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New Craft Beverage Modernization and Tax Reform Act Bill Introduced to Make Excise Tax Cuts Permanent

by Kerana Todorov
February 07, 2019

A bipartisan bill was introduced Wednesday in the U.S. Senate to make the alcohol excise tax cuts approved in 2017 permanent. The U.S. Senate and the House of Representatives in December 2017 approved a comprehensive tax reform package that included provisions to lower excise taxes wineries and other alcohol producers pay. The tax reform provisions, which had been introduced originally under the Craft Beverage Modernization and Tax Reform Act, were due to expire at the end of the year.

Sen. Ron Wyden, D-Ore., and Sen. Roy Blunt, R-Mo., on Wednesday announced they were re-introducing the Craft Beverage Modernization and Tax Reform Act to make the excise tax cuts permanent. Senate Bill 362 includes provisions to benefit more than 10,000 wineries, 7,000 breweries and 2,000 distilleries.

The passage of the excise tax cuts in 2017 resulted in a total estimated savings of $150 million for California wineries in 2018 and 2019, according to Wine Institute.

Tax reform has been the top priority of wine industry trade associations. The bill would permanently set a new system for domestic and imported wine: a $1 credit per gallon for the first 30,000 gallons; $0.90 for the next 100,000 gallons; and $0.535 for the next 620,000 gallons.

The bill would also make permanent provisions that allow wines with up to 16 percent alcohol levels—instead of 14 percent alcohol levels—to qualify for the $1.07 tax rate.

“Without a doubt, (the Craft Beverage Modernization and Tax Reform Act) is having the intended positive effect on wineries all over the country,” said Bobby Koch, president and chief executive officer of the Wine Institute. “Wineries are using the tax savings to invest in the future growth of their businesses, and in so doing so, are supporting their families, their employees, and their communities.”

WineAmerica also supports the bill. "The American wine industry generates more than $220 billion annually for the American economy through investments, jobs, tourism, and taxes," said Jim Trezise, president of WineAmerica. "The Craft Beverage Modernization and Tax Reform Act enhanced our industry's ability to contribute even more by channeling tax savings into purchases of new equipment, additional employees, increased wages, expanded distribution, and facility enlargements. The wine business is highly competitive, capital intensive, and labor intensive, so having extra funds available provides a real boost to our industry's growth. We are deeply grateful for the original legislation, and respectfully urge that it be made permanent.”

The bill makes the provisions permanent, and retroactive to Dec. 31, 2017, according to WineAmerica. The current language addresses ongoing implementation issues with bonded cellars and credits applied to bond-to-bond transfers, said Michael Kaiser, vice president at WineAmerica.

The bill’s current provisions do not cover tax credits for custom crush facilities. “We are continuing to work on that, and when we get closer to passage we will be have that language inserted into the bill,” Kaiser said.

Tom Danowski, president and chief executive officer of Oregon Winegrowers Association, also supports the legislation. “Lower taxes, reduced regulation and the flexibility to respond to each vintage’s unique conditions will enable increased investments to enhance wine quality, expand distribution and improve efficiencies allowing Oregon to compete more effectively in the intensely competitive global market for fine wines. Accelerating Oregon’s wine sector drives job creation, tourism revenue and asset appreciation in Oregon’s rural communities,” Danowski said in a statement issued by the Senate Finance Committee.

Senator Wyden said, “People around the world enjoy Oregon wine, craft beer, cider and spirits—providing not only a serious source of home state pride but also a huge boon to our state’s economy. By modernizing burdensome rules and taxes for craft beverage producers, this legislation will level the playing field and allow these innovators to further grow and thrive.”

Blunt said, “The craft beverage industry is driven by small businesses that support thousands of jobs and contribute billions in economic output.”

“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 to working with our colleagues to get it to the president’s desk,” Blunt said.

Co-sponsors include Sens. Thomas R. Carper, D-Del; Pat Roberts, R-Kan.; Debbie Stabenow, D-Mich.; Jerry Moran, R-Kan.; Michael F. Bennet, D-Color., Tammy Baldwin, D-Wis.; and Cory Gardner, R-Colo.

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