United States

Craft Beverage Modernization and Tax Reform Act

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

TAX ALERT  | 

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.

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