When the Chicken (Research) Must Come Before The Egg (R&D Study)

Key Takeaways from George v. Commissioner, T.C. Memo. 2026‑10 Filed February 3, 2026.

Overview

In George v. Commissioner, T.C. Memo. 2026‑10, the U.S. Tax Court addressed whether large‑scale poultry production activities qualified for the research credit under Internal Revenue Code §41. The decision offers timely guidance for companies in agriculture, manufacturing, food processing, and other industries where experimentation is embedded in daily operations rather than conducted in laboratories.

The Court allowed some credits, disallowed others, and fully abated accuracy‑related penalties—making this case especially instructive for understanding audit risk and documentation standards.

Facts in Brief

George’s of Missouri, Inc. (“GOMI”), an S corporation, oversaw the live‑production stage of a vertically integrated poultry business. Between 2012 and 2014, GOMI conducted numerous trials involving:

Feed additives and probiotic
Vaccines and vaccine‑administration methods
Disease‑prevention strategies
Genetic line changes for broilers

Originally, no research credits were claimed. After engaging a specialty research‑credit firm, GOMI amended returns and claimed over $4 million in credits. The IRS disallowed all credits and asserted penalties.

The Legal Framework Refreshed

The Court applied the four‑part test under §41(d):

Section 174 test – Activities must seek to eliminate technological uncertainty.
Technological in nature – Based on biological or physical sciences.
Business component – Directed toward a new or improved product or process.
Process of experimentation – Systematic evaluation of alternatives.

The Court also emphasized exclusions for routine data collection, quality control testing, and post‑production activities.

What Qualified—and What Didn’t

✅ Activities That Qualified

HatchPak and Tylan trials (2012 only).
The Court held that in 2012 GOMI faced genuine uncertainty about whether a vaccine‑antibiotic combination would control coccidiosis under actual production conditions. The taxpayer demonstrated defined hypotheses, applied testing, and data‑driven evaluation. However, repeating the same activity in 2013 did not qualify because uncertainty had already been resolved.

Key point: Once uncertainty is resolved, repeating the activity generally does not generate new research credits.

Certain probiotic trials.
The Court accepted that testing probiotics to improve broiler gut health could qualify. However, credits were allowed only where GOMI could identify which flocks were experimental. Credits tied to one probiotic were denied due to failure to link specific flocks to the trial.

Key point: Scientifically sound projects still fail without contemporaneous identification of experimental units.

LT vaccine “priming” trials (2014).
The Court allowed credits where GOMI demonstrated that priming broilers with one vaccine reduced side effects of another. Although the practice was known in breeder populations, applying it to broilers involved unresolved uncertainty. Only six production contracts qualified due to limited documentation.

Ross 708 genetic line trial.
This was the strongest qualifying project. GOMI conducted side‑by‑side control and test flocks, used uniform growing conditions, and obtained independent processing analysis. The Court classified the production broilers as “pilot models,” confirming that commercial‑scale production can qualify when conducted to resolve uncertainty.

❌ Activities That Did Not Qualify

Credits were denied for several claimed projects where contemporaneous records did not support the asserted experimentation, including:

Feed additive trials with no proof that dosages actually changed
Alleged dosage studies lacking documentation
Vaccine‑administration tests with no defined timeline
Estimated base‑year expenses under the alternative simplified credit

The Court rejected attempts to rely on post‑hoc reconstructions created solely for the research‑credit study.

“Research Must Come Before the Credit”

One of the opinion’s most notable themes was the Court’s criticism of retroactive characterization. The Court observed that some projects reflected the “chicken (the research credit study) coming before the egg (the research).”

For CPAs, this underscores a clear lesson: a research study may document qualifying research, but it cannot create it after the fact.

Penalty Relief: A Bright Spot

Despite disallowing significant portions of the credits, the Court fully abated accuracy‑related penalties. The taxpayers showed:

Good‑faith reliance on experienced advisers
Engagement of a reputable research‑credit firm
Careful review of claimed positions

This illustrates that partial failure on the merits does not automatically mean penalties apply.

Practical Takeaways for CPAs

Contemporaneous Documentation Is Critical
Companies must identify experimental units, timelines, and deviations from standard production as activities occur.
Uncertainty Must Exist at the Outset
Later failures do not resurrect credits once uncertainty has been resolved.
Commercial Production Can Qualify
Production costs may be research expenses when activities constitute pilot models designed to resolve uncertainty.
Estimates Are Vulnerable
Courts remain reluctant to apply the Cohan rule without solid evidentiary support.
Penalty Defense Matters
Good‑faith reliance on qualified advisers remains a meaningful shield.

Conclusion

George v. Commissioner confirms that innovation in production‑driven industries can qualify for research credits—but only when experimentation is real, contemporaneous, and well documented. For taxpayers, the case reinforces a familiar but critical principle: qualifying research must be proven in real time, not reconstructed years later.

Jason Massie, CPA, Esq.

As the Founder and President of MASSIE R&D Tax Credits, Jason is responsible for the quality, consistency, and integrity of our services. His strategic vision and leadership drive innovation within the company, encouraging collaboration and ne...