must demonstrate that you've attempted to eliminate uncer- tainty about the development or improvement of a product or process. 2. Process of experimentation. You must demonstrate – through modeling, simulation, systematic trial and error, or other methods – that you've evaluated alternatives for achieving the desired result. 3. Technological in nature. The pro- cess of experimentation must rely on the hard sciences, such as engineering, physics, chemistry, biology and/or computer science. 4. Qualified purpose. The purpose of the research must be to cre- ate a new or improved product or process, resulting in increased performance, function, reliability or quality. EXPENSES & DOCUMENTATION Eligible expenses for the R&D tax credit are wages (as reported on Form W-2, Box 1), supplies used in the research process, and contractor expenses that would be + Product innovation can be expensive. + Federal and state governments provide R&D tax credits to offset costs. + Qualifying R&D activities are pervasive in the wine industry, but many com- panies fail to claim the tax credits to which they're entitled. + Qualifying activities include the testing and development of new or improved of grape strains, irrigation systems, filtration systems and more. + The federal R&D credit lapsed on Dec. 31, 2013, but it's likely the credit will once again be extended. AT A GLANCE To qualify for a tax credit, R&D experi- mentation must rely on hard science. Photo: Thinkstock For easy splicing of 8-16 gauge wire. No tools required. Simply insert the wire into each end of the WireLink and you have a splice. A release tool is available from AgFast for 12-16 gauge wire. Trellis & Fence Wire Anchor Embossed jaws grip the wire as it is inserted and prevent it from being pulled out. The wire is retensionable with a pair of pliers or a claw hammer. Toll-Free: 877.552-4828 909.451.2299 • Fax: 909.593-8309 For your nearest dealer, contact: WIRELINK™ WIREVISE®