The Tax Credit is Live: Pennsylvania Now Accepting Brewery Applications for Capital Excise Tax Credits

by Norris McLaughlin & Marcus, P.A.
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The time has finally come! After a long wait, the Pennsylvania Department of Revenue has released the application form for Pennsylvania breweries to apply for Capital Excise Tax Credits. The application can be found here.

Expired since 2008, the Malt Beverage Tax Credit is back in Pennsylvania, effective from July 1, 2017. Prior to 2017, the Malt Beverage Tax Credit was effective from January 1, 1974 to December 31, 2008.  The revival of this tax credit was championed by the Brewers of Pennsylvania, an organization we proudly represent and support.  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 other manufacturers of alcoholic beverages 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 Commonwealth.  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 during the effective period, and amounts promised to be paid under firm purchase contracts executed during any calendar year falling within the effective period of these tax credits (i.e. 2017 and up because the effective period began on July 1, 2017).  The equipment must also be placed into service within the effective period.  The effective period for the first year is July 1, 2017 to December 31, 2017, and will be January 1 to December 31 for each successive year the tax credit is in effect.  Further, the tax credit cannot exceed the amount of qualified capital expenditures.

For the effective period in 2017, the applications are due to the Department of Revenue by April 1, 2018. During the application period, the submitting brewery must be in compliance with the tax laws and regulations of the Commonwealth of Pennsylvania.  Should the brewery be found to not be in compliance, notification will be provided to the brewery to become compliant within 30 days.  The tax credit claimed but not used during any taxable year can be carried forward for not more than 3 consecutive taxable years.

We have some questions that we want to get addressed from the Department of Revenue, and we hope to have some clarification on those items in the coming weeks. However, any brewery with qualifying capital expenditures between July 1 and December 31, 2017 should start preparing this application now so it is ready for the April 1, 2018 deadline.

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