Craft Brewery Financial Training Podcast
Craft Brewery Financial Training Podcast
Talking Taxes: What the One Big Brewery Bill Means for Your Bottom Line
New tax law just handed breweries a playbook to keep more cash in the business—if you know how to use it.
Today we’re joined by Brent Williams, CPA and brewery tax manager at Small Batch Standard, to translate the One Big Brewery Bill (OB3) into clear, practical moves owners can make right now.
From tips and overtime changes your team will feel on payday to the return of 100% bonus depreciation and immediate expensing for domestic R&D, we connect the dots between policy and day‑to‑day brewery operations.
We dig into the details that matter: how to label tips vs service charges in payroll so employees get the refund they expect and you keep the FICA tip credit; which assets truly qualify for full expensing and how to time purchases for the best tax outcome; why 199A remains a powerful 20% deduction for pass‑through owners; and how R&D applies to more than new recipes—it includes process improvements that reduce waste, speed up turns, or enhance quality. Brent also walks through retro choices for previously capitalized R&D costs, plus often‑missed credits like paid family and medical leave and small employer retirement plan incentives.
If you’re a small or mid‑size brewery planning equipment, considering a production build‑out, or just trying to make payroll and taxes play nicely, this conversation turns complexity into a checklist.
Bring clean books, schedule a projection meeting, and map out 2025 vs 2026 moves so depreciation, credits, and cash flow align. OB3 isn’t just policy—it’s a strategy to fund growth without squeezing margins.
If this was helpful, follow the show, share it with a brewery friend, and leave a quick review so more owners can find it.
Got a question about your brewery finances? Send it our way and we may tackle it in a future episode. Kary@BeerBusinessFinance.com
And of course, don't forget to sign up for the free brewery financial newsletter - filled with tips, tactics and strategies to help you run a more profitable brewery.
Today on the podcast, we're gonna talk taxes, brewery taxes with Brent Williams, CPA and brewery tax manager with small batch standards. So you might be familiar with this thing called the OBBB, sometimes called the One Big Beautiful Bill, other times called the One Big Brewery Bill. So we're gonna talk about the key changes, the updates that you need to know about and understand, how this is gonna impact small and mid-sized breweries, and what you should do now to prepare for it, even if some elements of the one big brewery bill are still evolving. So Brent is gonna share all those details. We're gonna break down all the different rules and rule changes and how you can take advantage of all this. So for now, please enjoy my conversation with Brent Williams from Small Batch Standard. Welcome to the Craft Brewery Financial Training Podcast, where we combine beer and numbers to provide you with tips, tactics, and strategies so that you can improve financial results in your brewery. I'm your host, Carrie Shumoy, a CPA, CFO for a brewery, and a former CFO for a beer distributor. I've spent the last 20 years using finance to improve financial results in our beer business. Now I'm helping other craft breweries to do the same. Are you ready to take your brewery financial results to the next level? Okay, let's get started. Just a quick note, we'll be right back to the podcast. I want to let you know about a new network for beer industry professionals. It's called the Beer Business Finance Association. It's an organization of financial pros, just like you, looking to improve financial results, increase profitability, connect with your peers, and share best practices. So I'd love to tell you a little bit more about this. If you are interested in learning more, please email me, Carrie at Beer Business Finance.com. That's K-A-R-Y at beerbusinessfinance.com. Or you can visit BBFassociation.org. That's BBFassociation.org to learn more. Hey Brent, welcome to the podcast. It's good to see you.
SPEAKER_01:Yeah, Carrie, thanks for having me on.
SPEAKER_00:I'm excited to talk today. We're going to talk about taxes. Um not always the most exciting topic for people, but I think between you and I, there's a lot of excitement here because there's, you know, there's ways that we can take advantage of tax rules that you might not otherwise be aware of, or there's always changes. So we're gonna we're gonna get into all that. But why don't you set the stage for us and maybe kind of give us the backdrop of you know what small batch standard is focused on and what what's top of mind for your brewery clients right now?
SPEAKER_01:Yeah, no, that's a fair question. Well, you know, we small batch standard is you know the go-to provider for financial services in the industry. And I'm I'm with the tax team. And this new tax bill, the one big beautiful bill, or OB3 as it's termed frequently, has been brought a lot of changes to the industry. There are a lot of things in this bill that are very relevant to our industry and what we do. So it's certainly important to stay on top of that and understand the changes and how they relate to you and your business. So absolutely get into some of that as we go here today.
SPEAKER_00:So people probably aren't, you know, they're aware of it, right? But maybe not as dialed in as certainly you are on the tax side. So um if they haven't been following it closely, like maybe could you summarize like the key changes or updates that brewery owners need to understand?
