House and Senate Members Reintroduce the Craft Beverage Modernization and Tax Reform Act

By Michael Kaiser, Vice President

1.31.2017

On Monday January 30th, leading House and Senate Members reintroduced the Craft Beverage Modernization and Tax Reform Act. This comprehensive bill would drastically reduce the federal excise tax (FET) burden on wineries, breweries and distilleries. Every congressional district in the United States includes a brewery, winery, distillery, importer or industry supplier, all of whom operate under an outdated tax structure.  A reduction in the FET will result in consumers benefiting from greater choice and allow businesses to invest in product development, improve infrastructure and stimulate employment in communities across the country. WineAmerica strongly supports the passage of the Craft Beverage Modernization and Tax Reform Act.

Senate Introduction

The Senate version of the bill (S.236) was introduced by Senator Ron Wyden (D-OR). Senator Wyden has been the main architect of this bill and originally conceived it in June 2015. He was joined by eleven of his fellow Senators on the new version of the bill. This bipartisan piece of legislation features six Democrats and six Republicans as original co-sponsors, they are:

Democrats
Tammy Baldwin- WI
Michael Bennet- CO
Thomas Carper- DE
Robert Casey- PA
Debbie Stabenow- MI
Ron Wyden- OR

Republicans
Roy Blunt- MO
Shelly Moore Capito- WV
Cory Gardner- CO
Jerry Moran- KS
Rob Portman- OH
Pat Roberts- KS

Senator Blunt of Missouri has also been tireless in his support for the bill, he is the chief sponsor on the Republican side.

House Introduction

The House version of the bill (H.R. 747) was once again co-sponsored by Reps. Erik Paulson (R-MN-3) and Ron Kind (D-WI-3). They are joined by a diverse and bipartisan group:

Democrats:
Earl Blumenauer (OR-3)
Peter DeFazio (OR-4)
Ron Kind (WI-3)
Chellie Pingree (ME-1)
Mike Thompson (CA-5)

Republicans
Mark Amodei (NV-2)
Tom Emmer (MN-6)
Mike Kelly (PA-3)
Patrick McHenry (NC-10)
Dan Newhouse (WA-4)
David Reichert (WA-8)
Patrick Tiberi (OH-12)

Major Provisions for Wine

The major tax relief provisions specific to wine are nearly identical to the previous amended version of the bill, with some minor additions:

Expand Excise Tax Credit for Wineries

Under present law, wine is subject to an excise tax of between $1.07 and $3.40 per gallon, based on alcohol content and carbonation level. Qualifying small domestic wineries producing 250,000 wine gallons or less are eligible for a tax credit generally equal to 90 cents per gallon on the first 100,000 gallons produced, with that benefit phasing out between 150,000 gallons and 250,000 gallons. Hard cider is taxed as wine, subject to lower rates and a reduced credit amount. This provision removes the phaseout and replaces the credit with a new tiered credit system for wine produced in the U.S. or imported as follows: $1.00 for the first 30,000 wine gallons, $0.90 for the next 100,000 wine gallons, and $0.535 for the next 620,000 wine gallons. In addition, this provision removes the existing prohibition against claiming the credit for naturally sparkling wines. Conforming expansions are made to the cider credit. Find an estimate of your new tax rate here

Expand Alcohol Threshold for Certain Wines

Under current law, still wine is taxed at different rates based on alcohol content. Still wine containing not more than 14 percent ABV is taxed at $1.07. Still wine above 14 percent and less than 21 percent ABV is taxed at $1.57 per gallon. For labeling purposes only, alcohol content in wine may vary from the stated amount within certain tolerances, however no such tolerances exist for tax purposes. This proposal would provide that wines up to 16 percent ABV may qualify for the $1.07 tax rate, in order to provide more certainty for wine producers.  

