Congress Overhauls Tax Code, Gives Tax Breaks to Alcohol Producers

The U.S. Congress voted along party lines to pass the Republicans’ $1.5 trillion rewrite of the federal tax code, which includes two years of excise tax relief for alcohol producers and importers.

On Tuesday afternoon, the House of Representatives voted 227-203 to pass the Tax Cuts and Jobs Act, which includes the Craft Beverage Modernization and Tax Reform Act (CBMTRA).

The Senate followed, voting 51-48 in favor of the bill in the early hours of Wednesday morning.

Due to violations of budget rules, the House was forced to reconsider the final bill Wednesday afternoon, which it passed on a 224-201 vote.

President Trump

The bill now heads to President Donald Trump, who is expected to sign it into law before the end of the week.

In a series of tweets, Trump praised members of Congress for passing the tax code rewrite and called it “the biggest in history Tax Cut and Reform Bill.”

“We are delivering HISTORIC TAX RELIEF for the American people! #TaxCutsandJobsAct,” Trump tweeted Wednesday afternoon.

In a press statement, Beer Association president and CEO Bob Pease called the passage of the bill “a monumental day for small and independent brewers.”

Jim McGreevy

Beer Institute CEO Jim McGreevy, in a message to the organization’s members, hailed the bill as “the first substantial federal excise tax reduction for the beer industry in decades.”

However, McGreevy cautioned that Trump’s signature isn’t the final step for the bill as the Alcohol and Tobacco Tax and Trade Bureau (TTB) must put into effect regulations to implement the bill.

“We will work with the TTB to ensure implementation takes place as quickly as possible and will keep you up-to-date on all developments as they happen,” he wrote.

The bill’s acceptance comes after decades of attempts to lower the excise tax on alcoholic beverage producers, which doubled for large brewers (from $9 to $18) in 1990.

The latest version of CMBTRA, which was introduced in June 2015, was born out of competing bills: the Brewers Association’s Small Brewer Reinvestment and Expanding Workforce Act (Small BREW) and the Beer Institute’s Fair BEER Act. After years of working separately, the two trade organizations finally came together to present a unifed excise tax reform bill. However, it failed to pass in 2015 and 2016, despite garnering bipartisan support.

A number of alcoholic beverage lobbying groups united behind the inclusion of the excise tax breaks in the Tax Cuts and Jobs Act, including the BI, the BA, Distilled Spirits Council of the United States (DISCUS), American Craft Spirits Association, Wine America and the Wine Institute.

“I think the passage of this bill shows that in order to do big things in the industry, everybody has to work together,” McGreevy told Brewbound.

Bob Pease

In an email to BA members, Pease wrote that “meaningful federal excise tax relief” for small brewers has been “a primary objective” of the BA for nearly a decade.

“The BA has played a central role within the beverage alcohol coalition, advocating for this historic change in public policy,” he wrote. “The BA, as an organization advocating on behalf of small brewers, has a commitment to its members to influence change when and where it can, without taking a position on larger legislation.”

Beginning January 1 and lasting through the end of 2019, CBMTRA will reduce the federal excise tax from $7 to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually. The legislation will 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.

According to the BA, the bill represents more than $142 million in annual savings for brewers. The BA added that the legislation could lead to the creation of an additional 9,000 beer industry jobs in the first 12 to 18 months after implementation.

“Our expectation is that small brewers will use their savings related to the recalibration of the federal excise tax on beer to invest in their breweries, expand their operations, create more jobs and hire more American workers,” Pease said in a press release. “We are very appreciative that Congress has enacted these bipartisan, strongly supported measures.”

In a Beer Institute press release, Rogue Ales president Brett Joyce echoed Pease by saying the legislation would help smaller breweries, such as his own, create jobs and reinvest in the day-to-day operations.

“Competition within the beer industry is thriving with more than 5,000 permitted breweries in the U.S. and over 1,300 breweries having been added to the U.S. marketplace over the past two years alone,” he said in the release. “Federal excise tax relief on beer will help support these small businesses.”

According to the Beer Institute, excise tax relief is expected to create an additional $320 million in annual economic growth in the beer industry. McGreevy thanked the more than 300 members of the House and 55 members of the Senate for supporting CBMTRA.

U.S. senators Roy Blunt (R-Missouri), Rob Portman (R-Ohio) and Ron Wyden (D-Oregon) as well as reps. Mike Kelly (R-Pennsylvania), Peter DeFazio (D-Oregon), Erik Paulsen (R-Minnesota), Ron Kind (D-Wisconsin) are credited with championing the tax reform for brewers. Several of those lawmakers have ties to the alcohol industry.

In early December, news website The Intercept reported on those ties, including Sen. Blunt’s son Andy Blunt working as a registered lobbyist for MillerCoors and Sen. Portman’s campaign receiving contributions from Fierce Government Relations, a firm that has lobbied on behalf of MillerCoors.

Provisions of the Tax Cuts and Jobs Act go into effect January 1.

UPDATE: National Beer Wholesalers Association president and CEO Craig Purser released a statement saying reducing the tax burden on the trade group’s membership has been “an ongoing priority for many years.”

“Most independent brewers are organized as S Corporations in a similar way to independent distributors so brewers benefit as well,” he said in the statement. “Rate reductions for all owners of S Corporations, estate tax relief, increased business expensing allowances and preservation of LIFO accounting have all been central to the association’s overall advocacy efforts. NBWA has been educating members of Congress about the hidden cost of excise taxes for over 20 years. NBWA’s role in the industry effort to secure a reduction in the excise tax was critical to the successful inclusion of a two-year FET reduction. We are pleased to see progress on all of these issues as Congress finalizes passage of legislation to reform our tax laws.”