Congress Approves Extension to Excise Tax Cuts for Brewers

Brewers to enjoy lower excise taxes for at least one more year.

Brewing Industry Guide Staff Dec 21, 2019 - 4 min read

Congress Approves Extension to Excise Tax Cuts for Brewers Primary Image

It’s not the permanent extension they had been lobbying for, but good news came to brewers this week in the form of a one-year extension to the lower federal excise tax rates in effect since 2018.

Two years ago, Congress approved a package of tax cuts ostensibly aimed at smaller beverage producers, such as smaller, independent brewers. In effect it lightened the tax load for breweries of all sizes. The cuts were set to expire by the end of 2019 unless Congress acted to renew them.

“The lower FET rates have been a boon to small and independent brewers located in all 50 states and nearly every congressional district,” said Bob Pease, president and CEO of the Brewers Association, in a news release. “These savings empowered brewers to reinvest in their businesses and resulted in an annual tax savings of more than $80 million.”

According to the BA, craft brewers contributed $79.1 billion to the U.S. economy in 2018, employing about 150,000 people directly. Including indirect impact, such as hires at distributors and beer bars, they are “responsible for more than 550,000 full-time equivalent jobs.” The BA says that was an 11 percent increase over the previous year.

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In the announcement, Pease said the extension was a “stop-gap,” and that “making these recalibrated excise tax rates permanent would go a long way in providing certainty and stability in a competitive business climate.”

The lower tax rates appear to be popular in Congress, with clear majorities of bipartisan support in both chambers. An early November "day of action" organized by drinks industry groups—including the BA and Beer Institute—helped to raise the number of cosponsors to 315 in the House and 73 in the Senate.

Since the law went into effect, more than 2,000 independent brewers have opened their doors. The lower excise rate made it easier for them to exist, operate, and invest in growth.

"They have never known the $7 per-barrel federal excise tax rate that this doubling represents," BA Director Paul Gatza told the Brewing Industry Guide, a few weeks before passage of the extension. That added cost may hamper investments in people, equipment, and growth. "Additionally, all small brewers pay regular taxes that any normal business pays, but have additional excise taxes at the state and federal level, which makes it a harder sector to compete in that those that are not impacted by excise taxes."

For at least another year, the law does the following:

• For breweries that produce fewer than 2 million barrels of beer per year, it sets the federal excise tax at $3.50 per barrel on the first 60,000 barrels produced. • For all other brewers and beer importers, it sets the federal excise tax at $16 per barrel on the first 6 million barrels, and beyond that keeps the current rate of $18 per barrel. • Allows separate breweries with different owners to transfer beer to each other (for example, for collaborations or blends) without tax implications.

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