Each weekend, we take a look at the past weeks top headlines for craft beer news in industry growth and legislation. The top pics are then shared each Saturday morning in Craft Beer News: A Week In Review.
This weeks Craft Beer News is dedicated to new legislation that can affect craft brewers nationwide, both large and small. The subject of the legislation is the taxation of breweries and how the rate of taxation is determined.
Craft Beer Legislation: Modernization & Tax Reform Act (S.1562)
The Craft Beverage Modernization and Tax Reform Act (S.1562) was proposed this month by Senator Ron Wyden of Oregon. If you haven’t heard of S. 1562, it is a bill to amend the Internal Revenue Code of 1986 and reform the taxation of alcoholic beverages. As of June 26th, the bill has been read twice and referred to the Committee on Finance.
The bill introduces an adjustment to the tax structure for brewers. The tax structure would be based on the size of the brewery, which is determined by the number of barrels it produces each year. Smaller to mid-size craft breweries would benefit with the deepest tax cuts, while larger breweries would not.
- Small Breweries Producing Under 2 Million Barrels Annually – Largest Tax Cut
- Mid-Size Breweries Producing 2 – 6 Million Barrels Annually – Minor Tax Cut
- Macro Breweries – NO Tax Break Past The First 6 Million Barrels Produced
Senator Ron Wyden’s proposed legislation is not the only reform that has been introduced with regard to craft beer and tax. In a recent press release, the Brewers Association and the Beer Institute gave their approval of H.R. 2903, Craft Beverage Modernization and Tax Reform Act.
Craft Beverage Modernization and Tax Reform Act (H.R. 2903)
This legislation is a big win for the brewing industry, bringing us together over the common goal of recalibrating federal excise tax. The Craft Beverage Modernization and Tax Reform Act will greatly benefit America’s small brewers and allow them to achieve their job creation and brewing capacity reinvestment objectives. – Bob Pease, CEO of the Brewers Association
H.R. 2903 reflects the same provisions found in S. 1562 with a few distinctions. According to the Brewers Association, H.R. 2903 will do three things:
- For Small Breweries producing less than 2 million barrels per , the federal excise tax will be cut to $3.50 per barrel.
- For all other Brewers, the federal excise tax is cut to $16 per barrel on the first 6 million barrels.
- All barrels produced over the 6 million mark will maintain the current excise tax of $18 per barrel.
The Brewers Association is supporting the reform, believing it will provide a fair taxation for craft beer across the board, and give tax relief for brewers and importers. This tax relief will allow brewers to invest those funds back into their breweries and thus continue to grow the industry for the United States.
What Happens To BIG Craft Beer?
In a recent article from Market Watch, Sam Adams is about to be kicked out of the ‘craft beer’ category, the new legislation was criticized as an overstep by Congress. The criticism focuses on the alienation of larger breweries from tax cuts and the redefining of what is a craft brewery and what is not. Larger brewers, such as Samuel Adams will be in danger of crossing the 6 million barrel mark if they continue their current pace of growth.
The article goes on to argue that craft beer doesn’t need a tax break. With its rapid growth, the craft beer industry is closing in on $20 billion and recently claimed 11% market share. However what craft beer does need is “a little help differentiating itself from is rapidly improving competitors.” By competitors, the article references Big beer, Anheuser-Bush InBev and MillerCoors, buying their way into craft beer.
The craft beer industry in the United States is experiencing change. The growing pains of coming to maturity in the beer industry can be a headache but hopefully the results will be long lasting success.
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