Legislative Update: Delaware Increases Alcohol Tax; North Carolina Approves ‘Brunch Bill’

Beer Excise Taxes Raised in Delaware

Delaware lawmakers earlier this week agreed to a state budget that includes an increase in the tax on alcohol, tobacco and real estate sales, which Gov. John Carney signed on July 1, according to Delaware State News.

Under the new law, breweries will now pay an excise tax of $8.15 ($0.262 per gallon) on each barrel of beer produced, up from $4.85 ($0.156 per gallon). Those costs are typically passed along to consumers, who can now expect to pay $0.06 more for every 72 oz. of beer (a traditional 6-pack).

Suppliers, wholesalers and retail store owners all opposed the increase, which lawmakers sought to shore up the state’s budget shortfall.

The alcohol tax increase, which goes into effect on September 1, is projected to generate $5.2 million in revenue, according to the Delaware News Journal.

North Carolina Craft Beverage Reform Passes Legislature

North Carolina Governor Roy Cooper has signed the state’s so-called “Brunch Bill” into law.

Senate Bill 155 allows county and city governments to adopt an ordinance allowing sales of alcoholic beverages to begin at 10 a.m. on Sundays in restaurants, retail establishments, bars and brewery taprooms. Previously, alcohol sales couldn’t begin until noon.

Morning sales have already been adopted by Raleigh and Carrboro, according to WRAL.

The National Law Review broke down other facets of the bill, many of which were included as part of a craft beverage modernization bill introduced earlier in the year. Among them:

  • Sales of 32 oz. aluminum “Crowler” cans in taprooms and bottle shops are now legal.
  • Breweries can now legally offer customers, visitors and employees samples.
  • Brewers are now allowed to drink beer for sensory analysis, quality control and educational purposes during the brewing process.
  • Homebrewers can now take their products to exhibitions, competitions and tastings for judging.
  • Farm breweries in dry counties may sell their products by obtaining a permit.

Laura Collier, a legal advisor for the North Carolina Craft Brewers Guild, has written an in-depth FAQ on the ins and outs of the legislation. Read her post here.

Earlier this year, provisions in the modernization bill that would have increased the state’s self-distribution production cap to 200,000 barrels a year as well as allowed smaller brewers to more easily terminate contracts with wholesalers were stripped out of the legislation at request of the N.C. Beer & Wine Wholesalers.

North Carolina law dictates that brewers producing more than 25,000 barrels annually are required by law to contract with a wholesaler. As Brewbound reported in May, this has led two craft brewers bumping up against the cap, Olde Mecklenburg and NoDa, to file a constitutional challenge to the law. That lawsuit is still pending with the state expected to file a motion to dismiss by August 25.

Brewers Oppose Clean Water Rule Repeal

A group of 48 craft brewers have signed a letter urging the Environmental Protection Agency and the U.S. Army Corps of Engineers to oppose the Trump administration’s proposed repeal of the Clean Water Rule.

The beer companies are all partners in the Natural Resources Defense Council’s (NRDC) Brewers for Clean Water campaign. Among the breweries signed on to the June 27 letter are Allagash, Founders, Great Lakes Brewing Company, Hopworks Urban Brewery, Lagunitas, New Belgium and Short’s Brewing Co.

In a letter to EPA attorney Donna Downing and the Corps of Engineers’ Gib Owen, the brewers stressed the need for clean water in the brewing process and opposed changes that would take away protections for water. They cited President Donald Trump’s executive order, issued on February 28, directing the EPA to rescind or revise the Clean Water Rule, guidelines that were issued in 2015 by the Obama administration in order to clarify which bodies of water fall under the Clean Water Act of 1972.

“We understand that the president directed your agencies to develop the new rule under a different legal test,” the brewers wrote. “That test has no scientific basis and would eliminate guaranteed safeguards for countless wetlands, as well as innumerable streams that don’t flow year-round. We oppose that approach because it would fail to preserve water quality and was rejected by a majority of the Supreme Court.”

The EPA is expected to make changes to the Clean Water Rule by the end of the year.

Pennsylvania Revives Malt Beverage Tax Credit

Pennsylvania’s Malt Beverage Tax Credit returned on July 1, giving brewers a tax break on the purchase of brewing equipment, machinery and cooperage, according to JD Supra.

Pennsylvania breweries can apply the tax credit — up to $200,000 per brewery in a calendar year — to offset the state’s malt beverage excise tax, JD Supra noted.

“This is important and a major win for the brewing industry in Pennsylvania because, unlike distilleries within the Commonwealth, brewers pay a special excise tax on their production at a rate of a penny per pint or $2.48 per barrel to the Department of Revenue for beer sold in the State,” the site wrote. “Essentially, now brewers can invest and upgrade their facilities, while receiving a credit against payment of the excise tax for the new dollars invested.”

The tax credit, which had expired in 2008, was revived in last year’s state budget bill.

The total number of credits in a calendar year is capped at $5 million, according to a blog post by Tim Horstmann, a finance and tax attorney with McNees Wallace & Nurick LLC. If that threshold is met, then breweries will receive a partial credit.

Read more on the tax credit here.

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