SPEAKER_01:Sure. So this bill, the majority of what it does is either making permanent or ending phase out provisions on a lot of the changes that we got in the 2017 TCJA Act. So there's a lot of things from there that you know we've either had in the past or have currently that are now either permanent or back to their original provisions without the phase down incurred. There are also a number of new things in here that we can talk about as well. We'll say, you know, to some to start it off with a summary, you know, it's it's kind of it can be divided up really between you know things that impact the employees of your business, your business itself, and you as the business owners, right? So the big things really for employees are the things that you probably saw in the news, right? No tax on tips, that's a big one, that was covered a lot. No tax on overtime, that was covered a lot. You know, in in both cases, those terms are kind of misnomers in a way, because you know, the TIP income is still subject to tax in some form. It's just now up to$25,000 of your employees' earnings from TIPS are no longer subject to income tax. However, they are still subject to your FICA employment taxes, things like that. You know, same same with overtime, still subject to employment taxes. Just, you know, the a portion of that overtime pay is now exempt from income taxes for the employees. For your business owners or for your business entities, right? Things that in many cases do pass through to the you as business owners, should your business be set up as a pass-through entity. Big things there are really the return of 100% bonus depreciation. You know, that's a big one from TCJA, the ability to take 100% depreciation on most capital asset purchases in the initial year that the purchase is made. You know, under TCJA we had 100% for many years. It started to phase down with 2024 to 80%, then 60% for 25%, expected to phase all the way down to zero over the coming years. Well, the OB3 bill changed that, and now we're back at 100% permanently. Well, in the for now, as permanent as things can ever be in the tax world. Yeah, so that's that's a big one that's important to manage. You know, your section 179 expensing, which is similar to bonus depreciation with some differences and what qualifies and how you can use it. The threshold on that has been raised from a million dollars in qualified property up to two and a half million. Another thing to keep in mind as you're looking at capital expansions and asset purchases, things like that. Your uh section 199A, qualified business income deduction, is now permitted. We've had that for a number of years also under TCJA, but it was expected to end at the end of 2025. And what that does is it allows for those of you who have businesses set up as pass-through entities, right? Like a filing as a partnership or an S corporation, it allows you to take a deduction on your personal return for up to 20% of the pass-through income that comes through that K1 that you receive every year. So that's back, you know, in in perpetuity now. So that's a good one. Probably the biggest one that I work with my clients on here is changes made to the RD tax credit. That's the research and development tax credit. As we all know, that's a big one in the brewery world that you know is a very valuable credit that you can utilize if done properly. Starting a couple years ago, the provisions on that changed to where the expenses that you incur while doing your research and development activities needed to be capitalized over five years and amortized rather than deducted in the year that the expenses are incurred. Well, that provision is now gone, thanks to the changes from OB3. You can now deduct those expenses in the year that you incur them for domestic research expenses. So that's a big benefit to those who are taking and utilizing the RD credit. And you know, all the effect of each of those things, you know, can pass through to the owners of these businesses as well, for those who are pass-through entities, as you know, most entities in our industry tend to be. So it's very important to be conscious of what you're doing with your depreciation, how you're managing your pass-through income, and what credits you're taking, because those pass through those K1s and end up on your individual return. So very important to stay on top of these things and make sure that you are managing your activities in the most productive way.
SPEAKER_00:Absolutely. What um so there's a lot there, and maybe I'm gonna kind of wind it back and hit you with some um uh what is the effective date or the or are there different effective dates? Because you mentioned, oh gosh, at least seven or eight or nine different things that we need to unpack a little bit, but are they all the same? Are they different based on what which so people sitting here now like, okay, when did that actually take effect? Because a lot of times taxes like, well, this'll this will take effect next year in January. We're just getting ready for it. But I some of these are like in effect now, are they?
SPEAKER_01:Yeah, the bulk of this is actually in effect now. Most of these provisions have a 1125 start date. So any activity that occurred after January 1, 2025, falls into this. You know, your bonus depreciation is slightly different. That kicks in as of I believe it was January 16th, 2025. But the rest of these, like the the tips provision, the overtime provision and RD, all of that is effective for 2025. So this is these are things you want to be talking about with your tax professional who handles both your business return and your personal returns now, because this this stuff affects you for the year that's currently happening for those returns that's that are going to be prepared starting in a couple months here in the as we kick off 2026.
SPEAKER_00:So let's let's talk through each of your buckets. So what if I'm a brewery owner? Let's start from that perspective. Tips and overtime. Presumably, my payroll provider has baked in these new tax rules and whatnot, but is there anything that they need to do or be aware of, or is it just simply it's a thing now?
