Zoo and Wildlife R&D Tax Credit Benefits for Businesses

Zoo, Wildlife, and the R&D Tax Credit

Small businesses in the zoo and wildlife sector can leverage the Research and Development tax credit to recover costs for innovative projects, such as habitat design, species conservation, or veterinary advancements. Eligible activities may include developing new animal care techniques or sustainable exhibit technologies. The payroll tax offset for R&D for startups allows qualified companies with less than $5 million in revenue to apply up to $250,000 annually against payroll taxes, easing cash flow while funding research. This incentive helps offset personnel costs, allowing startups to invest more in critical R&D activities without sacrificing operational growth. Consulting a tax specialist can ensure maximum benefit.

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Founded in 1984 by J.W. Norris as Reed & Co., Swanson Reed has grown to become one of the world’s largest firms specializing in Research and Development (R&D) tax credit consulting. We boast numerous publications. Our AI software, TaxTrex, is a cutting-edge AI language model capable of preparing R&D tax credit claims in just 90 minutes. Our R&D credit audit insurance policy, creditARMOR, is one of the most cost-effective audit management products on the market.

If you have questions or need further assistance, please call or send an email to our CEO, Damian Smyth, at (000) 000-0000. Feel free to book a short conference call with one of our national R&D tax credit specialists at a time convenient for you.

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Case Study: Zoos and Wildlife

Business Scenario

This case study exemplifies the application of key legislative requirements for eligible R&D activities, applied to relevant activities in the zoo or wildlife sector.

Jungle Junction is a popular, high-quality zoo offering the chance to view and interact with animals native to the jungle.

In 2008, Jungle Junction noticed an increase in deaths within its gorilla population. Upon further research, Jungle Junction discovered that most deaths were caused by infectious diseases.

After determining that infectious diseases were a major cause of mortality in captive gorillas, Jungle Junction initiated an R&D project aimed at controlling and preventing the situation. The company’s main business objective was to create a medical device capable of detecting diseases in gorillas in their early stages, which would lead to improvements in disease diagnosis and management in gorilla populations.

To achieve its technical objectives and overcome related technical risks, Jungle Junction generated new knowledge at the conclusion of each experimental phase and built upon this knowledge at every stage of the project. To qualify for the Research and Experimentation Tax Credit, Jungle Junction needed to ensure its “qualified research” met four main criteria, known and developed by Congress as the Four-Part Test. After a self-assessment, Jungle Junction declared the following experiments as R&D activities.

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Jungle Junction’s Eligible R&D Activities

Design and development of a series of prototypes to achieve technical objectives and prove the hypothesis (design and adaptation of the disease detection device).

Jungle Junction’s hypothesis for its experiment stated that a device for disease detection in gorillas could be designed and developed.

After two years of design and testing, Jungle Junction concluded that its experiments showed such designs were feasible but needed to be fully tested to prove the hypothesis.

Testing and data analysis to achieve reproducible results to a satisfactory standard (development and testing of the disease detection device).

The hypothesis for this R&D activity stated that with better knowledge of specific infectious diseases and their vectors, mechanisms to improve disease detection in gorilla populations could be identified.

Details of this experiment included developing the device based on information obtained through the model and testing the device to ensure its efficiency, accuracy, and safety.

Background research to evaluate current knowledge gaps and determine feasibility (background research for the disease detection device design).

Jungle Junction undertook background research which included the following activities:

Literature research and review
Consultation with industry professionals and potential clients to determine the level of interest and commercial feasibility of such a project
Preliminary review of equipment and resources regarding capacity, performance, and suitability for the project

The activities conducted in background research were necessary because they helped identify key elements of the research project, thus qualifying as R&S work.

Ongoing analysis of customer or user feedback to improve prototype design (R&S based on feedback for the disease detection device).

Jungle Junction’s eligible R&D activities during this project phase included:

Continuous analysis and testing to improve the efficiency and safety of the design.
Continuous development and modification to interpret experimental results and draw conclusions that served as starting points for developing new hypotheses.
Commercial analysis and functionality review.

These activities qualified as R&D work because they were necessary to evaluate the performance capabilities of the new design in the field and to improve any flaws in the design.

Live Webinar: The R&D Tax Credit in the Zoos and Wildlife Preservation Sector

Duration: 60 Minutes

Learning objectives include:

An overview of R&D Tax Credits
Identifying Qualifying Research Activities
Defining the 4-Part Test
How to substantiate activities through documentation
Identifying Qualifying Research Expenses

Cost: FREE

Knowledge Level: Basic*

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Definition of Qualified Research

Qualified research consists of research activities with the intent of developing new or improved business components. A business component is defined as any product, process, technique, invention, formula, or software that the taxpayer intends to hold for sale, lease, license, or actual use in the taxpayer’s trade or business.

The Four-Part Test

Activities that are eligible for the R&D Credit are described in the “Four-Part Test”, which must be met for the activity to qualify as R&D.

Permitted Purpose: The purpose of the activity or project must be to create new (or improve existing) functionality, performance, reliability, or quality of a business component.
Elimination of Uncertainty: The taxpayer must intend to discover information that would eliminate uncertainty regarding the development or improvement of the business component. Uncertainty exists if the information available to the taxpayer does not establish the capability for development or improvement, the method of development or improvement, or the appropriateness of the business component’s design.
Process of Experimentation: The taxpayer must undertake a systematic process designed to evaluate one or more alternatives to achieve a result where the capability or method to achieve that result, or the appropriate design of that result, is uncertain at the beginning of the taxpayer’s research activities.
Technological Nature: The process of experimentation used to discover information must be fundamentally based on principles of hard sciences such as physical or biological sciences, chemistry, engineering, or computer science.

What specific records and documentation did Jungle Junction keep?

Similar to any tax credit or deduction, Jungle Junction needed to keep documents outlining what it did in its R&D activities, including experimental activities and business records to demonstrate that the work proceeded systematically.

Jungle Junction kept the following documentation:

Literature review
Background research
Project records and lab notebooks
Test protocols
Test results or analysis / trials
Progress reports and meeting minutes
Assignment records / resource usage logs
Staff timesheets

By having these records on file, Jungle Junction confirmed it was “compliance ready” — meaning that if it were audited, it could present documentation to show the progression of its R&D activity, ultimately proving its eligibility for the R&D credit.