Increased Carbonation Tolerances for Certain Low ABV Wines

Present law provides a tolerance for still wine of 0.392 gram of carbon dioxide per hundred milliliters of wine, which is generally taxed at $1.07 per wine gallon. Wines exceeding this limitation are taxed as “sparkling wine” at either $3.30 or $3.40 per wine gallon. This provision would increase that tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine for wines produced primarily from grape or solely from honey and water, which do not contain any other fruit and contains no more than 8.5 percent ABV.

Reduce Compliance and Tax Burdens for all Producers, and Improve Excise Tax Administration

The bill exempts beverage producers from complex capitalization rules for aged products, removing the requirement that bottle aging be considered in production time.  The bill also continues TTB funding increases that were secured in for FY 2016 of $5 million for label and formula approval and $5 million for fair trade practice enforcement. The increases are to be authorized for FY 2017 and FY 2018, along with an additional $5 million for the cost of implementing the bill, including new federal permit approvals.

Next Steps for WineAmerica

With the reintroduction of the bill, WineAmerica will now begin the process of securing additional co-sponsors. At the end of the last legislative year, the bill had nearly 300 House co-sponsors and 53 Senators. Along with our alcohol industry partners, our goal will be to match or exceed the totals from 2016. Concurrently we will be meeting with the relevant House and Senate Committees as the agenda for tax reform is set. We look forward to working with our members and Congress to to ensure the FET burden on the beer, wine and spirits sector is at the forefront of the discussion.

For more information please contact Michael Kaiser, mkaiser@wineamerica.org

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WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations. As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

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TTB Issues Industry Circular On Repeal of Bond Requirements

The Alcohol and Tobacco Tax and Trade Bureau (TTB) has issued an industry circular to provide final guidance on the removal of bond requirements for certain wineries, breweries and distilleries that are liable for not more than $50,000 in federal excise taxes in a calendar year. As WineAmerica has reported over the past year, this tax filing change was authorized as  part of the Fiscal Year 2016 Omnibus Appropriations Bill that was signed into law in December 2015. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was folded into the omnibus legislation as part of a comprehensive package. WineAmerica advocated strongly for the inclusion of these new rules in the larger appropriations bill. The new rules went into effect on January 1.

The new bond exemption is for wineries that expect to have not more than $50,000 in excise taxes imposed in calendar year 2017. Additionally, to qualify for the exemption wineries must have been liable or no more than $50,000 in federal excise taxes in 2016. Because eligibility for the bond exemption depends in part on a taxpayer’s expected tax liability, taxpayers who are eligible for the bond exemption and who want to operate without a bond must notify TTB and obtain TTB approval. New applicants must notify TTB that they are eligible for the bond exemption during the initial application process. Existing taxpayers who wish to apply for the bond exemption must do so by amending their permit.

TTB amended its application forms (including the online equivalents submitted using TTB’s Permits Online system) to allow taxpayers to notify TTB that they are eligible for the bond exemption and request TTB approval to operate without a bond. For more efficient processing, TTB recommends that taxpayers who have previously applied using Permits Online, as well as all new applicants, use Permits Online to submit applications and amendments. Existing taxpayers who are not yet users of Permits Online should file this amendment by paper application. TTB cannot begin processing an existing taxpayer’s bond termination request until it receives the taxpayer’s final tax payments covering any remaining excise taxes incurred in 2016.

For more information or if you have specific questions please contact Michael Kaiser at mkaiser@wineamerica.org or 202-223-5172

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WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations. As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

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Senate Works to Lower Wine Excise Taxes (April 13 Update)

The amendment was dropped from consideration on the bill. We will be considering other legislative options with our alcohol industry coalition partners.

Craft Beverage Reform and Tax Modernization Act Introduced as Amendment to FAA Bill

by Michael Kaiser

4.7.16

Senators Ron Wyden (D-OR) and Roy Blunt (R-MO) have introduced the Craft Beverage Modernization and Tax Reform Act (CBMTRA) as an amendment to the Federal Aviation Administration (FAA) reauthorization bill. The FAA, like any independent federal agency, is required to be reauthorized every few years by Congress in order to be fully funded. Often times, other policy items (or riders) are added by amendment to an unrelated bill in order to secure passage. The FAA reauthorization is currently being debated in the Senate and could be voted on as early as next week.

