The Craft Beverage Modernization and Tax Reform Act Continues to Gain Momentum
Last fall, we reported on the Craft Beverage Modernization and Tax Reform Act (“CBMTRA”). The bill has experienced ups and downs since its inception, however it appears to be gaining overall momentum in recent months.
The bill is also receiving rare bipartisan support, as it seeks to provide tax cuts to a widely popular industry. As of August, 252 members of the U.S. House of Representatives are co-sponsoring the bill. A companion bill in the Senate has bipartisan support from 46 Senators.
Currently, the Alcohol & Tobacco Tax & Trade Bureau (“TTB”) imposes a Federal Excise Tax of $18 per barrel of beer. For “small producers” – breweries that produce less than 2 million barrels per year – the Federal Excise Tax rate is $7 per barrel for the first 60,000 barrels produced.
How would the CBMTRA change that? First, the “small producer” credit would drop from $7 per barrel to $3.50 per barrel for the first 60,000 barrels. Second, the tax on every barrel over 60,000 and up to 2 million would be $16, instead of the current default of $18. The act would also reduce the Federal Excise Tax to $16 per barrel on the first 6 million barrels for all other brewers and all beer importers. Breweries that produce over 6 million barrels per year would still pay the current $18 per barrel Federal Excise Tax.
So what kind of impact can we expect from these tax cuts? Overall, the Brewer’s Association projects that these cuts would create approximately 9,000 jobs in the 18 months that follow.
For smaller breweries, the impact should be significant, and most commonly would range from several hundred dollars per year to six figure savings, depending on production. It is also important to note that there are more breweries in the U.S. today than there have ever been in the history of the country. Likewise, competition has increased dramatically, and therefore any amount of tax relief would help substantially.