PA House Finance — 2026-04-16

or making improvements to the facility or equipment to claim a credit against the malt beverage tax, equal to the amount of capital expenditures they incur, up to a maximum of 200,000. Unfortunately, in its current form, many local breweries are unable to use the full amount of the credit. For example, a new brewery could easily incur capital expenditures of 200,000 or more just to become operational, but will only be able to use a portion of the credit at a time when it needs funds the most. That's why I'm introducing House Bill 2340, which will allow credit to be carried forward for five years. Or three, it will also permit the credit to be sold or transferred to other Pennsylvania breweries, which will also allow small operations to get an instant cash infusion they can use to support their business. As a business owner myself, I'm devoted to empowering small businesses in the Lehigh Valley, especially businesses that can revitalize our communities. Brewers serve as important community gathering spaces where people go to grab locally made food and drinks and connect with friends, families, and colleagues. Most of us have one in our district. This bill will help us preserve those craft breweries, ensuring that people have more options than the largest national beer brands. I appreciate the opportunity to support the Pennsylvania beer industry by allowing me more local breweries to take advantage of the malt beverage tax credit. I look forward to hearing from local brewers and the brewers of Pennsylvania and Trey Association who can share how this bill will support their industry. Thank you.

Do I have to push it? That is a fantastic question.

So I started my own CPA firm about in 2019, and two of my first four clients were breweries in Philadelphia, and there's a lot more regulation to go along with them. and then they were on the same street, and I said, there's no way there's all these breweries doing things correctly. So two grew into four, grew into ten, and now we service 51 breweries in five different states. But we're from Bucks County. So, yeah, it is a really cool way to be a CPA firm.

Chairman Samuelson, Chairman Greiner, and members of committee, my name is Hannah Eisen. I'm the executive director of the Brewers of Pennsylvania, or the trade association representing the interests of craft brewers throughout the Commonwealth. With more than 500 breweries employing more than 15,000 hardworking Pennsylvanians, our industry is an economic engine in the Commonwealth, generating more than $5 billion in economic activity each year. It is my pleasure to be here today to discuss improving the state's malt beverage tax credit program. the growth of craft brewing that the commonwealth has seen in the last 20 years can be directly attributed to the rich history of brewing in the state and also the general assembly's consistent efforts to improve the regulatory and fiscal framework for our manufacturing industry the malt beverage tax credit was created in 2016 with the intent of incentivizing the opening of new breweries and the expansion of existing ones as well and initially the program worked as intended as we saw exponential growth in both new breweries opening and increased production capacity of existing breweries. In fact, in 2024, Pennsylvania produced more craft beer than any other state in the nation other than California. As with most things created a decade ago, however, the program is in need of updating to keep up with the shifting needs of the industry and to maintain the competitive advantage the Commonwealth has over neighboring states in attracting craft breweries. Right now, opening a brewery requires hundreds of thousands of dollars in capital expenditures, many of which would be eligible for the tax credit provided by the program. However, a new brewery lacks the malt beverage excise tax liability to take advantage of the credit because the credit can only offset liability. For example, a 1,000-barrel brewery would have a total excise liability of $2,480, yet that brewery may have a $200,000 tax credit, meaning that 98% of the credit can never be realized each year. The proposal being considered here today, led by Representative Tibercio, would improve this program by allowing that brewery holding the credit to sell it to other malt beverage excise tax liability holders, putting needed cash back into their businesses, and achieving the growth this program has intended to promote. It is worth noting that this program has an annual allocation in the budget of $5 million, and this legislation would not change that in any way. Further, it would also prohibit any purchaser of the credits from eliminating more than 50% of its existing liability, ensuring that the Commonwealth continues to realize tax revenue from the industry. Allowing these credits to be sold, like most other credits provided in the Commonwealth, will be a significant driver of reinvestment and new investment throughout the craft beer industry and guarantee that Pennsylvania can remain a leader in attracting growth in our industry. I would like to thank Representative Tibercio for her leadership on this issue, as well as all the representatives who have supported this legislation thus far. I remain hopeful that this improvement can get made and implemented this year and stand ready to work with all of you to make that hope a reality.

