Raise a Glass for R&D Tax Credits in the Craft Brewing Industry

Source Advisors | Source Advisors

January 21, 2021. 3 min read
Who knew the craft brewing industry would qualify for the research tax credit. Ask a Master Brewer about their unique beers and you will likely receive a passionate description of how they constantly explore innovative and diverse styles of beer making to meet market demands and stay competitive. Companies in the brewery industry often invest large amounts of time, resources and materials in experimentation and exploration of new products, formulations, techniques, and process improvements. Because of the inherent uncertainty involved in the entire brewing process, many of the activities in the craft brewing industry qualify for the R&D Tax Credit.
What is the R&D Tax Credit?

The R&D Tax Credit is a dollar-for-dollar savings on current or future tax liabilities and its intention is to promote innovation and stimulate job growth. Brewing companies who take advantage of the credit realize substantial tax savings and increased cash flow which enables them to reinvest back into their business. A company in the brewery industry can expect to receive a federal credit of as much as 10% of the qualified costs incurred in analytical and experimental R&D activities. The best part about the tax credit is that it rewards risk – whether the initiative succeeds or not.

Examples of R&D Activities Within the Brewery Industry
  • Developing the best process settings to improve yield, throughput, and overall beer quality
  • Evaluating raw materials (e.g., multiple malts, hops, and yeasts) used in formulations
  • Conducting small batch formulation test trials
  • Conducting multiple rounds of testing to scale-up to production volume
  • Testing for product’s organoleptic properties
  • Developing new or improved bottle conditioning or canning processes
  • Developing new or improved hopping techniques or varieties of hops
  • Evaluating process enhancements and incorporating state-of-the-art machinery
  • Testing improved filling and bottling methods to ensure longer shelf life
  • Enhancing filling processes to improve water recycling and waste management.
Offset up to $250,000 in Payroll Tax

Eligible small businesses may elect to use up to $250,000 of the research credit against payroll taxes in any given year.

What Next?

To learn more, talk to the R&D tax credit team at Source Advisors. We can quickly determine if your firm qualifies and help you decide if an R&D study would be financially valuable for your firm.

R&D & Energy for Real Estate Tax Accounting Methods

Construction and real estate firms often ask us: “How do we qualify for the R&D tax credit?” Our boilerplate answer is to review the 4-part test below to ensure you have a qualification marker that covers the activities you are performing to create or improve your products or processes.

By Brian Coddington, Max Vignola, Imran Syed | 15 Nov

New Small Firm Cost Seg Opportunities

Cost segregation is a highly beneficial and widely accepted tax compliance strategy utilized by commercial real estate owners and tenants to accelerate depreciation deductions, defer tax and improve cash flow.

By Brian Coddington | 12 April

Can the R&D Tax Credit Be Used to Offset the AMT?

The Protecting Americans from Tax Hikes (PATH) Act of 2015 includes provisions that allow certain taxpayers to offset their AMT liability with the R&D tax credit for taxable years beginning on or after Jan. 1, 2016.

By Alex Pak | 7 April

How the R&D Tax Credit Has Expanded Over the Years

Governments typically incentivize private industry to produce research and development (R&D) as a strategic tool to advance their economies.

By Deb Roth | 8 April

The Nine-Point Plan for Handling §179D

Section §179D can help your commercial real estate clients reduce taxable income and increase cash flow significantly.

By Source Advisors | 24 March

Reconciliation bill likely to have a tax impact on energy-efficient buildings

It’s no secret that climate change is a top priority for the current administration. As part of the hotly debated tax and spending legislation moving through Congress

By Source Advisors | 28 October

How Integrators Can Take Advantage of Incentives and Tax Savings

Integrators who have experienced a dip in business during the pandemic may be able to take advantage of a few lesser known tax credits and income tax deductions.

By Source Advisors | 11 August

Subscribe for our newsletter
to stay up to date
Email address

Related Articles