The food industry operates in a complex regulatory environment posing unique operational challenges. But it also offers opportunities for tax credit optimization that might not be on your radar — especially if you’re a foreign company new to conducting business in the U.S.
While food manufacturing and distribution companies are focused on maintaining quality, meeting compliance requirements and managing tight margins, substantial industry-specific tax credits may be going unclaimed, including:
Work Opportunity Tax Credit (WOTC). Companies that hire from specific groups — like military veterans or the previously incarcerated — may be eligible for the Work Opportunity Tax Credit (WOTC). For companies hiring 50+ employees annually, the WOTC can generate tens of thousands in annual tax savings.
Food companies often have high turnover rates and diverse workforce needs, making your business well-positioned to benefit from these hiring incentives. The key is implementing proper screening processes from the start to identify qualifying candidates before hiring decisions are made.
Research and development tax credits. R&D credits don’t just apply to high-tech companies. Recipe development and reformulation efforts may also qualify. For example, if your team works to eliminate artificial ingredients or create allergen-free alternatives, these activities could meet the criteria for qualified research.
Remember, R&D credits aren’t limited to breakthrough innovations. Incremental improvements to existing products, packaging innovations that extend freshness and production process optimizations all contribute to your credit potential. Always be sure to maintain detailed records of project timelines, employee time tracking and experimental processes to prove your qualifications.
Energy efficiency incentives. Food manufacturing is often energy-intensive. If you’re establishing operations in the U.S., keep in mind the federal Section 179D deduction allows up to $1.88 per square foot for qualifying energy-efficient improvements to lighting, HVAC and building envelope systems. Refrigeration system upgrades, LED lighting conversions and advanced HVAC systems typically qualify for these deductions.
Energy efficiency credits require detailed engineering studies and equipment specifications. To qualify for these incentives, be sure to create systematic documentation processes that capture relevant activities in real time.
Employee training and development credits. There are also workforce development incentives available at both the federal and state levels. Many U.S. states offer training grants and tax credits for companies that invest in employee skill development for manufacturing processes and food safety certifications.
Whether you’re training workers on specialized equipment, food safety protocols or quality control procedures, these expenses often qualify for credits. Some states even provide enhanced incentives for training programs that lead to industry-recognized certifications, making this especially valuable for food manufacturers who must maintain strict compliance standards.
Are you leaving money on the table?
By understanding and properly claiming these credits and incentives, you can improve your cash flow and competitive position in the market. The experts at Magone & Company can help ensure your business is making the most of the tax opportunities available. Contact us today.
This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.