Wine Excise Tax Reduction Extension Becomes Law
December 24, 2019
Washington, D.C. – The consolidated appropriations package, which includes a one-year extension of the Craft Beverage Modernization and Tax Reform Act (S. 362/ H.R. 1175) that provides federal excise tax benefits for all wineries, was signed into law by the president late on Friday, Dec. 20.
“The Craft Beverage bill will help provide certainty for California’s 4,000 wineries to reinvest in their businesses and employees,” said Robert P. “Bobby” Koch, President and CEO of Wine Institute. “Our wineries saved nearly $150 million in taxes in 2018 and 2019, and that has helped support the nearly 800,000 jobs in the nation that their wines generate.”
Wine Institute had been working to extend the Craft Beverage legislation before it expired Dec. 31, 2019 and will continue its work in the new year to make the bill permanent. Introduced by Senators Ron Wyden (D-Ore.) and Roy Blunt (R-Mo.) and by Representatives Ron Kind (D-Wis.) and Mike Kelly (R-Pa.), the legislation extends through Dec. 2020 reforms enacted in 2017 that create a fair and equitable tax structure for wineries. The bill had 324 cosponsors in the House and 74 in the Senate.
“We are grateful for the leadership, hard work and perseverance of Senators Wyden, Blunt, Kind and Kelly for their support of wineries throughout the country,” added Koch. “I also want to thank Rep. Mike Thompson for his help with this important legislation. Rep. Thompson (D-Napa Valley), Co-Chair of the Congressional Wine Caucus, was instrumental in the Ways & Means Committee’s inclusion of the Craft Beverage bill in the end-of-the-year tax package.
The legislation will reduce excise tax payments for every winery in the country by expanding the value of the existing producer credit and doing away with the phase-out that currently prohibits many wineries from receiving any benefit. Excise tax rates for small- to medium-sized wineries will be reduced from 55% to more than 80%. The bill will also allow for the innovation of new products. The wine provisions will be continued beginning Jan. 1, 2020.
Importantly for the wine sector, the legislation also includes a much-needed change that will allow bonded wine cellars and fulfillment centers to once again claim the tax credit on behalf of wineries without being subject to additional administrative burdens. This correction will be made retroactive to Jan. 2018.
KEY PROVISIONS OF S. 362 / H.R. 1175 FOR WINE:
- Applies the excise tax credit to all wineries.
All wineries regardless of production size may continue to claim a credit of between $.535 and $1 per gallon on the first 750,000 gallons of production. The total value of the full credit is $451,700 per year, based on producing the full 750,000 gallons. Wineries will be able to claim the credit on wine that has been transferred in-bond to another bonded winery or bonded wine cellar that acts as a fulfillment center.
- Allows sparkling wine to qualify for the tax credit.
Sparkling wine will be eligible to claim the tax credits listed above.
- Taxes wine containing up to 16% ABV at $1.07 per gallon.
Wines with 14% to 16% Alcohol by Volume (ABV) were formerly taxed at $1.57 per gallon.
- Increases the carbonation threshold in low alcohol wines.
Wine with 8.5% ABV or less will be permitted an increase of .392 grams to .64 grams of carbon dioxide per hundred milliliters.
Source: bw166 LLC *Estimated annual tax savings from expanded FET credit and 14-16% ABV change based on BOE data for California wineries. Individual winery savings may vary depending on production between 14-16% ABV.