Are you a brewery or distillery claiming the NYS Alcoholic Beverage Production Credit?
If so, you should be aware of the general rules regarding the credit, as well as taxability of the credit when it is received for both New York State and federal purposes.
You may be eligible for this credit if your business:
- Is a registered distributor under Article 18 (Taxes on Alcoholic Beverages); and
- Produced in NY during the tax year a maximum of:
- 60 million gallons of beer or cider,
- 20 million gallons of wine, or
- 800,000 gallons of liquor.
The Instructions for Form CT-636 state the following:
If you produce more than one type of alcoholic beverage in NYS within the tax year, you qualify for the credit for each alcoholic beverage produced within the production limits stated above. If you exceed the production limit for an alcoholic beverage, you cannot claim a credit for that beverage.
Example: If you produce 50 million gallons of cider and 100 million gallons of beer in NYS in the same tax year, you qualify to claim the credit for the cider production. However, you would not qualify to claim a credit for the beer production since you produced more than 60 million gallons of beer in NYS in the tax year.
How much is the credit?
The amount of credit per tax year for the first 500,000 gallons produced in NYS is:
- 14 cents per gallon of beer or cider;
- 30 cents per gallon of wine;
- $2.54 per gallon of liquor with more than 2%, but not more than 24%, alcohol by volume (ABV); and
- $6.44 per gallon of liquor with more than 24% ABV.
If you produced more than 500,000 gallons, the credit is 4.5 cents per gallon up to:
- 15 million additional gallons for beer, cider, or wine; and
- 300,000 additional gallons for liquor.
How can you claim this credit?
Your business can claim this credit if you meet the criteria described above. Corporations need to file Form CT-636; all others need to file Form IT-636.
Additional instructions for claiming the Alcohol Beverage Production Credit can be found in the Instructions for Form CT-636 and Instructions for Form IT-636 on New York State’s Department of Taxation and Finance website.
Is the credit taxable?
Yes. New York State credits are generally taxable for federal purposes as a recovery if a taxpayer benefited from a federal deduction related to such credit.
A recovery is a return of an amount a taxpayer deducted or took a credit for in an earlier year. The most common recoveries are refunds, reimbursements, and rebates (IRS Publication 525, page 24).
Each year, New York State alcohol manufacturers pay an excise tax to the State for the production of alcohol, which is a deduction on the federal and state returns. Since the business received the benefit of the deduction for excise taxes paid in the previous year, the credit must be included in the taxpayer’s gross income the next year.
Still have questions?
If you have additional questions about the taxability of the NYS Alcoholic Beverage Production Credit, our accounting and tax experts at RBT CPAs are happy to answer them. RBT CPAs has been proudly serving businesses in the Hudson Valley and beyond for over 50 years. Visit our website or call us at 845-567-9000 to speak with one of our professionals today.