As we reported last year, the CBMTRA is a comprehensive alcohol excise tax reform bill containing tax provisions for every alcohol commodity. WineAmerica was neutral on the bill as originally written (see our initial analysis here), but worked over the course of the Summer and Fall of 2015 to secure an agreement that was more beneficial to the American wine industry. The bill was close to being added to the FY 2016 Omnibus Appropriations Bill but that effort fell short at the last minute. The bill has now been revived this past week.

The specific provisions for wine are as follows:

Expands Tax Credits for All Wineries

Under present law, wine is subject to an excise tax of between $1.07 and $3.40 per gallon, based on alcohol content and carbonation level. Qualifying small domestic wineries producing 250,000 wine gallons or less are eligible for a tax credit (Small Producer Tax Credit) generally equal to 90 cents per gallon on the first 100,000 gallons produced, with that benefit phasing out between 150,000 gallons and 250,000 gallons. This provision removes the phase out and replaces the credit with a new tiered credit system for wine produced in the U.S. or imported as follows:

  • 1.00 credit for the first 30,000 wine gallons produced
  • $0.90 credit for the next 100,000 wine gallons produced (30,001 to 130,000)
  • $0.535 for the next 620,000 wine gallons produced (130,001 to 750,000)
  • All wine produced over 750,000 will be taxed at the regular rate.
  • In addition, this provision removes the existing prohibition against claiming the credit for naturally sparkling wines.

Expands the Alcohol Threshold for Table Wine

Under current law, still wine is taxed at different rates based on alcohol content. Still wine containing not more than 14% alcohol by volume is taxed at $1.07. Still wine above 14% and less than 21% alcohol by volume is taxed at $1.57 per gallon. It is important to note that for labeling purposes alcohol content in wine may vary from the stated amount within certain tolerances, however no such tolerances exist for tax purposes. The CBMTRA would provide that wines up to 16% alcohol by volume qualify for the $1.07 tax rate, raising the threshold for table wine from 14% to 16%.

Increases Carbonation Tolerance Levels for Low Alcohol Wines

Current law provides a tolerance for still wine of 0.392 gram of carbon dioxide per hundred milliliters of wine, which is generally taxed at $1.07 per wine gallon. Wines exceeding this limitation are taxed as “sparkling wine” at either $3.30 or $3.40 per wine gallon. The CBMTRA would increase that tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine for wines produced primarily from grape or solely from honey and water (mead), which do not contain any other fruit and contains no more than 8.5% alcohol by volume.

WineAmerica supports the passage of the Craft Beverage Modernization and Tax Reduction Act. This is the first time wine, beer and spirits have all been supportive of the same federal tax reform package. We commend Senators Wyden and Blunt for introducing the CBMTRA as an amendment to the FAA reauthorization bill and look forward to working with them and our industry partners to ensure passage in the Senate and then turn our focus to the House of Representatives.

 

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Questions? Contact Michael Kaiser, Director of Public Affairs, mkaiser@wineamerica.org.

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations.  As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy

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House Introduces Alcohol Excise Tax Reform Bill

June 26, 2015

Washington, D.C. – Representatives Erik Paulsen (R-MN) and Ron Kind (D-WI) have introduced H.R. 2903, the Craft Beverage Modernization and Tax Reform Act. This bill mirrors Senator Ron Wyden’s (D-OR) bill introduced in the Senate earlier this month. H.R. 2903 has been referred to the House Ways and Means Committee for consideration.

Like the Senate bill, H.R. 2903 consolidates many of the provisions of the various beer, distilled spirits and cider bills into one comprehensive proposal, and incorporates a change in tax structure for the winery small producer tax credit.