SPEAKER_01:That's a good question. Um, fortunately, your payroll provider is going to do the majority of the lifting here for you. Your piece in this is really gonna be to make sure that how your payroll system is set up is correct, right? Because with the tips, the big thing there is that it's tips, it's it's tips only, right? And in order to be considered a tip for the purpose of this provision, it has to be an amount that is freely given by your customer to your employee, right? So things like, you know, say you have, say you do auto gratuity, say you do service charges, things like that. Those don't count, right? So you need to make sure that those are mapped in your system to where those end up in the regular wages bucket for your employees, right? Whereas you want to make sure that those tips, amounts that are truly our tips, are mapped so they end up on the tip line on your employees' W-2s. Because that's going to be how their tax preparers make the determination on what portion of their income goes into this, you know, income tax exempt tips bucket, right? Up to their$25,000 limit. So if you have it set up correctly so that those amounts, when they come through your system, are properly categorized when they go into payroll so that they show up in the right place on your employees' pay stubs, on the W-2s they get at the end of the year, then you're you're good to go on that. But you know, as we see from time to time, those payroll systems don't always get set up quite right. So if you have your auto gratuities being counted as tip income in your employees' pay stubs, then the W-2 information they get at the end of the year isn't going to be quite right. And then they're going to run into issues with you know what is taxable versus what is not. So you just you really want to make sure that your payroll system is set up to properly categorize these different types of income that your employees receive.
SPEAKER_00:Good. That's good advice. I mean, over time it's probably pretty self-explanatory. Um the okay, from the perspective of the employee, and so they get, you know, and and that's not most of our audience, but it's I'm just I'm curious, like, what do they need to do to actually take advantage of it? So I I get my um you know, my tax forms, my W-2, whatnot, and I'm filling out my taxes as an employee, and I got all these tips. Like, what do I do on the tax return? Like, what's different for me as an individual filing my taxes?
SPEAKER_01:Yeah, so that's a good question. The way that it's gonna work is there will be on the 2025 Form 1040, there'll be an above-the-line reduction to your income for your tipped income, right? Should come through Schedule One. It will just take, it's expected to take, you know, none none of these forms have been released yet. But what's happening, what's expected to happen is that it's expected to take that box eight tip income that you'll see on your W-2 and include that as a reduction to your income on that will come through on you know page one of your 1040 and just reduce your taxable income. So this is something that you can take advantage of regardless of whether or not you itemize your deductions, whether you take the standard deduction or you itemize for things like you know, mortgage interest, property taxes, charitable contributions, things like that. You'll be able to use this either way. You just want to make sure that when you're doing your return for 2025, you're seeing whatever amount is in that tip wages box on your W-2 come through on your 1040 as a reduction to income.
SPEAKER_00:Gotcha. Okay. And there's caps on that for so higher income earners, that there's they always they love these phase outs, right? So it can't be simple. Um, what are the caps in terms of if I'm an employee, I'm a tipped employee, I'm doing my taxes, you know, filing jointly, perhaps. How does that work?
SPEAKER_01:Yeah, so the phase outs on this are around$150,000. So if you or if you're earning more than that, you know, you can expect to see this phase out. If you and a spouse together are filing and earning more than$300,000, you can expect to see this phase out. But you know, as long as you are within those income windows, then you can expect to see this come through.
SPEAKER_00:Gotcha.
SPEAKER_01:Now shifting back, I'll also mention while we're at it, no changes were made to the withholding tables for this for 2025. So the as long as your withholding is filled out correctly, income tax is still being going to be withheld on this income. You'll just expect to see that come back to you as a refund on your 1040, right? Gotcha.
SPEAKER_00:Nice little nice little bonus for some folks. Yeah.
SPEAKER_01:Yeah, you know, and what'll happen with that going forward is unknown at this point whether changes will be made for 26 or future years to try to bake that into the tax that's withheld on you during the year. But for 2025, you can expect to see the difference come back as a refund.
SPEAKER_00:Okay. And then from the perspective of the brewery, you know, we have this FICA FICA tip credit. Is that how does that get impacted with all of these changes?
SPEAKER_01:That's a good question. For the brewery owners out there, your FICA tips credit stays intact as a result of this. Since the tip income is still subject to employment taxes, right? Your Social Security tax, your Medicare tax, those are still being paid on this. You know, the business is still covering its half of the employees' tax on that. You're still able to take the same FICA tips credit that you've taken in the past for the business share of those employment taxes that are paid on TIP income. So no expected changes there. That you know, commonly used and very valuable credit is still still fully available as it's been in the past.
SPEAKER_00:Good. Excellent. Sounds like a overall a win-win in that bucket. Yeah. Of OB3. One big brewery bill.
SPEAKER_01:I love that term because so much of this is so applicable to the industry that one big brewery bill is honestly more appropriate name for it.
SPEAKER_00:That's right. So when you think OB3, one of those bees is the brewery.
SPEAKER_01:Yep. Love it.
SPEAKER_00:So let's shift now to the uh business bucket. Um maybe talk a little bit more about this bonus 100% bonus depreciation on most assets. Maybe do the opposite and say, like, do you are there specific assets that would not qualify? And if so, like what's the general category of those things?
