Bill Providing Tax Breaks to Small Breweries is Re-introduced in US Senate

In 2015, Sen. Ron Wyden, D-Ore., introduced the Craft Beverage Modernization and Tax Reform Act (“CBMTRA”) to the Senate. The bill was designed to restructure tax rates on alcohol production for beer, wine, and certain distilled spirits. The bill was gaining wide support, and was accompanied by a similar bill in the House of Representatives. However, due to the recent shakeup in Congressional seats, the re-introduced bill is now in need of new supporters from the Senate.

As many who are familiar with the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) know, the current tax structure on alcoholic beverages can be daunting. However, the recent surge in micro-breweries and small craft breweries has brought about public awareness and has spurred political action, as evidenced by the CBMTRA.

The current federal excise tax rate for beer is $18.00 per barrel. For “small producers” (i.e. breweries that produce less than 2 million barrels per year), the tax rate is $7.00 per barrel for the first 60,000 barrels, then $18.00 per barrel for each barrel after.

As can be seen throughout the country, micro-breweries and small craft breweries are continuing to gain momentum. However, despite the “small producer” credit, prohibition-era regulations and current federal excise taxes imposed by TTB can still cause a significant burden. Which is exactly why Sen. Wyden re-introduced the CBMTRA to the Senate in January 2017.

At the re-introduction, Sen. Wyden commented that “Oregon’s economy earns significant benefits from the jobs and small business growth created by our state’s world-renowned craft beer, wine and spirits producers. . . This bill would ensure these industries no longer face the unfair burdens of Prohibition-era rules and taxes.”

Based on the text of the bill, it appears the CBMTRA would accomplish that goal. The most significant change to the tax code would be the beer excise tax rate for small producers. Any domestic brewery that produces less than 2 million barrels per year would pay $3.50 per barrel on the first 60,000 barrels, then $16.00 per barrel for each barrel after. This is a significant drop from the current $7.00 tax rate for small producers. Other important changes include beer removal regulations, reporting stipulations, and ingredient definitions.

Whether the CBMTRA will continue gaining momentum this year remains to be seen. But if the bill is passed, you can expect to see a ripple effect in craft breweries across the nation, as they will likely capitalize off the new standards to reinvest in expanding brewery operations and increase their ever-growing foothold in the beer industry. As of 2016, craft beer was said to represent approximately 12% of the overall beer market share. If the CBMTRA passes, one could only expect that figure to rise.