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Good News: Alcohol Tax Breaks Brewing In Congress

on 21/05/15 at 11:07 am

Booze News

Screen-Shot-2015-02-24-at-11.15.49-AMTax relief may be on the way for alcohol producers both large and small. Two tax breaks for brewers are vying for the spotlight on Capitol Hill, while a third piece of legislation would grant earlier tax deductions to distillers of aged spirits. All three pieces of legislation signal a willingness on the part of Congress to address the growth and economic benefit of the alcohol industry, but two of the bills also represent a growing schism among producers. Both the bills concerning beer taxation will reduce the excise taxes on sectors of the brewing industry, but these competing bills pit craft brewers against larger brewers, setting up a David and Goliath fight over tax reform.

The first bill of the two bills to be filed this year, the Small Brewer Reinvestment and Expanding Workforce Act (“Small BREW Act”), would reduce the federal excise tax rate by 50 percent on the first 60,000 barrels produced by breweries that produce 6 million or less barrels a year.[1]¬†Barrels between 60,000 and 2 million produced would also receive a discounted tax rate of $16, down from $18. This bill also widens the net for craft breweries, tripling the capacity under which breweries qualify for incentives. The Brewers Association (“BA”), a trade group for craft brewers, estimates that the cost of the tax will be approximately $64 million annually, but will create around 5,200 jobs in the first 12-18 months after passage.

The Fair Brewers Excise and Economic Relief Act (“Fair BEER Act”), introduced less than a month after the Small BREW Act, contains nearly similar tax provisions to the Small BREW Act, although it also eliminates the excise tax on the first 7,143 barrels of beer.[2]¬†The oddly specific 7,143 barrel threshold in this bill was designed to comport with the definition of “small brewer” under the Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau, helping with ease of administration. The main difference between the bills, however, is that the tax breaks in the Fair BEER Act apply to all brewers, regardless of size. The Fair BEER Act finds its most staunch support from the Beer Institute (“BI”) and the National Beer Wholesalers Association (“NBWA”), trade groups that represent the beer industry as a whole and beer distributors, respectively. The cost in tax revenue is a subject of dispute between the BI, which estimates the total around $113 million, and the BA, which puts a figure of $150 million or more on the bill.