The R&D Tax Credit Aspects of Shellfish Farming

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As one of the largest growing food industries globally, Aquaculture is a field that needs to adapt to become more sustainable. Aquaculture is the practice of growing and harvesting aquatic animals for human consumption. The practice has become more controversial in the last decade with its rapid growth. One way that is being explored to make aquaculture more sustainable is bi-valve farming. Bivalves is a group of aquatic creatures that includes mussels, clams, and oysters. They are filter feeding organisms capable of filtering up to 50 gallons of water a day per individual thereby increasing water clarity, allowing sunlight to penetrate which in turn facilitates seagrass growth and other organisms.

Shellfish cultivation and harvesting is an essential part of the US and global seafood industry with an estimated value at $340 million in the US. In the past, bivalves were harvested by hand initially as a subsistence farming product in shallow coastal waters. Later on, they were retrieved using treading, short rakes and hand operated rakes. While these methods are still used, more efficient, less labor-intensive methods are being researched in order to increase productivity and continue to grow the practice of cultivating bivalves. These practices are also improved in order to lessen the negative impact on the surrounding environment. Essential aspects of shellfish harvesting which have room for technological advancement may include dredging, workboat conversions, and hatchery techniques and procedures.

Shellfish Harvesting

The Research & Development Tax Credit

Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • Must be technological in nature
  • Must be a component of the taxpayers business
  • Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
  • Must eliminate uncertainty through a process of experimentation that considers one or more alternatives

Eligible costs include U.S. employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, U.S. contract research expenses, and certain costs associated with developing a patent.

On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and for the first time, pre-profitable and pre-revenue startup businesses can obtain up to $250,000 per year in payroll taxes and cash rebates.

Shellfish Dredging

Dredging is the process of harvesting various species which reside in the seabed. More contemporary methods of on-bottom shellfish cultivation include mechanical and hydraulic dredging. Mechanical dredges scrape the seafloor with chain link bag towed behind the workboat. This dredging method has become an industry standard since the 1970s. Hydraulic dredges involve using pressurized water to loosen the sediments and remove the clams with a collection bag towed behind the workboat. In general, a shellfish farmer only harvests a small portion of the field annually in order to allow for growth in the unharvested areas.

Mechanical Dredge

Oyster dredging is generally done mechanically using dredges comprising a steel frame with a serrated blade and a bag attached to the frame to collect the harvest. Oysters reside in areas with hard structures to attach to during the growth process so the ground is made up of hard sediments. The teeth of the blade penetrate the soft bottom directly removing oysters from the substrate surface. These dredges have a considerable amount of weight and must have a proper blade angle. The efficiency of the mechanical dredge depends on the substrate type and the size of the oysters. The catch rate can be improved by passing over the same area multiple times. To collect juvenile oysters, farmers employ hydraulic suction dredging. A venturi dredge can be employed for the harvesting of oysters. This dredge has chains designed to scare unwanted organisms from the mouth of the dredge to limit the amount of bycatch. It is also designed to remove a limited amount of sediment so as to not permanently disturb the estuary.

Clam dredging was originally done using a mechanical “rocking chair” dredge. Currently, farmers use hydraulic dredges to liquefy the material caught in the mouth of the dredge. The efficiency of these hydraulic dredges must be adapted based on the sediments and is typically used on a muddy bottom. The hydraulic dredge is designed with a wide blade and is towed faster than a venturi dredge.

The effects of dredging on the environment vary based on the design of the harvesting device and implementation. The disturbance of habitats varies across a single harvested area. These effects can be experimentally measured by conducting experimental dredging and observing the response of the benthic zone (the lowest area in a body of water). Experimental data must be compared to preliminary data due to the existence of site-specific factors. There is also the possibility of comparing experimental data to a control site with similar conditions. Researchers should also consider that the clam and oyster environments are very high energy and tend to recover quickly due to high levels of activity in the area.

The physical effects of shellfish dredging involve the effect on the water quality due to the physical disruption of the benthic substrate. Hydraulic dredges liquefy the substrate which causes an increase in the amount of suspended sediments in the water thereby increasing the water column turbidity. These suspended sediments tend to extend 50 feet beyond the dredging zone.

The biological effects of shellfish tend to be species-specific and is based on the biological characteristics and the physical characteristics habitat. The movement of dredges or the liquefication of sediments can cause benthic organisms to be killed, removed, or crushed. The number of clams destroyed by hydraulic dredges is directly related to the water pressure. When the turbidity of the water column increases and suspended particles increase, which can interfere with the respiratory and feeding processes of some benthic organisms. In extreme cases the turbidity can harm visual feeders and plankton. After the initial harvest, there may also be a decrease in abundance of organisms as well as the biodiversity of the habitat. This effect is temporary as the species is replenished when farmers incorporate hatcheries and shellfish cultures into their activities. There is also the risk of damage or harm to by-catch (unwanted fish and other marine life including different species, incorrect sex, or juvenile).

The chemical effects include the alteration of the chemistry of bottom sediments when the benthic organisms are disturbed. Bivalves are organisms which filter the water in the ocean. As a result of this property, removal or placement of these organisms affect the chemical composition of the water. Dredging can actually better the system metabolism, have an impact on the water column processes, and facilitate trophic transfer. Bivalves ingest and process suspended organisms redistributing as biodeposition. This process can also influence the movement of carbon, nitrogen, and phosphorus.