SPEAKER_01:Sure. That's the very little has changed on that front. You know, there is a uh one provision that we'll get to in a minute that can impact this, but for the most part, the assets that do not qualify for 100% bonus are still your building assets, right? Your 39-year, when you 39-year building assets, right? Whether that's leasehold improvements, you build out a space to outfit it for your use, you know, anything that doesn't fall into that 15-year qualified bucket, right? Basically anything that is structural to the building, right? Anything that is permanently attached to the building and now part of the building still falls in that 39-year bucket and would not be eligible for bonus depreciation. There is one caveat to that, which is not fully flushed out at this point. There is a provision within the new bonus depreciation rules that can allow qualified manufacturing property to receive 100% bonus depreciation. We are still expecting further guidance to come out on that. We don't know at this point exactly what counts as qualified manufacturing property. We're hoping it can include, you know, like a big brewery production building, right? So you build out a new production facility. We're hoping that that can qualify. It's not been clarified yet, but we're we're optimistic that it will. But for now, the best way to look at this is to think, you know, anything that you per any capital assets that you purchase outside of building out an existing space to meet your specifications or building a new building should qualify towards 100% bonus.
SPEAKER_00:Got it. Okay, great. Thank you. All right, let's shift to this 199A. I think for most people this is Greek. Uh I used to do taxes a long time ago. For me, I'm like trying to recall. So maybe step by step through this, like what exactly is it, and how exactly do brewery owners like take advantage of it? Like, how does it all work again?
SPEAKER_01:No, that's a that's fair. So section 199A for qualified business in business the QBID, right, is the main term for it, right? But essentially what it is is it's pass-through income that your business generates, which, you know, say you have a brewery that is classified as a partnership or an S corporation for tax purposes, right? Meaning that when you file the business's business return, you the income from that business comes out on a Schedule K1, which you then, as the business owner, include on your personal tax return as income that you pay taxes on at the personal level, right? The section 199A provision allows you to consider 20% of that pass-through income that comes through the business return and hits your personal return as a deduction on your personal return. So say your business produces$100,000 of pass-through income for the year. When you do your$1040,000, you're showing$100,000 of pass-through income from a K1 on Schedule E. Well, then you'll see that come through the return. Then on the face of the return at the bottom, there's a line for your KBID deduction, right? That will allow up to 20% of that$100,000 to be a deduction. So with the Section 199A provision, rather than paying taxes on that full$100,000 that came through a pass-through income, you're now paying taxes on$80,000 of that.
SPEAKER_00:That's nice.
SPEAKER_01:So, you know, it's it's a good benefit to have for our pass-through entities that you know show taxable income each year. It just you know helps to reduce the tax burden on the owners who are the ones ultimately reporting that income for tax purposes.
SPEAKER_00:Now, will they see that on the K1 itself? Or is that something like nope, the K1's going to show you in your example 100 grand of pass-through income? You put that most people using tax software or hiring somebody, but it ends up on that schedule E. How do they know to take the 199A to take that 20%? Like, how does that mechanically work, I guess?
SPEAKER_01:Yeah, that's a good question. And the income numbers that you'll see on the face of the K1 will still be that full gross$100,000 amount, but you should see a statement in the back of the K1 that breaks out what your numbers for 199A are. It's usually a statement that just says, you know, 199A on it. And it'll show, you know, ordinary business income, in this case$100,000. Then you'll usually see an amount on there for any W-2 wages that are applicable to that income. This is, you know, wages that the business paid out in the process of earning that income. Then you'll see another line on that same statement that will include the business property that goes into it. And those are just used for limitation calculations, primarily, primarily in the specified services and trade aspect that wouldn't necessarily apply to a brewery's use of this provision, but you'll still see that on there. So when you receive your K1 for 2025, you should look for that statement on there and make sure that there's a 199A statement. And when you see that, you know, when you're doing your return, you'll either put those numbers into your saw the software you use when prompted, or your CPA will use that when they input the K1 to make sure that you're you're getting the deduction that you're eligible for there.
SPEAKER_00:Got it. But this this 199 a qualified business deduction is something that's come back. Is that right? It wasn't here, say last year or the year before, but it's back now.
SPEAKER_01:So it's actually been around the whole time. It was scheduled to expire at the end of 2025. So without the changes from this bill, you would have still received, you would have still had it for 2025. Just going into 2026, it would not have been in effect anymore. And at that point, you would have gone back to paying tax on the full 100,000 from our example, rather than the 100,000 less the 20% deduction.
SPEAKER_00:Got it. Okay. And you had mentioned, you know, this is applicable for pass-through entities, partnerships, and S-corps. Some people listening are like, well, I'm an LLC. How does that affect me?
SPEAKER_01:That's fair. Well, an LLC is a legal structure, right? So there's no there's no tax structure, LLC, right? Any any entity that is set up as an LLC chooses a tax structure to file under, right? You can classify an LLC in most cases as a partnership, which would file the Form 1065. You can classify it as an S corporation, which would file the Form 1120S, or you can classify it as a corporation, which would file the Form 1120. And those first two, the partnership and the S corporation, are the ones that this applies to because those are the pass-through structures where you get a K1 and the income passes through to your individual return. If your LLC in this case is set up as a corporation, this is not applicable to you. So, you know, there certainly are many cases where classifying as a corporation makes sense and is the right move, but this 199A just would no longer be applicable in that situation.