Thank you very much, Mr. Samuelson, Chairman Samuelson. Chairman Samuelson, Chairman Greiner, and members of the committee, thank you for the invitation to testify today and share my experience with the PA malt beverage tax credit program. As a CPA who's worked with over 100 breweries in the past decade from large multi-state organizations looking to expand into the state of Pennsylvania, and as small as home brewers looking to make the hobby now an actual business, I feel like I provide the expertise needed in the malt beverage tax credit program. I have a unique understanding of what the program is and why it is not being fully utilized by the PA brewery owners in this lovely state. Again, my name is Patrick McDonald. I'm the beer accountant. I've been a CPA since 2016, helping multiple breweries get their license, keep their license, keep them in compliance, and make sure that they are abiding by all the laws and regulations. You may not know this, but to be a brewery in the state of Pennsylvania, there's over 54 tax returns or tax submissions a year you need to submit, not only to local, but to the state and to the federal government. And if you miss one of those filings, they can take your license. It's a license that has to get applied every single year. If you're in the lovely city of Philadelphia or Allegheny County, that number goes up to 84. So if you miss a filing, there's anywhere between three to four regulators that are going to come after you to miss that. So our need of a CPA firm is greatly needed because a lot of times the knowledge behind that isn't easily attainable knowledge. but the malt beverage tax credit is a fantastic tool any new clients that we sign or any additional clients that we've talked to we the first thing out of our mouth you're in pennsylvania do you have the malt beverage tax credit and a lot of times they're like yeah we got that for 200 000 we're never going to use that on average they have a realization of about 15 so thank you for the 200,000 in 2020, 2021, it expires in three years. We're only using 15,000 at maximum. And I have a few examples that we can go through as well. But I love the credit. I just think the way that it's used right now, because it can only be applied to other malt beverage tax liabilities, the Pennsylvania Brewer's malt beverage tax liability is so small compared to what the credits awarded while the initial award may seem significant in dollar value and you have an additional three years to use that it just doesn't cover that initial capital outlay if you look behind you like that brewery system there on the small ends probably two hundred three hundred thousand dollars so Sherman Street might have gotten that credit back in the day when they had it they have to be producing very very very big numbers in order to utilize that full credit. Let's see. Sorry, I'm going off script, but we're going to go back on script here. Here we go. All right. Let's see. The money being allocated to these breweries, it's just not being fully utilized. Making these credits sellable between the breweries would be a game changer for the industry. I predict applications for the malt beverage tax credit would not just double, it would triple. My firm alone, we've been doing this since 2020. We've done 54 tax credit applications, zero have gotten denied, all of them have gotten accepted, and I can give you the specific numbers as far as what we've done every single year, but we have over 450 breweries in Pennsylvania and if you look at what's been applied for and what's been granted, we're talking 34, 41, 36, and I think 39 was the past four years worth my firm alone has done at least 34 of those Not taking into account the top five breweries who always take the full amount I here more representing the smaller breweries It helps everybody because it takes a lot of money to start one of these breweries, and you can't just go to a bank and get a loan like that. You need to show projections and everything like that. So So making the changes that are proposed in this bill to the tax credit, I think will keep more breweries in business. Looking at what was awarded in 2023, I already see two breweries on here that are out of business. And that was less than two years ago. So one of the breweries got $200,000. They're no longer around. One brewery got $33,000. They're no longer around. And I think it's the way that the credit's written. Here's some real-world examples. One of my median breweries, middle-of-the-road breweries, they started in 2023. They purchased a new brew house in Philadelphia. They received just under the cap of like $193,000. They're in their second full year of operation. They're roughly producing 400 barrels a year. It saves them $1,000 in malt beverage tax credits alone. Over the four-year life, they'll only use about 2.5% of their actual credit. and them specifically like a lot of my other clients they don't own their building so they have a landlord they signed a lease for 15 years every five years there's an escalator where their rent payment has to go up they had to get cranes in there before the building was made to get that actual um you know fixed asset and the actual equipment in there then they had to put the wall back up so that equipment can't really come out anymore and it's there they signed a lease for 15 years, it happens. They're reinvesting into a building that they don't even own. And a lot of my clients, I think only 15% actually own the building that they're in. So that's the other thing that I'll get into in a little bit as far as where their cash flow is actually going. Because it's hard to start a brewery. It's even harder to own the land and the building that you're in with the brewery. On the other side of it, I have a really good, one of my top performing breweries. They produce about 2,000 barrels a year. They were awarded $75,000 through the program last year. Save them $5,000. It's going to save them a total of, you know, 15 to $17,000. They're still leaving $50,000 on the table, so still two-thirds of that credit, and this is a brewery that is profitable. They own their own building. They own their own land, but they're still not able to take full advantage. So I kind of give you both sides of the perspective there. The first client would take 94 years for the credit to run out and be fully utilized. The second client that's doing very well, and I always have them as the gold star, it would take them 16 years to use this full credit the way that it's written. So I just wanted to give you two sides the perspective. As far as the day-to-day struggles with a brewery and the cash flow, with a small business, like I mentioned earlier, 15% of our clients own their buildings, so they're working really hard to pay a landlord. Nothing against landlords, but to take this much pride in a building like this and you don't own the building, it's not the best feeling. A lot of them have SBA loans or bank loans or even loans with whoever the equipment provider is. the banks always get paid. So some of these SBA loans that started as a variable rate at 3.5%, I'm seeing that 9.5%, 10.5%, 11%, just in interest. They'll have notes out there for hundreds of thousands of dollars. They'll barely be able to make the minimum payment, and they still have that full note that they owe for hundreds of thousands of dollars. They're struggling just to make the interest payment. So this credit will definitely help in that situation. I mentioned earlier Philadelphia liquor laws and Allegheny alcohol, that's additional taxes that They have to pay if they're in certain areas. The cash flow is very day-to-day in breweries. I don't know if they have weekly payroll, biweekly payroll. Even when you swipe your card here today, it's going to take two to three days for that to hit your account because it has to go through a point-of-sale system. So even though it is a cash business, everybody else gets paid until the last person to get paid is the brewery owners. and with weekly payroll needs, the funds to brew the next batch, the advertising budget, the first thing that's on the chopping block for these small owners is their salaries. You'll be amazed if you – I get to look behind the books on a lot of these breweries. Like I mentioned, we have over 51 of them that we service. They're not – a lot of these brewery owners are not taking salaries. They're working 70, 80, 90 hours a week just to make sure their staff can get paid. And they've already had the capital outlay for what they're doing. They've already paid the money, and I think the new bill will definitely help give them the funds that they need to operate a small business. Sorry, I'm going really off script here. But yeah, basically, these credits being sellable will be the direct reason some of these smaller breweries are able to stay open in business longer through the hard times of our current economy, and they can still achieve their American dream. Again, thank you to Representative Tabershio and the committee for addressing these important issues. Pennsylvania has a long and rich brewing history, and we hope to keep building on that tradition for decades to come. Thank you.

