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Trade Groups Seeking Extension of Craft Beverage Modernization and Tax Reform Act

by Kerana Todorov
November 23, 2020

Alcohol beverage trade associations continue to seek an extension of the federal alcohol excise tax reductions that were first approved in 2017 to help the wine, beer, distilled spirits and cider industries. 

However, time is running out. The provisions included in the Craft Beverage Modernization and Tax Reform Act (CBMTRA) expire Dec. 31. 

On Dec. 1, Members of wine, beer and distilled spirits industries are slated to participate in a “Day of Action” to rally support for the Craft Beverage Modernization and Tax Reform Act. 

The coalition’s long-term goal remains to make the federal excise tax rates and other provisions included in the Craft Beverage Modernization and Tax Reform Act permanent. 

Still, there is the possibility that the provisions could expire in December. 

“As it stands now yes, wineries should prepare for the possibility of the CBMTRA expiring in December 31. Wineries will have to go back to the tax rates they paid prior to January 1, 2018,” said Michael Kaiser, vice president of Government Affairs at WineAmerica. “So it’s not 100% certain it will expire, but wineries need to prepare for the possibility.”

U.S. Congress first approved the reduced excise taxes in December 2017 as part of a sweeping tax reform package pushed by President Trump. Among other provisions, the law allowed wineries to claim $1 credit per gallon on the first 30,000 gallons; $0.90 for the next 100,000 gallons; and $0.535 for up to $750,000.

In addition, wine with up to 16 percent alcohol by volume could be taxed at $1.07 per gallon. Previously, wines with up to 14 percent alcohol by volume were taxed $1.57 per gallon.

Alcohol beverage industry trade groups have tried to make CBMTRA provisions permanent for years. 

Instead, these provisions were extended for another year in 2018. 

In the meantime, federal legislation introduced in 2019 - HR 1175/S. 362 to make the excise tax cuts permanent and the other CBMTRA provisions permanent have garnered strong bipartisan support. The legislation has 350 co-sponsors in the House and 75 in the Senate. 

Charles Jefferson, vice president of Federal Relations and International Public Policy at Wine Institute, recently said he was “cautiously optimistic.”

Kaiser, of WineAmerica, said S. 362/H.R. 1175 remain “active bills” until the end of the 116th Congress. The bills will be defunct when that congress ends Jan. 3, Kaiser and others said. 

A new bill will have to be introduced in the 117th Congress, Kaiser explained. “We have worked hard to build up the co-sponsors of the bill and will have to work on that again once the bill is re-introduced,” Kaiser said. “In a more ideal world, the bill would be passed and signed into law on its own, but that does not seem like a realistic possibility”

The ultimate goal is either a long-term extension of 8 to 10 years, or “permanence,” he said. “That has been the goal from the start.”

 “We want to get out of this cycle of having to work for an extension every one or two years,” Kaiser said. “We will accept another short-term extension in order to keep the savings, but it is not our ultimate legislative goal.”

And all in all, the future of the Craft Beverage Modernization and Tax Reform Act remains uncertain.

Andue Ott, a representative for Moss Adams LLP, said it is “prudent” for wineries “to “proceed” as if the provisions expire Dec. 31. 

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