Washington D.C. – December 26, 2017
The Tax Cut Bill included an amendment that would give tax credits to wineries. The Craft Beverage Modernization Act, which was a stand-alone Bill that had support Congressional Support over the years and always failed to pass. Offered as an Amendment to the comprehensive Tax Cut and Jobs Act of 2017, it has now passed. This Amendment, long supported by the Brewers, Wineries and Distilleries, offers alcohol excise tax cuts to all three, however in different proportions.
The Alcohol Excise Tax Credits is now expanded to go beyond small wineries, even including imports with the passage of the new Tax Cuts. As of January 1, 2018, wineries would receive a $1 per gallon tax credit for the first 30,000 gallons of wine produced, going down to .90 cents on the next 100,000 gallons and 53.5 cents per gallon for the next 620,000 gallons. In the past wineries that produced more than 150,000 gallons and importers were not eligible for alcohol excise tax credits.
The Amendment also calls for a change in the tax class of wines that contain more alcohol. Previously higher proof wines were taxed at a higher rate, now wines containing up to 16% alcohol will all be taxed at the same rate. Sparkling Wine will also be eligible for the excise tax relief.
Lobbying will begin in earnest to keep the alcohol excise tax cuts in place. The Bill that passed, only allows for a two-year alcohol excise tax cut. The industry has been lobbying for over a decade to get the tax cut, now that it is in place, they will be pushing for an extension beyond the two years.
Although small wineries will benefit, the largest benefits may be seen by larger producers, not by percentage by actual dollars. It is only the very large producers who can receive the maximum credit of $451,700 annually based on production numbers. As small producers benefit from the tax cut, there will be an unintended benefit to overseas competitors.
Imported wines are included in the tax credits, which will allow wine importers to maximize the credit by importing the maximum number of gallons under a variety of brand names. The Anti-drinking lobby is not happy with the Tax Cut, and especially the provision that raises the proof of table wine from 14% to 16%. They see as encouraging drinking at a time when alcohol consumption is rising.
The Family Winery will benefit from the new Tax Cut, both in terms of their alcohol excise tax credits and in terms of the lower corporate rate that is a cornerstone of the Tax Cut and Jobs Act of 2017. Even if the lower taxes are passed on to the consumer, it will amount to pennies per glass. In terms of real dollars, the biggest beneficiaries are the largest producers, and the wine importers who will take advantage of branding to stay within the limits that will bring them the most relief.
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