SPEAKER_00:Got it. Thanks for that clarification. All right, let us turn now to the RD tax credit.
SPEAKER_01:Absolutely.
SPEAKER_00:Um walk us through this. I know, I know there were a lot of changes, and now we're changing back. So is this is this one also effective, Jan 1, 2025?
SPEAKER_01:Yes, this is effective for 2025. It's also in a way, it's effective retroactively back to 2023 when this all started. Because the the big change that occurred there a couple years ago is that up until that point, you'd always been able to go ahead and take an expense on the tax return for the expenses that you occur in the pursuit of research and development, right? You know, to this includes you know costs that were spent on research. It can include, you know, salaries and wages to employees who do the research, it can include you know amounts paid to outside firms that do research on your behalf, contract research. It can include the cost of supplies that are used in research and development activities. So in the past, when you did the credit, you would you know still get a deduction on your return for those costs, then you would also get a credit for you know whatever percentages in your case apply of those costs as a tax credit on the return, then you know, less less a reduction to it to expenses for the actual amount of the credit, so you don't double dip there, you would get the rest of those expenses as a deduction in the year that they were incurred. So taking the RD up until about two years ago really had a very negligible effect on what the business's taxable income for the year is. However, starting with 2023, that changed. And at that point, you were required to rather than take those expenses as an expense in the year you incurred them, you were required to capitalize them and amortize them, meaning that you would then get, you'd still get the effect of those expenses, you would just take it over the next five years as opposed to in the year that you incurred them. So in the end, you still get your full expense amount is just pushed out. And that had the effect of increasing taxable income for entities that were taking the RD credit for the first few years, as you know, the amortization period for those first few years is winding up. You know, your taxable income would be higher in, say, 2023, because rather than getting to take an expense for your full 2023 RD, you know, you're you're getting six months worth of amortization on that. And you know, the remaining four and a half years of expenses are pushed out over your next few years' return. So the big change here is that this bill made it so you no longer have to do that for domestic research expenses. Anything done outside the US is still required to be capitalized, but you know, that's largely not relevant in our industry. But starting with 2025, you can just take those expenses in the year incurred going forward for those of us who took the credit in previous years and capitalized those expenses. You have a couple of options for how you can get that expense, right? You can, you know, and this the clarification on this actually just came out a month or so ago. But what you're allowed to do under the changes to go back and capture those previously amorti capitalized and amortized expenses is you can one go back and amend your returns for the years that included capitalized RD expenses, and you know, re basically refile those returns for those years and take the expenses that you incurred in the year that you incurred them. Right. That's one option. It's probably not going to be the most you know used one because as we all know, amending tax returns is additional work, it's additional expense for you as a brewery owner. And when you're talking about pass-through entities with K1s, your investors don't want to get amended K1s and have to go back and amend their personal returns, right? So you can do it that way, and in that, in that in that way, it is retroactive. But what the more common option is likely to be is you are instead or alternatively allowed to, when you do your 2025 return, make an election on the return to take any previously capitalized RD expenses either in full in 2025 or spread it out over two years and take you know half of it in 2025, half of it in 2026. Or if you know you don't want to do any of those things, you're also allowed to just continue amortizing the amounts that you capitalized in previous years and go ahead and let those amortization schedules play out and just take the expenses over the years that follow.
SPEAKER_00:Interesting. Oh, those are some good options. So it's a it's set, yeah. I mean, why would you amend if you can just take it all in 2025 if you wanted to?
SPEAKER_01:Well, you know, there are cases where that will make sense where, you know, say you had high amounts of taxable income in say 2023 or 2024, you paid a big tax bill on your 1040 as a result, and you want to go back and you know recover some of those funds. In that case, it might make sense to go back and amend those previous returns, amend your personal returns, get refunds back on that tax that you paid. But you know, you do still have the additional costs that you'll incur for tax preparation on those forms, things like that. So, in most cases, what we expect to see happen here, at least with our client base, is we'll we'll expect to see those expenses, we'll expect to make the election in 2025. And depending on where their taxable income is for 2025, expected for 2026, we'll either take those costs as a deduction in 2025 or potentially spread them out between 25 and 26.
SPEAKER_00:Got it. Yeah, it makes sense. Yeah, whenever I talk to uh you know, taxes or any like complicated, I'm always like, why would anyone try to do this themselves? I would say don't do it, call Brent, he can help you out.
SPEAKER_01:Yeah, yeah. You know, especially once you get into the territory of being a business owner, especially when you're receiving K1s for pass-through, you know, that there's just so much going on in the tax world, so much you need to know that it's it's really to your advantage to have somebody who's who's up to date on these things advising you on what to do, just to make sure one get it right, and two, you know, don't shortchange yourself and pay more than you need to.
