Case Study: Hemp Start-up

How this innovative hemp start-up is including the R&D Tax Credit into its long-term financial planning!

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The R&D Tax Credit Experience with Leyton

Claiming the R&D Tax Credit with Leyton was an amazing experience. It was really nice to see a dedicated team come together and really took the time to understand a small operation like my business. I was really impressed. – Rusty Peterson, Business Owner

r&d tax credit hemp

Background


Founded in 2019, Align Agro is an organic hemp farming start-up operating in Davidson, Michigan. This client has approximately 20 acres of farm and cultivates for CBD, CBG, fiber, and grain with an emphasis on high performing genetics.

Due to Michigan not being a popular hemp farming location, Align Agro conducts significant research and development of the use of hemp cellulose into various applications, including farming practices and process improvements. The client applies an all around approach to engage in innovative testing and investigation for all aspects of hemp and its usage.

Qualifying R&D Activity

Among others, the two biggest qualifying R&D projects at Align Agro included: 1) Optimization of CBG and CBD based varietals, and 2) Optimization of industrial hemp varietals: grain and fiber. These cultivars have to be grown in different conditions. Our client tested different greenhouse conditions, soil amendments, irrigation methodologies, transplantation techniques, and a plethora of industrial and flower strains, including CBG strains like Matterhorn and Stormy Daniels.

Additionally, they are also implementing Integrated Pest Management (IPM) solutions to eliminate pests and improve the overall health of their crops. Other qualifying projects include evaluation of 14 different fiber and grain varietals to determine their viability given local growing conditions. Leyton’s hemp team will be working with this client to plan and document future R&D projects like cover crop testing.

r&d tax credit hemp

Result: 60% of client’s time spent on R&D and 89% of supplies qualified!

Once we had identified all of the qualifying activities that Align Agro was undertaking, Leyton’s hemp and agriculture team gathered and qualified the related expenses to these research and development projects. We were able to qualify the client’s time conducting research and development activity at 60% and the supplies used at 89%. These supplies included seed costs, soil amendments, water costs, bio-pesticides, and more.

Leyton’s industry experts and tax specialists worked hand in hand with Align Agro to thoroughly understand their processes and activities to build a substantive R&D Tax Credit claim. Our teams conducted an R&D study for 2019 and 2020 and identified a federal credit for the client, which they chose to carry forward to use it next year when they anticipate an income.

Our engagement with the client continues as Leyton’s financial experts are now helping the client build the R&D Tax Credit as a long-term financial tool and helping with their books to account for the client’s R&D expenses respectively.

Everything was easy-peasy! Leyton teams went above and beyond. People got back to me quickly, even with a 3 hour difference. I’ve told a couple of people about this credit already and it doesn’t cost you anything to look at it. You literally have nothing to lose!

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