Using innovative processes in your brewery could qualify you for significant tax savings under the R&D Tax Credit. Long thought of as a tax credit just for companies creating new products, it’s actually a great tool for craft brewers too. The key to qualifying is demonstrating a reliance on scientific-based data to improve your product (beer) or product quality (new flavors, etc).
Permanently renewed by Congress in 2015, the R&D Tax Credit recognizes businesses that devote money and resources to the following may qualify for the credit:
- Creating new or innovative products
- Design and engineering
- Prototyping, modeling, “trial and error” activities
- Improving existing products
As a brewery, your operation could meet the requirements. A few examples of R&D activities that you might be already engaged in are:
- Adding new equipment to your bottling /brewing processes
- Developing new yeast strains or fermentation processes
- Creating new bottle designs (including cans/crowns, etc.)
- Improving key filling techniques
- Testing new ingredient combinations for new flavors or tasty enhancements
You need to provide proof of R&D activities in your operation which can include notes from meetings where you’ve discussed new product enhancements or activities, technical reports, patent applications and other documentation. You’ll need to have detailed information to back up your application for the credit. As expected, the IRS sets a high bar for proving that your brewery qualifies for the credit. Keeping detailed records will help and consulting with a CPA who understands how to file for the credit can help improve your chances of getting IRS approval…and a credit.