SPEAKER_00:That's right, exactly. And I think it's um it's good to have a general awareness of this, right? So I think this is super helpful for people because they'd be like, oh, I never even thought about it like that. But so you have a general understanding, it helps aid in a conversation with you to say, all right, I you know, I listened to the podcast and I heard it tell me about this now. Because a lot of times, like it's useful for the more the brewery owner is armed with knowledge, uh or at least general knowledge, they can then sort of um have that conversation with you and sort of guide you towards areas that they're working on. Because this is the thing, a lot of times is like um when I was doing taxes, anyway, I'll make it personal is you know, uh you only know what you know. I mean, I have these all these tax rules at my disposal, but maybe there's something that happened in your business that I'm not aware. I didn't even know you were you had an RD thing. So I can prompt you with questions, but I think for the brewery owner to be an advocate for themselves, I guess that's where I'm kind of trying to go with this is to have enough knowledge to be able to say, Brent, we did this, we did that. This this year, does that? Oh, actually, yeah. Now we need to talk about. So, do you find that your brewery clients are able to have that discussion with you or share that information with you in terms of what's going on in their business so that you can help them take full advantage of the tax rules?
SPEAKER_01:Yeah, you know, that's one of the things that's important in this industry is, you know, really building relationships with your clients, business owners in this case, so that they're so that you have that level of involvement to where if they're thinking of making a big move, like you know, making a big capital purchase, they can come and talk to us and say, you know, we're thinking of buying a canning line. It's going to cost$400,000. Does it make sense to do it before the year closes this year, or is that something that maybe we should look at for next year, you know, and and have those conversations so that we can plan this out in a way that works best for you. RD is another example of that. You know, the amount and the amount of your credit, you know, really comes a lot of it comes down to how good records, how good of records are you keeping on your batches. You know, we produced an experimental batch here to try out this new recipe we wanted to see. You know, well, how how good of records did you keep on, you know, what the the costs of that batch were, what the inputs were, right? The better records you keep on that, you know, the more we're going to be able to capture in that credit when we do the calculation at the end of the year. So things like that are really important to, you know, one, have an idea of as a business owner so that you can have that dialogue with us so that we can make sure that we're on the same page about what you're doing and help you ensure that the records you're keeping are the right ones and that you know we have that information available when we go to do the return the next year rather than having to, you know, try to go back and find things that you know are lost of time at this point, or you know, recreate records of things that you know would have been much simpler to just record as you went throughout the year. So it's definitely important to one, have the baseline knowledge of what some of these provisions are and how they affect you, and then two, to keep in close communication with the professionals you work with so that we can have a plan and make sure that this information is captured and used correctly throughout the year.
SPEAKER_00:Do you have any best practices on how brewery owners can do that record keeping relative to RD uh credit related expenses?
SPEAKER_01:Yeah, absolutely. You know, the the best way to do it is really just to keep, you know, keep keep a record, right? You know, whether it's an Excel spreadsheet, something like that. And each time, you know, you do uh experimental batch, you try a new recipe, you try a new ingredient that you haven't used before and you want to see what happens, keep a record of that batch. You know, we we we brewed this batch on this date. Here are the costs of you know the ingredients that went into it. Here are the names of the employees that worked on it, here's how long they worked on it. If you keep records like that throughout the year as you go, and you give me that at the end of the year, that's gonna put us in a really great place to get started on that credit. Nice.
SPEAKER_00:Yeah. And my understanding, too, and you correct me if I'm wrong on this, is that the RD doesn't always isn't exclusively for say new beers, but it could be for new process. So for example, if your you know your process includes steps one, two, three, four, and five, and you're able to kind of work it out so that one of those steps can be removed so you're more efficient, and the time it takes to is a weird example, but is that fair to say that the RD is maybe applicable beyond um just new beers?
SPEAKER_01:Yeah, it absolutely is. It's applicable to improvements in processes, products, really anything where you're taking something that you know you've either done before and you're improving it, or you're trying something new and seeing seeing if you can make it work in a way that you know either develops a new product or improves an existing process for an existing product.
SPEAKER_00:So got it. Awesome. Um so is there as as you sort of, you know, the audience that listens, say maybe small brewery, you know, just a couple hundred barrels or larger, maybe you know, 20,000, 30,000 barrels, uh is the impact of these changes, does it matter if you're small, mid-size, or is it kind of across the board? No, it's one size fits all.
SPEAKER_01:Uh so it can it can impact it. Um these provisions would apply, you know, big and small across the board. I would say that you know, you're for your bigger production breweries, you're definitely going to want to watch that provision about you know the qualified manufacturing property and bonus depreciation on that, especially if you've got expansion plans in the future, you know, new production facility, anything like that. Um, for everybody, big and small included, you definitely will want to use this, be knowledgeable about this bonus depreciation, the return to 100% when you're planning out, you know, large equipment purchases, purchases of vehicles, anything like that, just to you know keep in mind, you know, well, where's our taxable income expected to be for this year? How do we think we're gonna do next year? You know, does it does it make sense to have these costs in the current year so that we can take the 100% depreciation this year and bring you know taxable income closer down as much as possible? Or will that be more beneficial to us next year? Right? So things like that, you know, will apply regardless of whether you're you're a large a large producer or you know, a smaller, smaller brewery outfit.