I think it's a combination of three things. The application itself, which my firm has done over 51 over the past four years, slightly archaic, but we're able to get it done. I don't know if you know this, you have to put it on a flash drive, a thumb drive, and it's an Excel, you put it on a thumb drive with links to the pictures and everything like that, they take the thumb drive, we never get it back, which is fine, thumb drives are now cheap, back in the day they used to be a little, you know, so you send the thumb drive, the applications are due March 31st or April 1st, I believe, you don't hear back until July, and then you're able to go back for that year and the previous, I think, two or three years to get your credit, which is fine. So that is a little daunting to some small brewery owners that are already wearing 18 different hats. The fact that it can only go against the malt beverage tax liability, it's like, oh, I spent $150,000. It's going to take me 40 years to get this back. It might not be worth my time is another factor. And a lot of these clients that we did on the past three years, they've gotten that credit and they're never going to use it for the next few years, even though they've made purchases that would still qualify. So I think it's a factor of all three of those. That's a great question.

so those are the statistics that you're referring to a thousand barrels tax liability would be about twenty five hundred two thousand barrels five thousand yeah and and to put that in perspective as far as like pints go right a thousand barrels is almost uh a year is 80 barrels a month roughly 83 85 sorry tax day was yesterday my brain is mush i apologize but there's what 144 pints in a barrel or is that a half barrel? That's a half. Yeah, so we're talking 200 and 250 pints would be your $2.50. So you have to be slinging beers to be able to take full advantage of it. And a thousand barrels a year is a very healthy client. 80 barrels a month is, hey, we are churning and burning some beer. That's turning over your system at least once a week, which is the average. Some people can do it one to two times a week depending on that. So depending on where you are and the price of your pint, it's a lot of pints to get through that full tax credit.

