For the fourth time, members of Congress have filed a bipartisan bill that, if enacted, would dramatically cut the federal beer excise tax that the nation’s small brewers pay on every barrel of beer they produce.
The Small Brewer Reinvestment and Expanding Workforce Act – Small BREW Act for short – seeks to implement a new tax structure to better reflect the evolving nature of the country’s booming craft beer industry, according to a statement from the Brewers Association.
As introduced by Representatives Erik Paulsen (R-MN) and Richard E, Neal (D-MA), the Small BREW Act seeks to cut the tax rate on a brewery’s first 60,000 barrels in half, from $7 to $3.50. If passed, the bill would also cut the excise tax rate from $18 per barrel to $16 for production between 60,001 and 2 million barrels. Once a brewery surpasses that 2 million barrel threshold, however, the federal excise tax would not change from the current $18 per barrel rate. The new rates, if signed into law, would be applicable to brewers with annual production of 6 million barrels or less, which is also the production cap in the BA’s current definition of a craft brewer.
In a press statement, Bob Pease, CEO of the BA, commended the effort to advance the needs of small brewers at the federal level.
“While small brewers pay the same business and employment taxes as other business categories, they are also burdened with an industry-wide federal and state excise tax which impede their growth,” he said. “Now is the time to recalibrate the excise tax to foster growth and employment where it is primed to happen—among our country’s small and independent brewers. We look forward to working with Congress to ensure the passage of this fair and meaningful bipartisan legislation.”
An earlier version of the same bill was introduced in 2013 and picked up more than 182 supporters in both major parties, but died after being referred to the House Committee on Ways and Means. In fact, that was the third time the Small BREW Act had been introduced to no avail.
In an interview with Brewbound in early 2014, Rep. Peter DeFazio (D-OR), who co-chairs the House Small Brewers Caucus, said policymakers have a hard time seeing the big picture when it comes to a graduated barrel tax rate.
“The problem around here is we don’t look at things on a holistic basis,” he said at the time. “It’s just, ‘does it cost the Treasury money?’ Some. They say, ‘Well, that’s a net loser.’”
Historically, the Small BREW Act hasn’t been alone on Capitol Hill as a bill with the aim of alleviating brewers of what many have decried as overly burdensome taxation. The Beer Institute has in the past backed a competing bill known as the BEER Act, which called for even deeper tax breaks and for them to be applied to all brewers regardless of size. A request for comment on whether the BI would again try to get its act passed in 2015 has yet to be returned.
But with the 114th Congress underway, lawmakers are nonetheless taking another shot with the BA-backed bill.
In the news release, Congressman Paulsen called the growing popularity of craft brewing “the quintessential American success story.”
“Many of these brewers start out enjoying a hobby, but end up growing businesses that create jobs and provide a product that people enjoy,” he said. “The tax code needs to catch up to the nature of the brewing industry and not penalize the nation’s small brewers.”
Neal, adding that he’s been a “vigorous supporter” of the craft beer industry, said that he looks forward to pushing the bipartisan effort forward.
“As someone who represents many small brewers in Massachusetts, I can attest that craft breweries are locally owned, generate economic development and create good jobs,” he said. “Our bill rightfully recalibrates the beer excise tax for America’s craft brewers, allowing them to grow and reinvest in their businesses.”
Alongside Paulsen and Neal, Representatives DeFazio, Earl Blumenauer (D-OR), Patrick McHenry (R-NC), and Patrick Meehan (R-PA) are joining in the reintroduction of the bill. All but Meehan are listed as members of the House Small Brewers Caucus on the organization’s website.
The Senate is expected to introduce a companion bill in the near future, according to the BA’s statement.