SPEAKER_00:Gotcha. Are there any components of OB3 that are still evolving that are still like, well, we're waiting on, or is this thing like ready to go?
SPEAKER_01:Well, this the way that this bill was written, so much of it included provisions about you know further, further clarification follow, right? And some of that has come out already, you know, with the uh, for example, that like what we talked about earlier about you know how to handle prior year capitalized RD expenses, some clarification over, you know, what types of industries qualify as you know, the tips earned in that industry qualify as qualified tipped income in this case, but a lot of it is still evolving, you know, that 100% the bonus depreciation on qualified manufacturing property is a perfect example, right? You know, we're we're just we're still waiting to see what comes out on that. So I would say we we we know a lot more about how a lot of this is going to work now than we did a few months ago when this came out, but there's there's still a lot to come.
SPEAKER_00:Gotcha. So is there any guidance that you would have given that okay, we kind of got it, but there's a little bit of uncertainty in maybe these areas. How how should breweries maybe prepare for that? Or there are some areas where you feel comfortable saying, yep, go ahead and make that additional purchase because we're we're pretty sure that's gonna fit. Or I guess how how are you advising clients as as it relates to that?
SPEAKER_01:Yeah, so in most most of the ones that are relevant to our client base, it's it's ironed out well enough to where we can move forward with it. You know, the RD and the bonus depreciation are really probably the two big business provisions that we can work with. You know, they're so you know, in terms of capital purchases, you know, you can expect 100% depreciation on an asset that you buy, so long as it's not, you know, an addition to a building or an upfit of a building, something like that. But you know, if you're planning on building a big production facility, maybe hold on that until we know we know whether it's gonna qualify or not, right? But things like that, you know, in terms of RD, we can go ahead and be planning now in terms of how we're gonna handle any capitalized RD costs from previous years on your return. The guidance that came out a month or so ago is pretty complete. So, you know, we at this point know enough to know, you know, let's let's look at where you're gonna be for 25 and let's see, does it make sense to go ahead and take you know your previously capitalized RD in 25, or should we plan to spread it out between 25 and 26, right? Things like that, you know, that we're we're we're pretty confident on on where how that's gonna work and what we can do. It's just a few things left, like you know, the that qualified manufacturing property that we we still really need to wait and see what happens.
SPEAKER_00:Gotcha. Okay. Um, so what are some often missed deductions or credits that you tend to see for brewers? Are there any patterns where you're like, oh boy, we we usually miss this or this, and the people should be aware of?
SPEAKER_01:Yeah, there there are there are a couple there that are important. Um as we've talked about, you know, today and in the past, the the RD and the FICA tip credit are the big known credits, right? Those are the ones that everybody knows about and hopefully at this point is is utilizing to their advantage as well as possible. But there are a couple of other smaller ones that I do see, you know, either missed on when new clients come in or just you know, the business owner didn't even know this was an option. So, you know, when we send out our our you know start of the year or our kickoff survey, right, for the tax season and we ask questions about it, it comes up, right? And it was just never considered before because nobody knew that this was the thing, right? The big ones there would be the uh FMLA credit, right? This is a credit that you're able to take to say say you have say you offer paid leave for your employees, right? Family medical leave, right? There's a credit that you can use to get back up to 25% of the cost of that on your return. So a lot of people are unaware of that, and that's one that often is missed unless you have you're working with a professional who asks, you know, did you do you offer this to your employees? Did you have any employees who took advantage of it during the year? If so, okay, let's get the information so we can go ahead and calculate that credit. Another one, this is a newer one, is the uh retirement plan, the small employer pension plan credit. This allows you to take to recapture, you know, it say you have a retirement plan for your employees, right? And you know, it's it's really it's really this really applies for the first five years or so that you have the plan. There are a number of provisions in this credit, but you know, for say you say you implement a retirement plan for your employees, right? For the first three years that you have it in place, you can recapture some of the costs of setting that plan up, right? Fees to the plan provider, you know, costs for the forms that need to be filed associated with that. You can recover, you know, up to$5,000 a year for those first three years in startup costs as a credit. Say you do uh an employer match on that retirement plan for the first five years that it's in play, you can recover anywhere from 100% to 25% of the first thousand dollars in match that you do for each of your employees. So smaller, lesser known credits like that are really an area that we try to make sure our clients don't miss out on. Yeah. That's something to keep in mind if you have either of those things.
SPEAKER_00:Do you have so you had mentioned um I think you said a survey? Is it like a checklist of questions, prompts that would get people to think, oh yeah, we do actually offer FMLA? And all of these sort of other things that just happen in business, but oh, I didn't know there was a so is that structured? The survey checklist is sort of structured to kind of draw that out from folks who might not otherwise think about it.
