Excise Tax Relief to Continue

Santa came a little early this year. Thanks to the hundreds and thousands of small business owners, distillers, and supporters of local distilleries heard by Congress, and to the hashtags – such as #ToastsNotTariffs and #StopCraftTaxIncreases – covering social media outlets last month, the Craft Beverage Modernization Act was prolonged into December of 2020.

Hooray for Excise Tax Relief!

The original Craft Beverage Modernization Act initially was passed as part of the Tax Cuts and Jobs Act of 2017. As stated on Congress.gov, the now-extended Craft Beverage Modernization and Tax Reform Act of 2019 aims to:

  • exclude the aging period from the production period for beer, wine, or distilled spirits for purposes of determining whether a taxpayer can expense, rather than capitalize, interest costs paid or incurred during the production period;

  • reduce excise tax rates on beer and distilled spirits;

  • permit the transfer of beer between bonded facilities without payment of tax;

  • increase the amount of the small wine producer tax credit and expand the categories of producers covered by such credit;

  • allow an adjustment to the producer credit for hard cider; and

  • modify the alcohol content limitations that apply to certain wines for tax purposes.

The prolonged act reduces the tax rate to “$2.70 per proof gallon on the first 100,000 proof gallons removed or imported, and $13.34 on the next 22.13 million proof gallons,” as per the TTB website. A proof gallon is defined by the TTB as “one liquid gallon of spirits that is 50% alcohol at 60 degrees F. Distilled spirits bottled at 80 proof would be .8 proof gallons per gallon of liquid.” Had the bill not been prolonged, distillers would have had to pay $13.50 per proof gallon, which could have quickly amounted to hundreds and thousands of dollars in taxes for craft spirits producers.

Although the major trade groups leading the extension were searching for a permanent reduction, garnering 326 cosponsors in the House and 73 in the Senate over the summer, the one-year extension offers some reprieve. However, many distillers and owners are proceeding with caution, either by cutting back production or not hiring and expanding, citing lack of confidence in 2021.

With a tumultuous election year coming up, all craft distillers and enthusiasts are urged to join a trade group or contact their Congressional representatives to make the tax permanent!

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