Industrial Hemp & CBD

Industrial hemp is a variety of Cannabis sativa L, which contains 0.3% or less of THC. Until the 2018 Farm Bill passed, hemp was considered federally illegal and classified as a Schedule I drug under the Controlled Substance Act (CSA), therefore no federal deduction or credits were allowed under Sec. 280E of the Internal Revenue Code. Hemp and cannabidiol (CBD) must be derived from the industrial hemp plant (C. sativa) to qualify for the R&D Tax Credit — not the cannabis plant. If your business focuses on industrial hemp-derived products or processes, whether it is hemp energy bars or CBD tinctures or lotions, your R&D costs could be offset by a dollar-for-dollar tax credit. In addition to the federal credit, many states offer tax breaks. Pre-revenue companies and start-ups with less than five years of revenue can use the federal R&D tax credits to offset future payroll taxes.

The following industries have claimed significant R&D tax credits and received millions in capital to reinvest in their workforce, infrastructure, and continued innovation:

Cannabinoid Product Development

Cannabis / CBD Testing Labs

CBD Extraction Companies

CBD Product Manufacturing

Equipment Manufacturers

Genetics & IP Companies

Hemp Farmers / Growers

Product Development

Seed-to-Sale Software

Sustainable Packaging

White Label Manufacturing

Example activities that qualify:

• Developing new strains and genetics
• Evaluating methods to optimize crop yields in various environments
• Developing new extraction equipment or procedures
• Automating or innovating grow rooms
• Creating novel seed-to-sale technology
• Curing / testing of potency

Do you have these job titles on your payroll, or do you hire third-party contractors to do these jobs?

• Botanists
• C-Suite
• Chemists
• Engineers
• Grow Consultants
• Master Growers
• Master Extractors
• PhDs
• Scientists
• Software Developers

Unsure of whether your hemp and/or CBD development activities qualify? The innovations your company has been working on may be eligible for significant tax breaks. STRIKE Advisory, LLC employs tax experts with years of experience in R&D tax credits, and working with Cannabis, Hemp, and CBD businesses. At STRIKE, we work on a success-based fee structure, enabling businesses in the Hemp and CBD industries to claim R&D credits/refunds without any out-of-pocket costs. We offer complete audit protection and a money-back guarantee. Use our R&D Tax Calculator to estimate your potential benefit, and partner with STRIKE to claim your tax credits with no up-front costs. Contact one of our experts today.

The R&D Tax Credit was created to incentivize companies across multiple industries to keep high-tech jobs in the United States. Companies can claim employee wages, supplies & raw materials, computer rental costs, and third-party contractor expenditures incurred throughout the R&D process. Current law permits companies to amend prior year tax returns (going back to the 2019 tax year), offering additional financial benefits from tax refunds. If you cannot use the R&D credits immediately, the IRS allows taxpayers to carry credits forward up to 20 years.

Linked journal articles:

Tax Incentives for Cannabis Companies

2018 Farm Bill Gives Tax Breaks for Industrial Hemp

82 Amazing Hemp Products