Increasing Brewery Cash Flow through the R&D Tax Credit

BREWER: What is the R&D Tax Credit?
LEYTON: The R&D Tax Credit is a permanent incentive that encourages and rewards continued innovation.  Breweries build it into financial plans year on year, and rely on it to assist cash flow. The R&D Tax Credit is a Federal incentive and allows breweries to reduce income tax liability in the current tax year, and receive a cash refund for taxes paid in the last three years. Many states have implemented their own version of the R&D Credit, and qualifying breweries can claim both. The Payroll Tax Credit is a Federal incentive that allows qualifying young breweries to reduce the FICA payroll tax liability almost immediately after the claim has been submitted.

BREWER: What kind of brewing activities and expenses qualify?
LEYTON: R&D typically occurs in recipe development and internal process improvements.  For example, experimenting with seasonal beers or unique brewing techniques, like NEIPAs and DDH IPAs, and developing improved brewing processes by incorporating new equipment into production lines would all be qualified activities. Qualified expenses include employee salaries, contractor/vendor expenses, and raw materials, such as hops, yeasts, and varietals.

BREWER: What is the role of a specialist, like Leyton, in an R&D Credit Study?
LEYTON: The R&D Credit requires familiarity with the most recent legislation, relevant tax code and IRS regulations, as they are applied to a brewery’s technical business activities. For R&D Credit purposes, an effective craft brewery team should include highly experienced scientists, process engineers and tax consultants to ensure the R&D Credit is accurately maximized while minimizing employee time required and fully supporting the credit claimed through records, such as brew logs and vendor invoices. A skilled specialist will be sure to analyze brewery activities and expenditures, calculate the credit(s), work with your CPA to properly include the claim in your brewery’s tax return, and provide a detailed technical report to substantiate your R&D Tax Credit.

BREWER: I already claim the R&D Credit; why should I revisit with a specialist?
LEYTON: Having a specialist take a second look at your R&D Credit never hurts, and specialists often offer a complimentary assessments to determine value. Either you confirm your current R&D claim process is great, or you find out you’re leaving money on the table. Neither outcome seems too bad.

Leyton has over 22 years of experience in R&D Tax Credits, operating across 11 countries. Our process has been refined to ensure all potentially eligible projects undergo a rigorous technical assessment, that financial calculations are in full compliance, and claims are substantiated with supporting documentation. Through a collaborative process, Leyton works with breweries to produce sustainable strategies to achieve the maximum eligible financial return, positively impacting the bottom line and improving financial business security. We love craft beer and take pride in our ability to help the community of brewers grow. Visit www.leyton.com, or contact [email protected] to learn more. Online at: LinkedIn, Twitter, YouTube, Facebook.