Have you been waiting to buy that new 20 barrel Brite tank? How about buying more kegs to distribute your beer? Beginning July 1, Pennsylvania breweries will have a new incentive to purchase brewing equipment, machinery, or cooperage used in the beer manufacturing process. It is with great pleasure that we welcome back the Malt Beverage Tax Credit.
Expired since 2008, the Malt Beverage Tax Credit is back in Pennsylvania. Prior to this year, the Malt Beverage Tax Credit was in effect from January 1, 1974, to December 31, 2008. The revival of this tax credit was championed by the Brewers of Pennsylvania, an organization Norris McLaughlin proudly represents and supports. The legislation will provide a tax credit, to be counted against a brewery’s Pennsylvania malt beverage excise tax liability, on any capital expenditure that expands brewery operations. This is important and a major win for the brewing industry in Pennsylvania because, unlike distilleries within the Commonwealth, brewers pay a special excise tax on their production at a rate of a penny per pint or $2.48 per barrel to the Department of Revenue for beer sold in the State. Essentially, now brewers can invest and upgrade their facilities, while receiving a credit against payment of the excise tax for the new dollars invested.
The tax credit applies to qualified capital expenditures for the amounts paid to purchase items of plant, machinery, or equipment for use by the brewer in the manufacturing of beer. However, the qualified capital expenditures shall not exceed $200,000 annually per brewery. The term “amounts paid” includes amounts actually paid and amounts promised to be paid under firm purchase contracts executed on or after July 1. Further, the tax credit cannot exceed the amount of qualified capital expenditures. Brewers must file the claim within one year of the date of purchase of qualified capital expenditures. The Department of Revenue has not released the forms that will be used for this process, but you will have to request the tax credit, have it certified by the Department of Revenue, and it will issue a certificate that you will give to the Secretary of Revenue.
Ultimately, what this means for your brewery is that if you plan to enter into any contracts and make any expenditures for brewing equipment, machinery, or cooperage, and can wait to do so until July 1, you should wait and claim the tax credits against your PA excise taxes for 2017. If you entered into the contract before July 1, the capital expenditures will not qualify even if the payment comes after July 1.
For information regarding national and state liquor law matters or general manufacturing and distribution advice, please contact our Liquor Law, Licensing, Manufacturing, and Distribution Practice Group: Liquor Law Department Chair Theodore J. Zeller III, Esquire (firstname.lastname@example.org); David C. Berger, Esquire (email@example.com) for Pennsylvania and New Jersey retail and manufacturing licensing; or contact our offices at 610-391-1800.