Increasing research in this area can be better for the environment and increase the availability of shellfish in a particular area. Shellfish harvesting is a major source of jobs in a coastal community. Current cultivation methods can better the potential of spawning, improve the utility of farming areas, and allow more efficient movement of shellfish. These benefits thereby increase profitability for shellfish farmers. Shellfish aquaculture has the potential for meeting requirements of environmental and social sustainability.  

Aquaculture Vessels

A large part of aquaculture is the conversion of workboats  to be equipped with the appropriate equipment for dredging and harvesting. Aquaculture vessels require a significant amount of research in order to design a vessel suitable to the harvested environment and the type of harvesting that would ideal for that species and habitat. Depending on the cultivation method, farmers may choose to harvest using one of the following vessels.

Rock and Bag Culture

Oyster workboats are designed using aluminum vessels sized for ease of accessing oyster parks with a shallow draft and a wide deck for handling the oyster bags. Mussel barges also have a shallow draft for easier access to the mussel parks with a wide deck for large load capacity for mussels. Long-line culture work-boats are designed with a flat bottom or shaped hull for work in either mussel or oyster farms. Vessels over 12 meters long are designed for longline farming and adapted according to the species. There are combined mussel and oyster farming workboats designed to be narrower than a barge with flat bottom hull and a high load capacity from the double bottomed hull. Aluminum wheel barges are designed with hydraulic wheels and can be controlled using an autonomous hydraulic unit or on a tractor. Some barges have hydraulic kickstands which provide an increased level of stability.

Other vessels include a floating breeding pond. The floating breeding pond is used to store shellfish to maintain the condition of products prior to shipment. Launching trailers are also incredibly important in farming and can be built according to the size, load and other constraints. Flat trailers are used for mussel boxes and oyster bags.

Sustainable Oyster Cultivation

In order to create a sustainable food source, farmers should consider replenishing the population of oysters or any other shellfish they may be harvesting. The different methods of growing oysters include variations of on-bottom and off-bottom growing methods. Bottom culturing is the most closely related to the way that wild oysters are grown. This allows the oysters to have access to nutrients they would have access to when growing in the wild. The benefit of this method is the quality of shells is stronger possibly due to the movement of water on the bottom. However, this method falls short due to the amount of product lost in the process due to suffocation or predators.
Off-bottom methods are used in order to overcome the disadvantages of bottom culturing methods. One off-bottom method is using a cage culture where the oysters are held and grown in mesh bags inside of large cages to keep the oysters from floating away or touching the bottom. Typically, they can be used when the oysters are very young and not ready to planted on the bottom. Rack-and-bag cultures is the use of mesh bags on a steel rack where tides should be low enough to allow access to the bags. Tray cultures can be used where space is limited since the trays can be stacked. Floating culture is used to give the oysters adequate exposure to waves in order to tumble them. Suspended culture also takes advantage of the waves flipping and tumbling the oysters while they are held in vertically suspended mesh bags. These culture methods all rely on the varying characteristics of their prospective habitats.


A shellfish hatchery is an essential part of the process for growth of healthy juvenile shellfish for commercial use. One of the most important elements of a successful hatchery is the location. The ideal location is determined by the level of the water supply. For example, oyster hatcheries require a relatively high volume of clean sea water with salinities from 15 to 30 parts per thousand. Low salinity caused by incoming waves of freshwater is harmful to oysters in the early stages. Other aspects of the location to consider are the turbidity, pollutants, boat traffic, and algae production.

The facilities for hatcheries can vary depending on the budget and production need. Typically, a facility would have a separate pump station to supply water for the facility from another location. Dual water lines and pumps provide a system to decrease the frequency of failed lines. The pumps are sized based on the distance, height, and volume of water to be moved. The water pumped into the hatchery can be first held in a tank in order to decrease turbidity of the water supply or it can be directly pumped into the hatchery. The water filtration and treatment systems include a combination of sand filters, cartridge filters, activated carbon, UV sterilization, and/or pasteurization.

The hatchery activities include water treatment, spawning, larval care, feeding, and setting. Filtration can be done mechanically or using UV treatment in order to remove unwanted particles or organisms. Spawning is the first step in production and can only happen with the water maintained at good condition. For larval care, the tanks must be cleaned prior to placing fertilized eggs. Larval care includes feeding algae, counting the larvae, draining the tanks regularly, and restocking larvae at their ideal density. It is crucial that the larvae are transferred at the optimal level of maturation in order to survive the conditions of the wild environment. This is just a glimpse into the activities that go on at hatcheries. The hatcheries play a vital role in breeding disease-resistant and fast-growing shellfish to maintain the sustainability of the shellfish harvesting industry.

National Oceanic and Atmospheric Administration

The National Oceanic and Atmospheric Administration (NOAA) is an American agency which focuses on the conditions of the ocean and other waters.  A service of the NOAA is the National Marine Fisheries Service (NMFS) who does research on commercial and recreational fisheries and their habitat along with a goal of protection and management of those fisheries.


Shellfish farming methods include a significant amount of research and experimentation in order to increase and maintain the sustainability of the practice. The industry will continue to grow as the demand for shellfish farming increase. With the benefit of an R&D tax credit, shellfish farming industries can continue to innovate and strengthen the industry as a whole.

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Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Mellissa McIntyre is a Tax Analyst with R&D Tax Savers.