SPEAKER_01:It is, yeah. And what it is is it's it's it's an email that goes out, you know, kind of a kickoff email that goes out to each of our clients as we're starting the year and getting started to work on their tax return. It includes a series of questions around credits, you know, any changes in the business during the year that we might not know about. You know, did you, you know, bring in new investors, things like that. If so, let's make sure we capture their information. Anything related to credits, this FMLA, retirement plan, RD, things like that. So it really is kind of a uh start of the a step at the start of the engagement that we send out that is really just prompts that's intended to you know jog the business owner's mind on, you know, things that may have happened during the year that may not have been shared with us yet, but that can be used to their advantage when preparing this return.
SPEAKER_00:Good. That's great. Yeah, just going back to the earlier discussion around you know, brewery owners advocating for themselves, getting a general bit of knowledge, but then being an active participant in the or participant in the tax process can be super duper important because I think there's this sort of mindset like, oh, my tax guy can handle that. And you can, but if you didn't know X, Y, or Z, then you you really can't help them. So, you know, maybe the takeaway here is that survey can be really valuable for you if you give it the time. It's not just, oh, it's a tax thing. I gotta do it for my tax guy. No, this can be real dollars, yeah, whether in deductions or credits. Uh so there could be some significant uh opportunities in there.
SPEAKER_01:Yeah, I would say that you know, we're we're as good as the information that we're working with, right? So putting effort into things like really thinking through what's on that kickoff questionnaire is important because you know, the more you share with us, the more we can do. Making sure that your books are, you know, your financial record keeping, however you do it, make sure your books are clean, complete, and delivered to us as early as possible following the close of the year. Because, you know, the again, the information that we have to work with is is you know, in a lot of ways, the the mark or the measure of what we can do, right? So if you're sending us, you know, clean, complete, closed books in January, then you know, we're off to a much better start than you know if we're if we're talking in July and the books still aren't done yet, right? So I would say, you know, one, make sure that your financial information is as complete and high quality as possible, and keep up with it, right? Because you know, knowing knowing your financial position is integral to how well you're able to run your business, right? So staying on top of that as a business owner is important both for you but also for us. And that you know, the better financial information we have to look at during the year and do taxable income projections based on things like that, the better we can advise you on what makes sense for your situation.
SPEAKER_00:Absolutely. Uh well, as we wind down, Brent, what's uh let's do the one piece of advice? Give people like maybe one action step that they can take. So if you could give one piece of advice to any brewery owner who's listening, what would you recommend that they do now to try to get ahead of tax season, you know, maximize all of these deductions and whatnot under the new one big brewery bill that's out there?
SPEAKER_01:I would say reach out to your tax advisor. Make sure your financials are caught up to date. Reach out to your financial, reach out to your tax advisor, see if you can, you know, have get a meeting on the calendar. Maybe, you know, ask them for a projection of where your net income looks like it's going to be for 2025. Then get a meeting and sit down and talk through. Okay, you know, here's where it looks like we are. Here are some moves we're maybe thinking about making this year, maybe this year, maybe next year. Let's talk about what makes sense for this year, what makes sense for next year, right? So I would say just start start the dialogue for tax season now, right? We don't need to wait until you know January, February to do that. Getting that conversation going now, getting an idea of where you're going to be taxable income-wise, and talking through any moves you're thinking about making before the year closes out here. That can go a long way towards a successful tax filing season in the spring.
SPEAKER_00:Love it. It's great stuff. Um, well, Brent, why don't you tell folks how, if they want to connect with you, learn more about Small Batch Standard, what's the best way for them to do that?
SPEAKER_01:Yeah, so the best way to do that would be to start with our website. Take a look through there. We have pages that talk about you know what our service offerings are and what we might what we can do to help you, right? What our different service lines are, what how those are applicable to you as a business owner and what we might be able to do. Then there's a way to contact us through the website. And if that's something you'd be interested in having a more detailed conversation with, you know, fill fill that out and somebody from our team will be able to talk to you and get that conversation going about how we might be able to help.
SPEAKER_00:Awesome. Well, Brent, this was great information today. Really broke it down, simplified it. Thank you so much for your your time and expertise in sharing all that with us.
SPEAKER_01:Yeah, no, thanks. Thanks for having me on here and taking time to talk to me. Hopefully, uh what we went through today is helpful to the audience out there, and everybody can come away from this no one more than they did before.
SPEAKER_00:That sounds great. Brent, thank you so much.
SPEAKER_01:Thank you.
SPEAKER_00:Thank you for listening to the Kraft Brewery Financial Training Podcast, where we combine beer and numbers so that you can improve financial results in your brewery. For more resources, tools, guides, and online courses, visit Craft Brewery Financial Training.com. And don't forget to sign up for the world famous Kraft Brewery Financial Training newsletter. Until next time, get out there and improve financial results in your brewery today.