Industry: Alcohol Distillation
Number of Employees: 20+
Commonly Qualifying Tasks:
- Development of custom distillation equipment
- Development of distillation process
- Development of new flavor profiles and associated production processes
- Development of techniques for organic fruit infusion
A growing alcohol distillation facility located in California was looking to claim the R&D tax credit by conducting a study of activities conducted over a four year period. The company produced spirits including gin, vodka and tequila. The company did not have any outside contractors performing any qualifying activity so the scope was limited to wages (based on time spent by employees on the development process) in addition to any supplies associated with the creation of new products.
The first area that the company examined was the development of new products. One such line of products was their organic fruit infused spirits. These products required extensive experimentation to create the best process for infusion of the flavors into the alcohol. As experimentation was the only way to validate a formulation, supplies expenses associated with the creation of each sample batch were included in the pool of qualifying expenses. This was in addition to the time that the development team spent to develop the initial formulation for a sample batch.
In addition to the development of new products, the company was also able to qualify time associated with the creation of custom distillation equipment that would fit inside their building envelop, allow for the most flexibility in distillation processes, and would accommodate the volume that the company needed to produce. This entailed the design of workflow through the production facility in addition to engineering done to site, place, install and integrate equipment into the existing utilities.
Based on the activities being conducted in addition to the extensive experimentation and testing that was conducted, the company was able to realize roughly $80,000 in combined federal and California tax credits.
