New Law offers benefit to U.S. brewers, wine makers and distillers

Last updated on October 19th, 2020

You’ve probably heard by now that the craft beverage industry — the business of making alcoholic beverages — is booming across New York State. It seems every day or so brings news of a new brewery, winery, distillery or even hard cider maker. In 2011, there were a little more than 300 makers of wine, beer, distilled spirits and hard cider operating in New York. As of this past December there were more than 186 regional craft breweries, 3,132 micro-breweries, 1,916 brew pub, wineries top 400, even distilleries stand at over 100.

Many believe the remarkable growth is attributed to the passage of a New York Beer Production Tax Credit sponsored by Former Senator Lee Zeldin (R-C-I, Shirley).

In 2012 the New York State Senate passed legislation that provided financial incentives to establish breweries in the state, lowering fees and increasing the production cap for small breweries from 60,000 barrels to 75,000 barrels. New York also created a farm brewery license, provided an exemption from paying the annual State Liquor Authority fee, expanded tax exemptions for tastings, and launched a grant program for marketing and promotions.

The 2017 federal tax reform bill (H.R.1), signed into law on Dec. 22, 2017, included the Craft Beverage Modernization and Tax Reform Act (CBMTRA), which could provide $150 million in annual savings for brewers.

The CBMTRA is intended to update and modernize the excise tax and regulatory requirements for craft brewers, wine makers and distillers, with a goal of ensuring the continued growth of the important American craft beverage industry.

This legislation is meant to promote job creation through improved cash flows available for business reinvestment by reducing excise tax and regulatory burdens for brewers.

The CBMTRA helps all brewers by reducing excise taxes on the industry in the following manner:

  1. Domestic brewers producing fewer than 2 million barrels annually: the federal excise tax is reduced to $3.50 (down from $7.00) per barrel on the first 60,000 barrels and is reduced to $16.00 (down from $18.00) for barrels produced in excess of 60,000.
  2. For all other brewers and all beer importers: the federal excise tax is reduced to $16.00 (down from $18.00) per barrel on the first 6 million barrels and remains at $18.00 per barrel for barrels produced in excess of 6 million.

The CBMTRA further provides:

  • Language that allows for greater collaboration between unaffiliated brewers by, among other things, removing restrictions on tax-free transfers of beer
  • A more simple Alcohol and Tobacco Tax and Trade Bureau (TTB) approval process for beer formulation and label approvals
  • Improved excise tax enforcement and administration to crack down on tax evasion
  • Additional funding for TTB regulatory functions and label approvals

The CBMTRA is a welcome step for the industry. Brewers, wine makers and distillers should carefully consider the impact of the CBMTRA on their operations, cash flow and growth plans, along with other industry-specific state and local tax incentives now available.