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New York State Alcoholic Beverage Production Credit

August 15, 2016
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New York State (NYS) Department of Taxation and Finance just provided some additional summary guidance about the Alcoholic Beverage Production Credit, which expands the former beer production credit.  This new credit, which went into effect for tax years beginning on or after January 1, 2016, allows a registered distributor producing beer, wine, cider, or liquor below certain limits to claim a NYS tax credit for its production.
 
The maximum credit allowed each year is listed below:
Alcoholic beverage type Gallon limitation Maximum credit allowed
Beer 15,500,000 $745,000 *
Cider 15,500,000 $745,000 *
Wine 15,500,000 $745,000 *
Liquor 800,000 $  83,500**
* ($.14 X 500,000 gallons) + ($.045 X 15,000,000 gallons) = $745,000

**($.14 X 500,000 gallons) + ($.045 X 300,000 gallons) = $83,500

The maximum credit amount is applied at the entity level.  A shareholder, partner, LLC member, or beneficiary of an estate or trust is allowed to claim a share of the credit passed through from a New York S corporation, partnership, LLC, estate, or trust that is a registered distributor eligible for the credit.
 
Application and Refund of the Credit
For business corporation taxpayers, the credit cannot reduce the tax obligation to less than the applicable fixed dollar minimum tax.  However, if the credit allowed for any tax year reduces the tax to the minimum amount, any excess credit may be treated as an overpayment of tax to be credited or refunded.
 
For personal income taxpayers, the credit may reduce the tax to zero. If the credit allowed exceeds the tax, the excess may be treated as an overpayment of tax to be credited or refunded. However, no interest will be paid on the refund for either type of taxpayer.
 
If you have any questions or for more detailed information regarding this tax credit, feel free to contact Eugene Ruvere or Michael Freel.