Yes. I think in this situation, a rising tide raises all ships, where, yes, there are a number of producers in Pennsylvania. As you can see, the past few years, the top five to six always get their $200,000 tax credit. But that means these major breweries are almost on another stratosphere compared to the breweries that we're representing here as the mom and pop. Maybe they might have one or two locations. But these are the breweries who would essentially be buying them from the smaller breweries. I think it's a win-win in the situation. I don't think it, you know, competition's always good, but I think in this situation it really helps the smaller breweries that had to have that capital outlay, that are working really hard to pay that 10% bank note just to keep their doors open. Well, thank you.

Thank you for your testimonies. You kind of raised a red flag for me about the archaic way of filing the paperwork. Yes. I feel like maybe we need to discuss that at some point to figure out how we streamline that process and make it more automated.

Thank you.

I'll start with Jim Yerge. Chairman Samuelson, Chairman Greiner, and members of the committee, as you know, my name is Jim Yerge. I'm the owner of Yerge Brewing in Emmaus. I'd like to thank you for having me here to testify on the need to improve the malt beverage tax credit through the passage of HB 2340. It's my pleasure to share my story with you. Yerge Brewing began as my retirement project, and we opened at our original location in September of 2016. The original location was 1,500 square feet, so smaller than this room, and housed both the production facility and the tap room with only 35 seats. While cozy, it soon became clear that to provide the kind of experience we wanted to share, including a wide array of beer offerings, comfortable spaces both indoors and outside for our customers, we needed to expand to a larger location. In 2021, we purchased, renovated, and opened our new location just a few blocks away with more than double the production capacity, over 100 indoor seats, and inviting outdoor spaces both along the Main Street in Emmaus and in a covered tent alongside the brewery that we heat in the colder months of the year. While we still brew small batches of beer, we strive to always have a wide variety of beer styles, along with local Lehigh Valley mead, cider, kegged cocktails, and wine offerings. We continue to use food trucks to provide variety in food options for our customers, thereby also providing opportunities for over 50 different locally owned businesses. While we have used, excuse me, while we used to have only one full-time employee, who was my son and our brewer, I was the brewer when we opened, but he took over quickly, plus three or four part-time bartenders. We now have two full-time staff in production, a full-time taproom coordinator, and five to six part-time bartenders. Our expansion allowed us to realize our vision while also providing good-paying jobs to more people in our community. In fact, being an active part in building our community and giving back has always been part of our mission. From our annual November Giving Thanks campaign that started two months after we opened, where customers help us select a local nonprofit to receive 10% of all November sales, to hosting local nonprofits for fundraising events. We just had She Nailed It In last week from Habitat. To participating in off-site events, we try to do our part to build and support local community. We typically donate over $12,000 a year to local organizations, much in small in-kind donations, but if you go to our website, you can see a list of over 34 organizations to whom we've donated over $1,000 each over the year. We take pride in being good community partners. This expansion, the job growth, the increased community philanthropy, and business-to-business development did not come cheap, however. The cost of the property we purchased and the renovations needed to open the doors came at a cost of a little over $1.2 million, mostly funded by loans but also personal investment. Included in the totals for our renovations were over $110,000 in new equipment for which we applied and were granted a malt beverage tax credit. We've continued to invest in our new equipment, such as a small canning machine so that we could offer four packs to our customers. And we've also started to need to replace some of the equipment that's reached its useful lifetime, such as our electric boil that needed to be replaced for about $6,500. Each of those was also submitted and proved for a malt beverage tax credit in subsequent years. The reason I'm here today is because despite our more than $150,000 in credits, we will be able to recover only about 2% of those credits before they expire. And in fact, the big ones have nominally already expired. Let me explain. We produce about approximately 250 barrels annually at a tax rate of $2.48 per barrel, bringing our total Pennsylvania excise tax liability to just over $620. The credit currently can only be applied to our excise tax and can only be carried forward for three years. Without changes to the program, we're going to forfeit 98% of that credit. I've spoken with other brewery owners, and I know this has come up, who don't even bother to apply for the credit because they are in similar situations. By passing HB 2340, allowing us to sell those credits to other malt beverage excise tax liability holders, we would be able to recoup a far greater percentage of these credits and can then reinvest them back into our business. The program is already allocating the $5 million annually, so there's no additional cost in state funds to be spent in the legislation. It merely makes it possible to use the funds as intended to provide incentive for breweries to open and to expand. Opening a brewery is more often than not a passion project or maybe a retirement project. And I can assure you we will continue to reinvest in our brewery and our community with every dollar we can realize from this legislation. I thank you for allowing me to be here today and look forward to answering any of your questions.

