Congress Overhauls Excise Taxes for Alcohol Producers

Federal Tax Alert

Firm Alert

Author(s) , , ,

Brewers, vintners and distillers across the country raised their glasses as Congress passed the Tax Cuts and Jobs Act and, with it, the Craft Beverage Modernization and Tax Reform Act of 2017. The Craft Beverage Tax Reform Act is poised to be a boon to craft brewers producing fewer than 2 million barrels annually, as it cuts the federal excise tax on those brewers’ first 60,000 barrels of beer in half, from $7 per barrel to $3.50. Larger scale breweries will also share in the benefit, as all other brewers’ and beer importers’ excise taxes will drop from $18 per barrel to $16 per barrel on the first 6 million barrels they produce. These reductions are only applicable with respect to beer removed in 2018 and 2019; however, industry groups ultimately expect these cuts to amount to more than $142 million in annual savings for brewers alone across the country. The act also eliminates tax liability associated with transferring beer between bonded breweries, thus allowing for more collaboration amongst beer makers.

Beer makers aren’t the only beneficiaries, however. Wineries will receive an expanded excise tax credit amounting to a $1 credit per gallon on their first 30,000 gallons of production, $0.90 per gallon for their next 100,000 gallons produced and $0.535 per gallon on the next 620,000 gallons of production, with sparkling wine qualifying for these tax credits for the first time. Additionally, the excise tax on distilled spirits is reduced to $2.70 per gallon on the first 100,000 gallons distilled and $13.34 on the next 22,130,000 gallons. Again, these reductions sunset after 2019.

The act was signed into law by President Trump on December 22. As the act takes effect in 2018, the Bradley Food and Beverage and Tax teams are ready and able to help you take advantage of these new rules so you can grow your business.