Maximizing Tax Relief: Understanding R&D Tax Credits for Breweries

17 Feb 2025 Maximizing Tax Relief: Understanding R&D Tax Credits for Breweries

Authored by Travis Keeter, CPA

When you think of Research & Development (R&D), industries like pharmaceuticals or technology come to mind. But did you know that breweries can also qualify for R&D tax credits? While beer brewing dates back to ancient Egypt, modern breweries are constantly refining processes, developing new brews, and improving production techniques- all of which may be eligible for valuable tax savings.

The R&D tax credit is nonrefundable, reducing your tax liability dollar for dollar. These tax savings can be reinvested into your operations, fueling future growth and innovation. So, how does a brewery qualify for an R&D credit?

Qualifying R&D Activities for Breweries

There are three main categories of activities that breweries can leverage to claim the R&D credit:

1. Process Improvements
   • Developing or refining fermentation processes
   • Improving distillation and filtration techniques
   • Enhancing bottling or canning processes
   • Innovating methods of disposing of spent grain disposal
2. Product Development
   • Testing new flavor combinations
   • Experimenting with ingredient interactions and shelf-life enhancements
   • Reducing waste or improving sustainability practices
3. Supporting Activities
   • Conducting trial runs to ensure product consistency
   • Testing and calibrating brewing equipment
   • Researching and implementing new brewing technologies

Documenting Your R&D Activities

To maximize your tax credit, proper documentation is key. Eligible expenditures include:

• Time spent on R&D by brewers, scientists, and engineers
• Materials for the prototypes, pilot batches, and testing
• Contracted services related to experimentation and process consultation

Tips for Claiming Your Maximum Credit

To ensure you capture all eligible R&D expenses, consider these best practices:

1. Early Identification of Qualifying Projects
   • Collaborate with brewing teams to flag potential R&D activities
   • Schedule regular reviews of ongoing R&D projects
2. Implement Strong Internal Processes (This one can be tough, but it’s worth it!)
   • Maintain thorough documentation from project inception
   • Utilize project management tools for better tracking (Even an Excel spreadsheet works!)
3.  Partner with Tax Professionals
   • R&D credit calculations can be complex – seek specialized expertise
   • Ensure compliance with both federal and state regulations

Additional Tax Benefits for Breweries

Breweries may also be eligible for other valuable tax incentives, such as:

• Federal Fuel Credit – For off-highway use of fuel in brewery operations
• FICA Tip Credit – A tax credit for tips reported by employees

Don’t Leave Money on the Table

The R&D tax credit can provide significant financial benefits for breweries investing in innovation. By adequately identifying, documenting, and claiming your qualifying activities, you can reduce your tax liability and reinvest those savings into your business.

If you’d like to explore your brewery’s eligibility and how your brewery can take advantage of these tax benefits, contact Travis Keeter, CPA at Haynie & Company. Let’s make sure you’re getting the savings you deserve!

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