While craft brewing and research & development don’t instantly correlate, they are in fact as interrelated as any other research intensive industry. As a result, many breweries are unaware that a majority of their innovations and improvements are eligible for the Research and Development Tax Credit. The R&D credit allows taxpayers to convert everyday business expenses into much more favorable tax credits, subsequently increasing a company’s after tax cash flow. Below are a list of some of the common activities that could qualify for the R&D Credit.
- Development of new or improved product formulas including hop, yeast and barley varieties
- Development of new or improved bottling or canning process
- Development of new or improved bottle or can design
- Development of new or improved fermentation process
- Development of new or improvement brewing and bottling equipment
- Innovations to improve product shelf life
- Innovations to filtration and preservation methodologies
- Innovations to manufacturing process
While the R&D credit offers very favorable tax treatment, as such it can be subject to scrutiny from the IRS. The key to successfully claiming the R&D credit is precise and accurate documentation of the activities performed. If your company has any questions about the Research & Development credit, please contact the tax advisors at Stephano Slack, LLC.