With tax breaks for alcohol producers set to expire at the end of 2019, the push to make excise tax relief permanent officially started today as the Craft Beverage Modernization and Tax Reform Act (CBMTRA) was reintroduced into the U.S. Senate by Sens. Ron Wyden (D-OR) and Roy Blunt (R-MO).
The new bill seeks to make permanent the two years of excise tax relief alcohol producers and importers received as part of the Tax Cuts and Jobs Act, a $1.5 trillion rewrite of the federal tax code that President Donald Trump signed into law in December 2017.
“When it comes to wine, craft beer, cider and spirits, Oregon does it best. It’s time to level the playing field for craft beverage makers,” Wyden wrote on Twitter. “I’m introducing my bill to allow these small businesses to continue to grow and create good jobs in Oregon.”
“The craft beverage industry is driven by small businesses that support thousands of jobs and contribute billions in economic output,” Blunt added in a press release on the U.S. Senate Committee on Finance website. “This bill will remove tax and regulatory barriers that are making it harder for Missouri’s brewers, distillers, and winemakers to grow and compete. I’m encouraged by the strong, bipartisan support this measure had in the previous Congress and look forward.”
As part of the original legislation, the federal excise tax for domestic brewers producing fewer than 2 million barrels annually was reduced from $7 to $3.50 per barrel on the first 60,000 barrels. The legislation also cut the federal excise tax to $16 per barrel on the first 6 million barrels for all other brewers and beer importers, while maintaining the $18 per barrel excise tax for brewers producing more than 6 million barrels.
After falling short in 2015 and 2016, the legislation received support from 56 senators and more than 300 House members and passed both houses.
The new legislation already has bipartisan support from an additional 10 co-sponsors, including Sens. Thomas R. Carper (D-DE), Pat Roberts (R-KS), Debbie Stabenow (D-MI), Jerry Moran (R-KS), Robert P. Casey Jr. (D-PA), Rob Portman (R-OH), Michael F. Bennet (D-CO), Shelley Moore Capito (R-WV), Tammy Baldwin (D-WI), and Cory Gardner (R-CO).
In a joint press release, a number of alcoholic beverage trade groups — including the Beer Institute (BI), the Brewers Association (BA), Distilled Spirits Council of the United States (DISCUS), American Craft Spirits Association, Wine America, the Wine Institute, and the U.S. Association of Cider Makers — said the bill would create “a more fair and equitable tax structure for beverage alcohol producers and their consumers,” while simultaneously empowering their members to invest in their businesses and hire more workers.
BI president and CEO Jim McGreevy praised Wyden and Blunt for again co-sponsoring the bipartisan legislation as well as Rob Portman (R-OH).
“Today, America’s beer industry continues to be a crown jewel in our nation’s manufacturing sector, supporting more than 2.2 million good-paying jobs and pouring more than $350 billion into the national economy,” McGreevy said in a press release issued by the trade groups. “Making federal excise tax relief permanent for our nation’s brewers and importers will enable them to continue to innovate, invest in their businesses, support jobs, and give back to their communities.”
In a note to BI members, McGreevy added that the House of Representatives is expected to introduce a companion bill next week.
Meanwhile, BA president and CEO Bob Pease said extending the tax cuts would allow small and independent craft brewers to “create and innovate.”
“Our brewers can be found in every state and employ more than 135,000 Americans,” Pease said via the joint release. “They are at the heart of what makes small businesses so important to the nation’s greater economy. We remain hopeful that this legislation will be made permanent to support the small brewers of today and tomorrow.”
In December, the BA board officially approved the formation of a political action committee (PAC), with a focus on making the tax cuts permanent.
When plans for the PAC were first announced in October, Left Hand Brewing founder Eric Wallace, who also serves as the chair of the BA board, sent an email to BA members saying “the time is now to continue our outreach and lobbying to make CBMTRA permanent and not just a two-year excise tax reprieve.”
“Our fear is that returning to the higher tax regimen in 2020 could possibly cause a surge of brewery failures amongst those already on the brink,” he wrote.
Wallace added that having a craft beer-focused PAC to support lawmakers on both sides of the aisle could be a difference maker in establishing permanent tax reform.
Meanwhile, U.S. Association of Cider Makers executive director Michelle McGrath attributed much of the growth in regional cider — sales increased 22 percent in 2018 — to the excise tax cuts. “Small cideries are expanding their staff and operations in a direct response,” she said in the release. “The industry can continue to support manufacturing, neighborhood renewal projects, rural economies, and orchardists, but we need these credits to stick around on a permanent basis to do so.
“The margins are so tight in cider that many family-owned cideries are literally depending on it,” she added.
Stem Ciders co-founder and CEO Eric Foster told Brewbound that CBMTRA “is one of the most progressive pieces of legislation” that alcohol industry had “seen in the last 10 years.”
“It’s a very real amount of money,” he added. “Any time as a country and a community that we can free up the hands of business owners to grow their business and provide more jobs, it’s a great thing. I think it’s a huge success and a great example of a pretty diverse industry working together to achieve a common goal.”
Stem Ciders produced about 10,000 barrels of cider in 2018. Foster said as his business continues to grow over the next couple of years, the company “will really start to benefit from the cut itself.”