The issues that face the American winery.
At any moment there are dozens of bills in state and federal legislators that would affect your winery. While they vary in region and in scope, many fall under specific policy categories.
Read our policy positions and learn more about the major issues facing the American wine industry. These positions outline the history behind the issues, the significance of the possible changes and the stance WineAmerica has taken on the subject.
Sustainability & Social Responsibility
American wineries have long been at the forefront of environmental stewardship and sustainable farming practices. Whether through green building or minimally interventionist vineyard practices, American wineries are serious about farming for the future. WineAmerica supports these efforts and encourages its members to adopt best practices.
Recognizing that wine is socially sensitive product, WineAmerica has long adopted the Wine Institute Code of Advertising Standards. Self-regulation has long been at the core of our industry’s commercial free speech, and we believe it should remain so. It is up to wineries to ensure that wines are not marketed to minors.
As technology transforms how wines get promoted and sold, American wineries must adapt their conception of “advertising.” Likewise, employee server training programs are key to advancing responsible consumption. WineAmerica remains dedicated to promoting social responsibility among our members and will continue to strive to provide them the tools to make good marketing decisions.
Stewardship and minimal intervention are central to conception of what it is to be a winery. Wineries preserve open land, make it productive and profitable, and hope to keep it that way.
In 2005, WineAmerica first adopted the Wine Institute Code of Advertising Standards. We continue to believe the Code is the gold standard for the industry. In the past year, we’ve provided reminders to our members about the use of appropriate age-gating tools on winery websites and posting on social media.
Responsible business practices are core to the wine industry’s ethic. We need to be serious about the future of farming and the evolving social context of wine.
Federal Label Approval
WineAmerica has long supported an effective, transparent federal label approval system that provides a defined path to federal regulatory compliance. We believe in policies that promote label clarity, allow the disclosure of truthful information, and reduce the regulatory burdens associated with label approvals. Delays in label approvals can drastically affect a winery’s business planning and budget. Without a time efficient and effective label approval system, American wineries risk the loss of profit and market opportunity.
WineAmerica’s label assistance program is one of our longest standing member benefits. We have deep experience in providing technical advice and securing Alcohol & Tobacco Tax & Trade Bureau (TTB) approvals for our winery members. As our members have transitioned to electronic label submissions, WineAmerica’s role has evolved. Our technical expertise and strong TTB relationships make us an effective advocate on complex label approval questions.
In the past year, we have voiced support for a variety of technical changes in federal regulation that would promote disclosure of truthful information consumers find helpful. These changes include giving wineries the ability to use vintage dates on American appellation wines and to use the term “fortified” on fortified wines, including Port-style and Sherry-style wines.
Label approvals are mandated by federal law and ensure that consumers are not misled about the wines they buy. We believe rules governing label approvals should be clear and should protect the free speech rights of our members.
Wineries and vineyards are long term commitments that depend on sustained investment across generations for their success. Recovering investments in land, vineyards, and equipment takes years. Bearing the risk of varying vintages takes commitment. Managing inventories in light of annual harvests takes steely calculation.
Nearly every new vineyard and winery developed in the past three decades has been a mom and pop start-up. Many have grown into substantial family businesses that enrich the fabric of their local communities. Many are beginning to be transferred to children and grandchildren.
WineAmerica has long opposed the estate tax. Requiring large cash payments to pass a winery on to the next generation discourages taking the long view. We believe that federal estate tax law should be modified to ensure these wineries are cross-generational successes.
Disproportionate taxes can lead to serious liquidity problems when a winery is passed to the next generation. Banks are typically reluctant to make loans secured by winery inventory or vineyard development, and winery operating costs typically don’t leave these largely fixed asset businesses cash heavy.
In 2001, and again in 2010, federal estate taxes were modified to make the burden more manageable, but with expiration dates built into both laws, reasonable accommodation threatens to become a substantial tax hike when prior rates kick in at the end of the 2012.
As part of the Family Business Estate Tax Coalition, WineAmerica believes that Congress should remove the succession burden from family farms and businesses, and pass estate tax reform that encourages cross- generational investment.
Beginning in 2013, without an extension of current law, family wineries passing to the next generation may be forced to sell off parts of their business to meet unreasonable estate tax requirements.
WineAmerica is a strong supporter of federal programs that fund viticultural research, as well as the development of marketing, strategic planning and export opportunities. We believe that funding in these areas is critical to improving the quality and competitiveness of American wineries and contributes to the continued growth and success of rural economies across the country.
