This post originally appeared as an op-ed on Forbes here.
Last week, Oregon Senator Ron Wyden appealed to beer and wine lovers everywhere by introducing a bill to reform the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ation and regulation of alcoholic beverages. The “Craft Beverage Modernization and Tax Reform Act of 2015” (S.1562) would reduce excise taxes on alcoholic beverages, decrease compliance burdens, and eliminate some regulations on various beverage classes including small brewers, cider makers, vintners, and distillers.
The bill is an attempt to combine many previous pieces of legislation such as the Small BREW Act, the Distillery Excise TaxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. Reform Act, the CIDER Act, the AGED Spirits Act, and the Craft Beverage Bond Simplification Act, which also attempt to reduce burdens on the alcohol industry.
Wyden’s bill provides an interesting look at just how complicated alcohol excise taxes can get and how different the provisions are for different alcohol types. A centerpiece for beer is that small brewers (those producing under 2 million barrels annually) would see excise taxes on beer reduced from $7 to $3.50 per barrel on their first 60,000 barrels. Other measures include simplification of beer formulation and label approvals, the removal of restrictions on tax-tree transfers of beer, and the repeal of some inventory regulations.
Cider producers will see a broadened definition of cider by altering carbonation requirements and increasing the allowed maximum alcohol content for being considered a “cider” for tax purposes from 7 percent to 8.5 percent.
For wine makers, the bill establishes a $1 per gallon credit on the first 30,000 gallons and $0.90 per gallon credits on the subsequent 100,000 gallons produced. The bill will also raise the bottom threshold for alcohol content for wine from 14 percent to 14.25 percent alcohol by gallon.
This threshold matters because wines under 14 percent are currently taxed at $1.57 per gallon, while wines with higher alcohol content—fortified wines, like port, Madeira, and sherry—are taxed at $1.57 per gallon when between 14 and 20 alcohol by volume and $3.15 per gallon when between 21 and 24 percent alcohol by volume.
Finally, distillers would receive tax reductions on the first 100,000 proof gallons produced by decreasing the tax from $13.50 to $2.70 per proof gallon. The bill will eliminate the prohibition of home hobby distilling, though it will still maintain some precautionary rules.
The act also creates additional reforms by reducing compliance burdens for all craft beverage manufacturers. Specifically, the bill will free nearly 90 percent of producers from bi-weekly filing requirements and exempt the producers from capitalization rules for aged products.
Though the bill is a tax reduction for many small brewers, vintners, distillers, and cider makers, there is not a lot of broad-based excise tax relief. Other bills have offered to lower overall excise tax rates as well as rates on small producers.
H.R. 2520, for example, would lower the tax on distilled spirits from $13.50 to $2.70 on the first 100,000 proof gallons, but tax all additional spirits at $9.00. S. 958 would exempt small brewers from paying any excise taxes on their first 15,000 barrels, and would tax the next 45,000 barrels at $3.50, and would tax additional barrels at $9, instead of the current $18.
We’ll have to see how this bill fares in what has become a crowded field of alcohol excise tax bills at the federal level this session. The bill has been referred to the Senate Finance Committee, where Senator Wyden serves as the ranking member.Share