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 email@example.com.