Exactly. Thank you very much. Chairman Samuelson and members of the committee, I want to thank you for allowing me to be here. My name is Larry Winans and I'm the owner of Jack S. Brewing Company with locations in Lewisburg and Williamsport. We employ over 75 people with good paying jobs and are proud to be active philanthropy partners in the community. As Jim is, we enjoy that aspect. I appreciate the opportunity to be here in support of improving the malt beverage excise tax credit program through passage of HB 2340. Jackass Brewing Company was founded in 2019 and with an opening date for the first location, March 11th of 2020. For those of you that can do math, which is I'm going to assume everybody, that's five days before the COVID shutdown. There were five really good days. And then they weren't. But we stuck through it. We kept all of our employees on. We did everything we could to survive. Our decision to expand into a second location was grounded in the idea that our presence, because we saw what we did in Lewisburg, that we could do this in another community, could fill a perceived market need while allowing us to become an integral part of that additional community. The task was daunting. As we opened up, we expanded into a facility that was seven times the size of our original facility. We had a perceived market need. we included over $384,000 in investment in equipment, such as they have here, to brew the beer that we thought we would need. And we intentionally bought it from a company out of Nebraska because we wanted everything to be U.S. made. We bought our kegs from a company in Pennsylvania because that was very important to us. So we did this purchase over a two-year period. Given this large investment, we decided to pursue the malt beverage tax credit. I will be honest with you, as Patrick McDonald testified, the paperwork was a little daunting to me, and the benefit was very small, so I hadn't done it. I just didn't feel that it was worth it based on what we would get. He insisted on it, in fact, beat me up about it, so we did it, which is great. And we were awarded the full credit for the two years because we purchased our equipment over the two-year time period, which is fantastic. However, if we were utilizing the credit, it would take us almost 300 years to realize that benefit. And I don't know about you guys, but I'm not going to be around here in 300 years. I know my wife would be scared of that. While I can appreciate the limited relief that we have, and I really do, the notion of being able to sell the credits to a willing partner within the industry in Pennsylvania and recuperate the dollars now would provide a tremendous benefit to Jackass Brewing Company. Frankly, it would be life-saving for us in this industry in this time period, and it would also benefit the Pennsylvania brewery that's buying the credit. So this is a true win-win for everybody. In our difficult economic environment, every penny counts. These dollars would allow us to insure our more than 75 employees, and apparently we hired two more people yesterday, so it's more than that. I just got the email this morning. I'm like, oh, they've got to do their onboarding paperwork. It would allow us to clear close to $150,000 worth of invoices, and we intentionally pursue working with companies that are Pennsylvania-based. So we would be able to pay these Pennsylvania companies their due payable and benefit everybody It would allow us to ensure we meeting the demand of the market as things are picking up Our production I mean I think it roughly 95 of the breweries in Pennsylvania produce less than 1,000 barrels. So it's incredibly frustrating for someone in my position to have this credit right there and not be able to use it to its full benefit. And it doesn't cost the state really anything. we do expect to pick up, so I think it might take slightly under 300 years for us to realize the benefit. I think that it's important. And my story has the unique qualities and the financial aspects of it are not restricted just to Jackass Brewing Company. Because I will be honest with you, like Patrick McDonald said, the owner is frequently the last person to be paid. I haven't taken a salary because I want my people to be paid and I want to hire the right people. I'm not here for me. I'm here for them and their families and the communities that we serve. The benefits would resonate to every county and every locality, not just Union County, not just Lewisburg, not just Williamsport, not just Lycoming County, but every county. And all the, well, it was 500 craft breweries, but now it's 450. So you know what that means. I'd like to again thank Representative Tabercio for your leadership on this not for myself although I appreciate it because I'm the lead person I want to thank you on behalf of every employee that works for Jackass Brewing Company because this is really meaningful to them and they don't understand it or know it but it's very powerful I'm hopeful we can get this change finished this year and the industry can see the meaningful reform it's great to see that Pennsylvania is the second leading producer Let's keep it that way. I look forward to questions, and I'm available for anything you ask.

