ADVERTISEMENT

Stimulus Deal to Make Excise-Tax Cuts Permanent

The major spending package includes additional relief for small businesses—including a provision that indefinitely extends excise-tax cuts for breweries.

Brewing Industry Guide Staff Dec 22, 2020 - 5 min read

Stimulus Deal to Make Excise-Tax Cuts Permanent Primary Image

Illustration: Jamie Bogner

The Brewers Association spent eight years asking lawmakers to lower excise taxes for small breweries before Congress approved the cuts in 2017. Those cuts were set to expire last year before they got a fleeting one-year extension. This week, Congress approved a large pandemic-era economic stimulus bill that would make those tax cuts permanent—among several other provisions beneficial to small businesses.

Among other provisions, the Craft Beverage Modernization and Tax Reform Act (CBMTRA) reduced the excise tax to $3.50 per barrel for the first 60,000 barrels of beer made at smaller breweries—those producing 2 million barrels or fewer per year. For larger breweries, it also reduced the rates to $16 per barrel for the first 6 million barrels produced, and to $18 per barrel beyond that. The law also included tax relief for winemakers and distillers.

The Brewers Association has been lobbying in cooperation with other beverage-industry groups to not only renew the tax cuts, but also to make them permanent. They have now succeeded, by getting the provision bundled into the $900 billion spending package, which is meant to stimulate the country’s economy while the world continues to grapple with the COVID-19 pandemic.

However, late Tuesday, President Trump threw the whole package into question when he unexpectedly threatened to veto it as lawmakers were heading home for the holidays. Although the White House had helped to negotiate the bill, Trump called for larger stimulus checks for individuals and said the legislation was full of “wasteful and unnecessary items”—citing several provisions in the funding bill to which the COVID relief package is attached.

ADVERTISEMENT

The relief package also includes a notable provision that would affect collaboration beers: It allows the transfer of beer between bonded breweries, so that they can move beer from one brewery to another without being taxed on the transfer. It can then be blended with the other brewery’s beer before maturation and packaging.

Brewers Association CEO Bob Pease credited the group’s hard work in cooperation with state brewers’ guilds and the lobbying efforts of individual breweries. “Thank you to everyone for a true community grassroots effort, and to our legislative champions in Congress,” Pease said in a news release.

What’s in the Stimulus for Small Businesses?

The overall package also includes a number of provisions aimed at helping businesses and individuals survive the pandemic financially.

According to a readout from the Brewers Association, it includes $284 billion for the Paycheck Protection Program (PPP), which provides incentives for small businesses to keep their employees on payroll. (The Small Business Administration disburses the funds as loans, which it later forgives if the business meets specific criteria.)

Specifically for hospitality businesses, the new package sets PPP loans at up to 3.5 times the monthly payroll (compared to the 2.5-times-payroll limit in the CARES Act earlier this year).

Businesses that received PPP loans earlier this year may apply again, up to a maximum draw of $2 million, if they meet certain criteria: They must have 300 or fewer employees and be able to show a drop of at least 25 percent in gross receipts in any quarter compared to 2019. (There are also criteria for businesses that did not exist in 2019.)

According to the BA, the new package simplifies the forgiveness process for those who borrow $150,000 or less. It also clarifies that businesses that receive PPP loans and use them on eligible expenses can still deduct those expenses on their federal tax returns, while broadening eligible expenses to include safety-oriented costs such as personal protective equipment and facility modifications.

The package also includes $20 billion in Economic Injury Disaster Loan (EIDL) grants for lower-income communities. The CARES Act passed earlier this year required PPP borrowers to deduct their EIDL amounts from PPP loan forgiveness; this package repeals that requirement. It also allows businesses that received less than the full $10,000 amount to reapply for the difference.

The most publicized part of the stimulus package is the coming disbursement of $600 checks for each person within a certain income threshold. For those out of work during the pandemic, the package also includes an additional $300 per week in unemployment payments through March 14.

Note: Article updated 12/23 to explain possible presidential veto.

ARTICLES FOR YOU