The monumental passing of the Craft Beverage Modernization and Tax Reform Act in 2017 marked the first time the US government reduced taxes for spirits producers of all sizes since the Civil War.
The act, which was announced as part of president Donald Trump’s US$1.4 trillion tax reform bill, equalises federal excise tax (FET) on spirits, wine and beer for the first 100,000 gallons produced annually. Under the legislation, distillers pay US$2.70 per proof gallon for the first 100,000 gallons produced in the calendar year. Previously, distilled spirits were taxed at US$13.50 per proof gallon.
Just weeks before it was due to expire at the end of 2019, the US government agreed to extend the act by another 12 months, a move welcomed by trade groups and distillers in the US. Many trade associations, including the Distilled Spirits Council of the US (Discus), have called for the act to be made permanent.
The call for the extension of the tax cut has been amplified further by the global economic devastation caused by the Covid‐19 pandemic, and many distillers are now facing the serious prospect of having to shut their doors permanently. The future of the tax credit is once again in limbo, and if it isn’t extended producers could be left facing a 400% tax hike in January.
Margie Lehrman, CEO of the American Craft Spirits Association (ACSA), says the extension of the tax cut is “imperative” for distillers, and is pushing for it to be made permanent. Lehrman says the bill has been “widely popular in both chambers of the government” but notes that if Congress does change hands, then the bill would face a setback by having to be reintroduced to new members coming in.
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