by Michael Kaiser
Alcohol excise taxes are a hot topic on Capitol HIll of late. This week we see another bill introduced that would lower federal excise taxes for wine. A bi-partisan bill, the Wine Excise Tax Modernization Act of 2016 (H.R. 4934), has been introduced in the House of Representatives by Congressmen Mike Thompson (D-CA) and Dave Riechert (R-WA) and would specifically focus on federal wine excise taxes. The major provisions of the bill are:
Expanding Tax Credits
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.
- Would also reduce the tax rate for sparkling and carbonated wine from $3.40 and $3.30, respectively to $1.07.
Expands the Alcohol Threshold for Table Wine
Under present 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 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. This bill would increase that tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine.
Congressmen Thompson and Riechert want to see federal excise tax reform, and to that end, they have also come out in support of the Craft Beverage Modernization and Tax Reform Act (see more information here). WineAmerica believes that the best chance for federal alcohol excise tax reform is through the larger reform bill and will be working with our alcohol industry colleagues to secure passage of the larger tax package.
Questions? Contact Michael Kaiser, Director of Public Affairs, firstname.lastname@example.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