Until 2008, wine grapes and other specialty crops, were not a part of the Farm Bill debate. The Farm Bill has determined domestic agricultural policy at five year intervals for more than 60 years. With specialty crops now accounting for 50% of domestic farm gate value, the silence was notable. Beginning in 2008, WineAmerica succeeded in ensuring that core investments encouraging the continued dynamic growth of American wineries were Farm Bill funded.
As part of the Specialty Crop Farm Bill Alliance, WineAmerica continues to defend these hard won programs and remains instrumental in demonstrating the benefits of specialty crop support for research, marketing, and pest and disease control.
Use by American wineries of Specialty Crop Block Grants, the Specialty Crop Research Initiative, the National Clean Plant Network, Value-Added Producer Grants and the Market Access Program continue to provide a substantial return on investment to rural America in the form of profitable farms, good jobs, and growing businesses across the U.S.
WineAmerica recognizes that America’s wineries and grape growers struggle to find affordable and reliable agricultural labor in a marketplace that is filled with uncertainty and potential legal hazards. Wineries and vineyards are long term commitments that depend on sustained investment. They require an extraordinary amount of hand labor to achieve the quality expectations of winemakers and consumers. A reliable, affordable, and well-trained agricultural workforce is a significant key to success.
Under the existing federal permitting process, American grape growers do not have the stable workforce needed for long-term success. For many years, WineAmerica has advocated for comprehensive immigration reform containing AgJobs, a bipartisan proposal that addresses the legal, ethical and business concerns of farmer and worker groups, and that greatly enhances the competitiveness of America’s wineries and grape growers.
AgJobs is common-sense reform that will bring stability to the nation’s seasonal agricultural work force. Its provisions regularize the permit process and allow workers, who abide by the law, to gain credits towards attaining permanent residency while promoting U.S. border and food security.
Given the political climate change in Washington, Congress now is focused more on enforcement than comprehensive reform. The new majority in the House is pressing for passage of the mandatory use of the flawed worker verification system. Additionally, new regulations that have made the existing permitting program even more unworkable. Currently, only 2% of winegrape growers and winery operators are able to use the existing permitting framework.
Without a stable agricultural workforce, wineries and grape growers cannot operate their businesses. As part of the Agriculture Coalition of Immigration Reform (ACIR), WineAmerica continues to work in a bipartisan way with like-minded members of Congress. The existing federal permitting process needs reform. WineAmerica will continue to pursue the passage of AgJobs or similar proposed legislation.
Small Producers Tax Credit
Federal law should be updated to ensure that all small producers, even those producing more than the current limit of 250,000 gallons, qualify for the small producer tax rate. While the current law has been incredibly beneficial to the expansion of the wine industry over the past two decades, it is no longer reflective of the wine marketplace.
WineAmerica supports adjusting the small producer tax credit to encourage wineries approaching the current production cap to continue making investments and growing their businesses. Successful mom and pop companies should have the tools to plant new vineyards, expand production, and hire new workers without an immediate tax hike looming at easily achieved production levels.
The winery small producer tax credit became law in 1991 when the total number of American wineries was one- fourth the current 8,000 plus winery basic permittees. As domestic wineries and wine markets have evolved, the 250,000 gallon cap—the limit at which the small producer tax credit is lost—has become an anachronism. By any measure, many wineries producing more than 250,000 gallons are small producers, and federal law should be amended to reflect these market changes.
The 250,000 gallon cap distorts ordinary investment behavior by penalizing successful businesses as they try to grow their businesses. While the small producer tax credit need not be unlimited, it must be more reflective of the existing wine market.
Wine excise tax increases can undermine winery profitability, distort consumer prices and deter industry investment. They also are not good policy.
- They don’t generate revenue – Following the most recent federal wine excise tax increase, the government mainly lost revenue for five years. Hundreds of businesses saw sales reduced, and bottom lines shrank.
- They don’t target problem drinking – 95% of Americans who drink wine consume light-to-moderate amounts—consumption often associated with reduced healthcare costs. Heavier drinkers, meanwhile, are least responsive to tax changes. Wine excise tax increases, therefore, reduce healthful wine consumption without reducing problematic drinking.
WineAmerica supports the continued dynamic growth of American wineries and the capital intensive family farming at the industry’s heart. Wine excise tax increases undermine productive and sustainable rural development.
WineAmerica keeps a careful eye on federal budgets and agency reports for mentions of possible federal excise tax increases. We are vocal in our opposition and careful to explain our reasoning. We also provide resources to our State Associations when the issue of excise taxes emerges at the state and local level. In the past few years, we’ve beat back proposals that could have tripled federal excise taxes.
