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

Author | 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.