New Tax, TTB Exemptions Benefit Small Brewers

Tax & TTB Reform 970

Craft beverage producers received a boost from Congress on Friday as the body pushed through a number of minor provisions that benefit brewers and cider makers which. The new rules were rolled into the recently approved $1.1 trillion tax extender package.

As part of the bill, lawmakers passed tax reforms that will provide favorable tax relief to smaller craft breweries and expand the definition of craft cider. Separately, the Alcohol and Tobacco Tax & Trade Bureau (TTB) amended its formula rule, finally exempting several ingredients and production methods frequently used by craft beverage suppliers.

Moving forward, small beverage alcohol producers that “reasonably expect” to be liable for less than $50,000 in annual excise taxes will no longer have to pay on a bi-monthly basis. Instead, those companies will now be able to file  quarterly. Similarly, alcohol producers expecting to owe no more than $1,000 in excises taxes per year will now be permitted to make one annual payment, rather than quarterly payments.

“Passing this bill means less red tape for small businesses that are such an important economic multiplier,” Senator Ron Wyden (D-OR) told the Brewers Association. “I hope this is only the first round of common sense legislation to cut taxes and unnecessary regulations for America’s craft beverage industry.”

United States Association of Cider Makers

The tax extender package also delivered good news to United States Association of Cider Makers (USACM). Congress approved and added the USACM-endorsed CIDER Act language to the bill — amending a section of the Internal Revenue Code that previously defined “hard cider” as being made with only “apples or apple juice concentrate” and capped alcohol by volume to 7 percent.

Congress raised the ceiling on the ABV classification for cider, meaning that makers will now pay standard hard cider tax rates — 22.6 cents per-wine-barrel — for carbonated ciders  up to 8.5 percent ABV and made with pears and pear juice concentrate. Previously, ciders that checked in above 7 percent ABV were taxed at wine’s $1.07 per-wine-barrel rate.

“This legislation represents a huge step forward for cider makers throughout the nation,” Mike Beck, President of the USACM in a statement on the organization’s website. “We are excited for the positive impact it will have on the U.S. cider industry, which is growing rapidly and creating small manufacturing and agricultural jobs across the country” 

beer institute

These reforms come at a time when both the Beer Institute and the Brewers Association have lobbied members of congress to pass the proposed Craft Beverage Modernization and Tax Reform Act (CBMTRA), which seeks to enact similar reforms on a broader scale for the craft beverage industry. The act, which both organizations  hoped would pass this year, was not included in the final bipartisan tax bill.

“While it is disappointing not to achieve our goal of passage this year, we’ve made great progress getting CBMTRA introduced and advanced in the 114th Congress,” Beer Institute CEO Jim McGreevy wrote to members. “As we close out 2015, CBMTRA has 156 co-sponsors in the House and 32 in the Senate. Be assured that the Beer Institute staff will take this tremendous progress and build on it in the coming year.”

The bipartisan budget package — which comprised of $1.1 trillion in government spending and $680 billion in tax cuts — also included 2016 funding for the TTB and the National Institute on Alcohol Abuse and Alcoholism. In addition, the agreement delayed the enforcement of new menu labeling requirements until December 1, 2016.  

Ingredient Exemptions


In a separate decision, the TTB updated its list of ingredients used in the production of beer to include more than 50 ingredients and processes that are no longer subject to additional formula requirements. Citing the growing volume of submissions, the TTB chose to expand its list of exemptions to include commonly used ingredients and practices. Aging a beer in bourbon barrels, for instance, will no longer force a brewery to submit its full recipe and production process to the agency.

“This is also a key win,” said Bob Pease, CEO of the Brewers Association, “It takes a substantial burden off the brewer of having to specifically label ingredients that are already well known to the trade and consumers by their flavor designation.”

Not all ingredients and were exempted, however. The Brewers Association had requested that items like juniper branches, pluots, spruce leaves, squid ink and woodruff also make the list. In its ruling, the TTB said it could not establish that those ingredients were “traditionally used in the production” of beer. Additionally, the TTB said it has not exempted extracts, essential oils or syrups.

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