I do want to represent Tiversio. I don't have any questions.

I don't have any questions, but listening to each and everyone's story, I love the fact that you use your business to actually bring communities together and use it to keep the volume growing. One thing that I liked about the Sherman Street Brewery when Samson invited me was, Yes, we were here on a Thursday. It was bingo night. And it was not just about the beer that we were drinking. It was more of the moments that we were sharing. Because we actually were having great conversation. We were supposed to be here for like half an hour just to speak a little bit about the bill and letting them know, the owner, what we're going to do. And next thing you know, we were here the whole night. And it was beautiful. And everybody came out and had a very nice time. I blame Bo. Yes. I know. and then the appetizers kept on coming. And Mr. Jurgi, yes, everything that you're doing as far as like for nonprofits, you know, you're using your actual funds no matter you're getting this credit or not to help your community out. And also with Jackass Brewery, what a name. I had to put that out there, but hey, you know what, I'll go and visit. That's okay.

Okay, so that will be a place we will visit soon. Fantastic. but also, you know, it was right in time of COVID, and you just kept on going and thinking about your employees. So just that little short part says a lot about your business, and I thank you. And we will do our best to push this forward. That's what we're here for. Thank you. And thank you.

From the moment I have gotten in the seat and even before doing small community work right here in this district, that's mostly what I'm really about very community driven that's the reason why we gotta keep small businesses open because like Patrick Patrick I'm calling you by your first name you gave so much information I feel like you know I'm ready to put my own brewery soon and then you will guide me to do this paperwork because it's not easy so you know we're always learning something new here as legislators but the first thing is helping out small businesses because that's also helping out our families and our children, and that's how we grow. Like I just stated, that bingo night, it impacted me. You'll be like, wow, yes, it did. And it was mostly because people were coming to us and having great conversation about music. It was just about anything. It was like, are you going to come next Thursday? So what is this bill about? And we were just laughing and having a very good time. And it was something very clean cut, which I told him that I was bragging about it. with the rest of the constituents around here and the manor. So I love that for you and I love everything that you do. Thank you.

Yes.

Yeah, if I may. And thank you again. and I really appreciate the persistence and the investment in the people that support and grow your business. It's very important to me. Not only your clients, but your employees. So thank you for that. I kind of want to use this moment and platform to ask that you also empower them to be informed because there's nothing more powerful than the collective power. And what I find in this space, in this role, right? I'm a second-term member, so this is my fourth year. And oftentimes we, you know, we attend hearings, we pass bills that have a direct, important, positive impact on our community, such as a small business community, but then oftentimes it'll die in the Senate. And so I think that now we have to learn from that and really empower the many employees that work for you so that they can make the call, send an email, visit if possible, put that pressure. Because I think the way we're going to change things in our communities and in our businesses is by really empowering those that are part of it and their families and their children, right? So imagine if all of us collectively start putting that pressure for this to happen. I think we can have a win before the year ends. That would be terrific.

Well, thank you again for everyone who attended today. Appreciate moving forward on this bill. And as I said, the committee does have a meeting at the end of the month where we could bring this bill up as soon as the meeting that we have the last week of April. I really want to thank Bo Baden for hosting us here at Sherman Street Beer Company. What a success story. Five years going strong here in Allentown, here in the Lehigh Valley, and we realize that there's 450 other craft breweries all over the state who would benefit from a change in the law, as representative Tibercio has suggested. So thank you for attending. Uh, this public hearing is adjourned.