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After a two year run, senators and the craft beverage industry are hoping to make the Craft Beverage Modernization and Tax Reform Act permanent.

Mike Pomranz
Updated February 07, 2019

The current drinking scene in the United States is unlike anything the country has seen before. Though the amount of alcohol Americans consume has remained relatively steady, the number of choices is unprecedented. Craft breweries passed the 7,000 mark last year — an all-time record. Craft distilleries now total over 1,500. Traditional cidermaking has reemerged in recent years. And of course, winemaking hasn’t just grown; it’s spread across the entire country to regions where wine grape growing didn’t even seem sensible in the past.

Shifting consumer tastes and interests have had a lot to do with this proliferation, but though most people don’t particularly enjoy talking about government regulations, changes in legislation have also played a huge role in making it easier for independent players to get into the alcohol game.

One of those pieces of legislation is The Craft Beverage Modernization and Tax Reform Act (CBMTRA). Though the bill includes a number of provisions, the most notable effect has been to lower the federal excise tax on alcoholic beverages — which are taxed by volume — especially those of the smallest producers. The idea is that lower taxes will increase profits, making it easier for upstarts to stay in business and easier for more established small producers to reinvest in their businesses, including by hiring more staff.

As evidence that these regulation changes work, the industry points to December 2017 when a two-year provision of the CBMTRA was passed as part of the tax bill. “Federal excise tax reform has dramatically helped to stimulate craft spirits growth,” Margie A.S. Lehrman, CEO of the American Craft Spirits Association, said in a statement. “As of August 2018, the number of active craft distillers in the U.S. had grown by 15.5% over the last year to nearly 2,000, yet without permanent and immediate reform, the stability of this vibrant industry is bound to be paralyzed. Without the certainty of a long-term reduction, it is impossible for any new or existing distillery to implement a business plan when the wide tax variable threatens the ability to hire new employees, purchase equipment, provide staff benefits, and continue to grow.”

Lehrman’s latter point is exactly why, now, the CBMTRA is being discussed again. The version passed in 2017 is set to expire at the end of this year, and, needless to say, alcoholic beverage producers would love to keep their current tax breaks. To that end, this week, it was announced that Senators Ron Wyden (D-Oregon) and Roy Blunt (R-Missouri) have reintroduced the CBMTRA, this time in an effort to make the current reduced tax rates permanent.

“The craft beverage industry is driven by small businesses that support thousands of jobs and contribute billions in economic output,” Blunt said in a statement. “This bill will remove tax and regulatory barriers that are making it harder for Missouri’s [and every other states’] brewers, distillers, and winemakers to grow and compete. I’m encouraged by the strong, bipartisan support this measure had in the previous Congress and look forward to working with our colleagues to get it to the president’s desk.”

Since the temporary version of the bill passed in 2017 with mostly bipartisan support, it would seem likely that this more permanent version would pass again — and potentially keep the craft beverage boom going. Not that we necessarily need something like 14,000 breweries and 4,000 distilleries, but it has been nice being spoiled for choice.

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