By Laura Kyler
A Bill to Reduce Craft Brew Industry Taxes Has Been Introduced In Congress
The US Craft Beverage Modernization and Tax Reform Act (S.1562), a congressional bill introduced just a few weeks ago, will cut taxes and modernize regulations for craft brewers, cider makers, vintners, and distillers.
In New Mexico, we currently have 47 breweries with about a dozen scheduled to open in the near future. NM breweries, in 2014, collectively produced a total of 65,000 barrels, and are expected to produce 80,000 in 2015 and 120,000 in 2016.
In 2014, the three NM breweries with the largest production were Santa Fe Brewing Co. at 17,500 barrels, Marble Brewing with 13,000 barrels and La Cumbre Brewing at about 7,500 barrels. If the Craft Beverage Modernization and Tax Reform Act of 2015 passes, our breweries’ excise taxes would be reduced from $7 to $3.50/barrel, which is a 50% reduction per barrel (or about $300K statewide).
The Brewers Association is opposed to the current level of excise taxes and stated, “The BA opposes excise taxes on beer as a matter of public policy. The taxes are paid by small brewers whether or not they are profitable. They are also paid by consumers regardless of income level and are historically very regressive taxes. The total amount of excise taxes paid on beer exceeds the total amount of profit in the brewing industry.”
The Beer Institute, established in 1986, is the national trade association primarily for the macro brewing industry, however they do represent both large and small brewers, as well as importers and industry suppliers. The Institute’s website states that they are committed to the development of sound public policy and to the values of civic duty and personal responsibility.
Currently the different associations are working together to grow broad bipartisan support for the bills in the House and the Senate. However, this hasn’t always been the case. The Brewers Association spent years promoting the Small BREW Act against the Macro Brew Industry’s Fair BEER Act.Previously the Brewer’s Association was against giving importers and larger brewers a tax break of any sort.
While the Macro Brew Industry, concerned that they would continue to lose market share to the craft breweries, felt any tax breaks should be as broad-based as possible. S.1562 is compromise legislation, introduced by Senator Wydon (a Democrat from Oregon), and it is supported by both the Brewers Association and the Beer Institute.
According to the Brewers Association the bill in its current form would do the following:
- Reduce the federal excise tax to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually, and reduce the amount mid sized breweries pay from 60,001 to 2 million barrels to $16 per barrel.
- Reduce the federal excise tax to $16 per barrel on the first 6 million barrels for all other brewers and all beer importers.
- Keep the excise tax at the current $18 per barrel rate for barrelage over 6 million. (Initially the macro breweries opposed an earlier version of this bill, in part because they were going to continue to be penalized, while the craft breweries were going to be allowed a lighter tax burden)
- Reduce the bonding and filing requirements for any American craft brewery that pays less than $50,000 per year in federal excise taxes.
- Allow for consolidated bookkeeping for brew pubs.
- Expand the list of ingredients that could be automatically included in a beer without approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB).
- Allowsmall, unaffiliated brewers to collaborate on new beers by giving them the flexibility to transfer beer between breweries without tax liability.
Jeff Erway, President and Master Brewer at La CumbreBrewing Co, said “the Craft Beverage Modernization and Tax Reform Act (S. 1562) represents reform that would allow small brewers to level the playing field in an increasingly competitive marketplace. Breweries around the state would save more than $300,000 in 2016 collectively. That’s money that will go to purchasing new and better equipment, larger fermenters, and hiring more skilled brewery staff, delivery drivers and sales staff. I, my co-workers, and my friends around the NM craft brewing community look forward to growing our independent breweries in a legislative environment that bolsters local,small, artisanal businesses.”
The number of breweries in the U.S. has grown steadily from 1,447 in 2005 to more than 3,400 today. And that trend isn’t any different in Albuquerque. Craft beer is now claiming an 11% share of the beer market by volume and a more than 19% share of that same market in dollars. With Marble Brewery starting a $1.5 M expansion and more than a dozen new breweries getting ready to open their doors across New Mexico.
A case has been made that craft breweries aren’t hurting for money. However, in a state with little economic growth and with Anheuser-Busch InBev buying up small breweries across the nation, many argue that NM not only would benefit from a lower tax burden for our breweries as a way to distinguish itself from our rapidly improving out of state competitors and from the injection of much needed resources into our economy.
Where do NM legislators stand?
Last Tuesday Congresswoman Lujan Grisham, Albuquerque’s Representative in the US House, hosted a fundraiser at La Cumbre Brewing Co.
Jeff Erway, in his opening remarks, mentioned his appreciation of her becoming a member of the Congressional Craft Brew Caucus and signing on as a co-sponsor or the previous version of the bill, the 2014 Small Brew Act.
When asked about the congresswoman’s support for reducing the excise tax for smallbreweries her Communications Director provided this quote, “The Congresswoman signed on [to the 2014 Small Brew Act] because small breweries have been a positive force for economic development, particularly downtown. The bill would have decreased costs for small brewers and made it easier for them to enter an industry that can have high start-up costs. It could encourage further entrepreneurship and the growth of businesses that are good community partners.” Gilbert Gallegos, Communications Director & Deputy District Director, Office of U.S. Rep. Michelle Lujan Grisham.
According to Andrew Stoddard, Deputy Chief of Staff/Communications Director for Congressman Ben Ray Lujan, “Congressman Luján had a productive meeting with a representative of New Mexico’s craft brewing industry [in early June] and is reviewing all aspects of the legislation and the impact it would have on the state. As New Mexico’s craft brewing industry continues to grow, it is playing an important role in our economy and showcases the talent and entrepreneurial spirit of our local brewers, which are being recognized not only in New Mexico, but across the region and the country for the quality of their work.”
Neither Senator Udall nor Senator Heinrich were available for comment on the new bill. Erway encourages “every beer lover in Albuquerque, and the state of NM to contact Senator Heinrich and Senator Udall and ask them to support their state’s small breweries by sponsoring The Craft Beverage Modernization and Tax Reform Act.”
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