Harness innovation in spirits production. Distilleries across the U.S. are experimenting with exotic botanicals, new mash techniques, novel barrel maturations and process automation. Many of these activities qualify for the federal R&D Tax Credit under IRC §41, with further state‑level opportunities.
Examples of qualifying activities in distilling
- Mash & Fermentation Innovation Trialling new grain blends or botanicals, alternative fermenter designs, mixed‑culture fermentations, yeast strain optimization
- Distillation & Separation Process Development Testing new still design, reflux ratios, advanced separation/column techniques, flavour capture technologies
- Barrel Maturation & Finishing Trials Experimenting with wine/sherry/taro barrels, new wood treatments, rapid‑ageing technologies, flavour infusion during maturation
- Packaging & Bottling Technologies Piloting automated fill, new bottle shapes, inert gas integration, smart caps, small‑batch format testing
- Sustainability & Waste‑Reduction Projects Spent‑grain reuse, water reuse systems, CO₂ capture, energy‑efficient still heating/cooling, packaging reduction/biodegradable formats
- Scale‑up & Process Control Moving from micro‑batch to commercial runs; refining process controls, sensor integration, yield tracking and automation
What qualifies as R&D in distilling?
To qualify, activities must:
- Pursue a permitted purpose such as a new or improved product, process or technique (for example, a novel botanical gin recipe, faster ageing method, or automated bottling line)
- Address technical uncertainty about how to achieve the flavour profile, yield, maturation time, or equipment performance
- Follow a process of experimentation — for example pilot batches, varied mash/fermentation protocols, alternative still designs, barrel trials
- Be technological in nature, grounded in chemistry (distillation, flavour, reaction), biology (yeast/mash), engineering (still/tank design), materials science (barrel wood, coating)
Qualified Research Expenses (QREs)
Roles commonly involved in qualifying activities
- Master distillers, assistant distillers
- Fermentation scientists, microbiologists
- Process engineers and automation specialists
- Barrel‑maturation specialists and flavour chemists
- Packaging engineers and sustainability leads
- External R&D partners and consultants
What does not qualify
- Routine production of a standard product following an existing recipe without experimentation
- General marketing, branding, sales or administrative tasks unrelated to experimental development
- Applying previously proven methods at scale without any experimentation or improvement
- Land acquisition or equipment purchases not tied to experimentation
Compliance and Documentation
Following the One Big Beautiful Bill Act (OBBBA) signed July 4, 2025, §174 now allows immediate expensing of domestic research expenses for tax years beginning on or after January 1, 2025. Taxpayers may also elect optional amortization under new §174A. Foreign research expenses must still be amortized over 15 years. This is separate from the §41 credit but impacts overall tax planning.
Maintain clear records of:
- Project descriptions, objectives, hypotheses and experimentation plans
- Batch logs: ingredient lists, mash/fermentation parameters, still run details, yield, flavour/sensory results
- Barrel logs, maturation times, flavour profiles, clarifier/treatment data
- Packaging/bottling line test runs, sensor data, control changes
- Employee time allocations tied to research activities, contractor invoices and software usage logs
Frequently Asked Questions
Yes. Spirits producers that develop new recipes, ageing or finishing techniques, separation/distillation processes, packaging innovations, or sustainability projects may qualify.
Wages of staff working on experiments, supplies for trial batches and packaging prototypes, software used in modelling/analytics, and a portion of contract research costs.
Small craft distilleries through larger regional operations may be eligible, as long as they are engaged in experimentation of products, processes, packaging or operations.
Routine production without experimentation, standard bottling runs, marketing or sales efforts, equipment installation without experimentation.
Savings vary by scale, trial volume and documentation. Industry sources indicate beverage companies may qualify for around ~18% of their eligible expenses.
Keep batch logs, process variation records, still/fermentation data, barrel logs, packaging test logs, employee time sheets, contractor invoices and software usage logs that tie to research projects.
Next Steps
Use our calculator to estimate your potential federal and state benefits
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