Craft distillers nearing OK for fed tax breaks

legislation-smallSometimes changes in governmental regulation spur expansion. The boom in craft distilling, winemaking, and brewing, fueled by removal of many old legal restrictions in New York and elsewhere, shows that. However, sometimes the expansion itself spurs more legislation.

Take the case of a current effort to persuade Congress to pass legislation modernizing a section of the federal tax codes so craft distillers would get the same tax breaks long enjoyed by craft brewers and craft winemakers. It is being spearheaded by an organization called the American Craft Spirits Association (ACSA), the non-profit trade association that is increasingly influential despite being only several years old.

A report from the ACSA released Monday says,"With the addition of U.S. senators Barbara Boxer (D-CA), Heidi Heitkamp (D-ND) and Joni Ernst (R-IA), the Craft Beverage Modernization and Tax Reform Act, S. 1562, now has a clear majority of senators in support of the legislation with 51 co-sponsors [which is a majority of the Senate]. The groundswell of support in the Senate is echoed by growing support in the House of Representatives, where the number of supporters behind H.R. 2903, the companion to the Senate bill, has now reached 284 co-sponsors [also a majority]."

When the legislation is passed, which appears inevitable, it will go to the White House for the president's signature. If it clears that hurdle, craft spirit distillers will be provided parity by paying a reduced Federal Excise Tax such as craft brewers and craft vintners have long had.

What a change will mean for consumers, however, will depend on the individual distilleries. While some may freeze or reduce prizes on some products as a result of having to pay less tax, others will invest in their facilities or simply pocket the difference.

Says the ACSA, "Taxes on distilled spirits are among the nation’s highest, comprising 54% of the typical spirits product’s purchase price. Craft spirits producers remain disadvantaged compared to our nation’s craft brewers and small wineries who receive a significant reduction in their FET rate. In fact, a craft spirits producer pays 5.4 times more FET than a craft brewer, and 16.4 times more FET than a small winery, for equal quantities of beverage alcohol."

Membership in ACSA is open to anyone, although voting members must be independent licensed distillers who meet several criteria, including having more than a 75% equity stake and/or operational control of a distillery producing fewer than 750,000 proof gallons annually.

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