The following tax provisions are included for wine:

  • The alcohol content for table wine is changed from 7% to 14% alcohol by volume to 7% to 14.25% alcohol by volume.
  • An expansion of the Small Producers Tax Credit eligibility from 250,000 gallons produced per year to 2,000,000 gallons produced per year.
  • A credit of $1.00 per gallon on the first 30,000 gallons of still wine for all producers.
  • A $.90 per gallon on the first 100,000 gallons of still wine (beyond the initial 30,000) if total production is less than 2,000,000 gallons per year.
  • If production is between 1,000,000 and 2,000,000 gallons the credit is reduced 1% for every 10,000 gallons produced in excess of 1,000,000.
  • The current tax rates for wines remain as is, and the credit is not available for sparkling or carbonated wines.

The bill will exempt the aging period of beer, wine, and spirits from certain capitalization rules. Under current law, taxpayers may generally deduct interest expense on a loan in the year in which it is incurred, along with certain costs of goods sold. Interest expense, and other direct and indirect costs related to the production of goods for sale, generally must be capitalized over the production period and recovered when the goods are sold. The IRS has held that producers of wine must include the time that wine ages in bottles as part of the production period, which concludes when the wine vintage is officially released to the distribution chain. In addition, those same rules apply to barrel aging of beer, wine, and distilled spirits. This proposal would exclude aging periods for beer, wine, and distilled spirits from the production period for purposes of these capitalization rules.

H.R. 2903 would also allow taxpayers with alcohol beverage tax liability of $50,000 or less to file quarterly, and would remove the bonding requirement for those taxpayers. A further modification would permit annual filing for those taxpayers expecting to owe less than $1,000 in alcohol excise tax.

Questions? Contact Michael Kaiser at mkaiser@wineamerica.org.

 

New Bill Would Change the Excise Tax Structure for Wineries

June 15, 2015

Washington, D.C. – Senator Ron Wyden (D-OR) has introduced S. 1562, “The Craft Beverage Reform and Modernization Act of 2015.” This bill would amend the current federal excise tax structure for all beverage alcohol. Senator Wyden has been consulting with the various alcohol commodity groups, including WineAmerica over the last few weeks. This proposal consolidates many of the provisions of the various beer, distilled spirits and cider bills into one comprehensive proposal, and incorporates a change in tax structure for the winery small producer tax credit.

The following tax provisions are included for wine:

  • The alcohol content for table wine is changed from 7% to 14% alcohol by volume to 7% to 14.25% alcohol by volume.
  • An expansion of the Small Producers Tax Credit eligibility from 250,000 gallons produced per year to 2,000,000 gallons produced per year.
  • A credit of $1.00 per gallon on the first 30,000 gallons of still wine for all producers.
  • A $.90 per gallon on the first 100,000 gallons of still wine (beyond the initial 30,000) if total production is less than 2,000,000 gallons per year.
  • If production is between 1,000,000 and 2,000,000 gallons the credit is reduced 1% for every 10,000 gallons produced in excess of 1,000,000.
  • The current tax rates for wines remain as is, and the credit is not available for sparkling or carbonated wines.

The bill also will exempt the aging period of beer, wine, and spirits from certain capitalization rules. Under current law, taxpayers may generally deduct interest expense on a loan in the year in which it is incurred, along with certain costs of goods sold. Interest expense, and other direct and indirect costs related to the production of goods for sale, generally must be capitalized over the production period and recovered when the goods are sold. The IRS has held that producers of wine must include the time that wine ages in bottles as part of the production period, which concludes when the wine vintage is officially released to the distribution chain. In addition, those same rules apply to barrel aging of beer, wine, and distilled spirits. This proposal would exclude aging periods for beer, wine, and distilled spirits from the production period for purposes of these capitalization rules.

S. 1562 would also allow taxpayers with alcohol beverage tax liability of $50,000 or less to file quarterly, and would remove the bonding requirement for those taxpayers. A further modification would permit annual filing for those taxpayers expecting to owe less than $1,000 in alcohol excise tax.

Press Release, Wyden (D-OR): “The Craft Beverage Reform and Modernization Act of 2015” 

Questions? Contact Michael Kaiser at mkaiser@wineamerica.org