The long-term investment required for productive winery development, and the challenges of meeting consumer expectations on wine pricing, combine to make wine excise tax stability critical for the health of American wineries.
In far too many states, the wine distribution system imposes a series of anticompetitive barriers that artificially pick economic winners, and short-circuit the free market system. WineAmerica believes these barriers must come down for the long-term health of the thriving American wine industry.
Anticompetitive barriers come in a variety of forms, including:
- Franchise protections –state laws that prevent wineries from terminating their distributors without expensive litigation, even when they underperform.
- Exclusive territories – state laws that prevent wineries from using more than one distributor in a given territory. If the distributor chooses not to carry one of the products a winery it distributes produces, tough, it isn’t going to be sold in the territory.
- At-rest restrictions – state laws that require wineries to “touch the dock” or be stored in a distributors warehouse for a given amount of time.
These laws serve no functional policy purpose other than to put a thumb on the scale against small wineries.
WineAmerica has long opposed anticompetitive barriers at the state level and continues to fight them throughout the country. In the past few years, we’ve defeated efforts to introduce franchise protections in Indiana, and at-rest restrictions in New York. Most recently, we successfully beat back an effort—the so-called CARE bill—to codify these anticompetitive barriers in federal law.
Wineries should succeed or fail on their merits, not based on a system that’s rigged against them.
Wineries should be able to sell their products to customers that want to buy them. Yet the gulf between the needs of today’s market, with nearly 8,000 wineries and a few hundred distributors, and the legal distribution system created in the wake of Prohibition, designed for a few hundred wineries and several thousand distributors, is wide and widely acknowledged. Certainly, states should be able to hold businesses who sell wine accountable— whether to prevent drunk driving, enforcing laws against sales to minors, or ensuring proper payment of taxes.
But the evidence does not support the restrictiveness of the distribution system that exists today.
WineAmerica supports state policies that encourage responsible, free market changes to this overly complex system.
WineAmerica champions a wide range of efforts to promote simplification of the distribution system, including laws that allow wineries to sell directly to wine shops and restaurants, and laws that allow sale directly from tasting rooms and at special events. Most recently, we supported a successful effort in New Jersey to expand self-distribution and tasting room privileges.
At its most fundamental, the free market system allows businesses to sell their goods to customers that want to buy them. Too often, when it comes to the sale of wine, the free market system does not exist.
WineAmerica has been a longtime advocate for winery direct-to-consumer shipping and a significant contributor to its legalization in the nearly 40 states where shipping is allowed. Winery shipping laws should provide producers of small brands an avenue to deliver their wines directly to consumers at minimal cost. The ideal law is simple, transparent and inexpensive to use, and allows thoughtful regulation, with as much uniformity between states as possible. With unnecessary legal impediments still a factor, WineAmerica continues its effort to make nationwide shipping an easy option for all of America’s wineries.
In 2005, WineAmerica submitted a friend of the Court brief in the Supreme Court case Granholm v. Heald. WineAmerica argued that the Constitution does not permit states to allow in-state wineries to ship their wines while denying the same privilege to out-of-state wines. The Supreme Court ultimately agreed. In subsequent years, we’ve testified in favor of numerous state laws, including, most recently, in Maryland and New Jersey. Both states now allow wineries to ship to consumers.
Shipping laws allow producers of small brands to capture a larger share of the final consumer price of their wines.
It also allows products that otherwise wouldn’t make it into the distribution system to reach customers that are interested in buying them.
What Differentiates Wine
At its core, winemaking is farming. Across America, wineries are at the heart of local agricultural and its future.
The role American winegrape growers and winemakers play in preserving family farms and rural landscapes is significant and growing. New centers of grape growing have flourished over the past three decades, and more than 30 states now have at least 25 wineries. Since 2003, there have been wineries in all 50 states.
Wineries keep our countryside beautiful. We are a model for high-yield, low-impact agriculture. Land that might otherwise have been turned over to developers is being farmed productively and profitably because of America’s wineries. Even small parcels in the suburbs are being made into profitable vineyards and wineries.
Our heritage is widely-known. Consumers expect an authenticity from their wines that they do not expect from
most other goods. They want to see where their wine was grown. It’s what makes wine country visits popular.
Our business is about connecting winegrowers and wine buyers. Whether it’s at the winery, in a restaurant, or at a fine retailer, wine is a conversation between producer and consumer.