Brew Savings with Good Beer

Breweries could recoup 7-10% of monies invested into new product development with an R&D tax credit.

By Laura Berry, Bowers R&D Associates

Happy hour wouldn’t be so happy without skillful brewmasters. These skilled artisans use water, grain, hops, and yeast to craft scintillating new flavors that bring people together. While many aspiring brewers dream of starting their own brewery, the cost of such an operation can be daunting.

Luckily, research and development (R&D) tax credits for breweries can make those dreams come true. Keep reading to discover how to apply for a Federal R&D tax credit and increase your brewery’s capital.

What is the Federal R&D Tax Credit?

An R&D tax credit incentivizes companies to spend more money on new product development to
increase competition and growth. Breweries are excellent candidates for the Federal R&D tax
credit program.

A permanent fixture in the US tax code, you can apply for a Federal R&D tax credit every year if your brewery continues to invest in designing a better brewing system or new beers. If your brewery qualifies, you could receive 7-10% of your qualified research expenditures (QREs) back as a credit.

The credit is incredibly useful as:

  • Qualifying start-ups can use it to reduce the FICA portion of payroll
  • Qualifying companies can use it to offset business income taxes
  • Companies can carry the credit forward 20 years

The Federal R&D tax credit is a vital resource for new and mature breweries. With it, you can launch your dream project to the next level or keep your business competitive. Of course, there are requirements you’ll need to meet to qualify for this resource.

Federal R&D Tax Credit Requirements

Before you can apply for the credit, you must ascertain if your brewery has:

  • Developed a new product/process and/or improved upon existing functionality
  • Encountered a level of uncertainty in the development process
  • Put into practice a process of experimentation to eliminate uncertainty
  • Conducted experimentation that relied on either engineering, biological, physical, or computer science
  • Employed all or a portion of your workers within the United States

If your brewery meets the above requirements, you can begin your Federal R&D tax credit study. These studies are best done under the watchful eye of an R&D tax credit expert. Most R&D studies take about 14 days to complete, and a professional can help you fill out all necessary forms correctly.

How are R&D Tax Credits Calculated?

To determine the amount of your credit, you’ll need to accurately list your QREs. These items are strictly defined as:

  • The salaries of employees who conduct R&D full or part-time
  • 65% percent of the cost of employing 3rd party contractors in the US
  • The cost of disposable supplies bought solely for R&D purposes

After determining how much your credit could be, you’ll need to learn how you can use the credit.

For example, if your brewery is under five years old and making less than $5 million in revenue, you can directly reduce the FICA portion of your payroll tax. Now, if your brewery is over five years old and/or making more than $5 million in revenue, you can use the credit to offset your business income tax.

Of course, if you live in a state that offers an R&D tax credit program, you could receive even more benefits.

Which States Have an R&D Tax Credit Program?

Luckily, many states offer tax credit programs. Unfortunately, if you live in any of the states listed below, you’ll only be able to apply for the federal credit:

  • Alabama
  • Alaska
  • Mississippi
  • Montana
  • Nevada
  • North Carolina
  • Oklahoma
  • South Dakota
  • Tennessee
  • Washington
  • West Virginia
  • Wyoming

While these states don’t currently offer an R&D tax credit program, you can always petition your elected officials to instate one. Remember, the federal tax credit program is also available to breweries no matter what state you live in.

Brewery owners located in a state that does offer a tax credit program can apply for both a Federal and state tax credit simultaneously.

R&D Tax Credits for Breweries: What You Need to Know

Taking advantage of R&D tax credits is a must for breweries. Offered by the Federal government and most states, this credit empowers your brewery to be innovative and remain competitive.

With a tax credit expert’s assistance, you could receive 7-10% of your QREs as a credit and reduce your tax burden. The federal R&D tax credit can even be carried forward 20 years. Don’t wait to get the credit you deserve. Contact us at Bowers R&D today to learn how much you can
save on taxes.

Scroll to Top