52 Senators Co-sponsor Landmark Tax Reform Bill
by Michael Kaiser, Vice President
The Senate support for the Craft Beverage Modernization and Tax Reform Act of 2017 (S.236) has reached a majority. This week Senator James Inhofe (R-OH) and Senator Kamala Harris (D-CA) became the 51st and 52nd Senators to sign on as a co-sponsor with Senator Ron Wyden (D-OR) who introduced this bipartisan bill in January.
The Craft Beverage Modernization and Tax Reform Act was originally introduced in 2015. This bill seeks to lower the tax burden for all wineries, breweries and distilleries in the United States. It is the first bill proposed that would reform the federal excise tax system for all three major alcohol commodities and is a major part of WineAmerica’s legislative agenda. A companion bill (H.R. 747) has also been introduced by Representative Erik Paulsen (R-MN-3) and currently has 281 co-sponsors. The bill now has a clear majority of support in both the Senate and the House.
“Wine is truly an all-American beverage produced in all 50 states. There are now more than 10,000 wineries with grapes from over 670,000 acres preserving precious agricultural land, The American wine industry’s total economic impact of nearly $220 billion includes 1.7 million jobs and $75 billion in wages,” said Jim Trezise, President of WineAmerica, “We are grateful that so many Senators see wine as an economic engine as well as a delightful beverage that enhances the quality of life.”
S. 236 contains the following provisions for wine:
Expands Tax Credits for All Wineries
Under present law, wine is subject to an excise tax of between $1.07 and $3.40 per gallon, based on alcohol content and carbonation level. Qualifying small domestic wineries producing 250,000 wine gallons or less are eligible for a tax credit (Small Producer Tax Credit) generally equal to 90 cents per gallon on the first 100,000 gallons produced, with that benefit phasing out between 150,000 gallons and 250,000 gallons. S. 236 would remove the phase out and replace the credit with a new tiered credit system for wine produced in the U.S., or imported, as follows:
- 1.00 credit for the first 30,000 wine gallons produced
- $0.90 credit for the next 100,000 wine gallons produced (30,001 to 130,000)
- $0.535 for the next 620,000 wine gallons produced (130,001 to 750,000)
- All wine produced over 750,000 gallons will be taxed at the regular rate
- Removes the existing prohibition against claiming the credit for naturally sparkling wines
Expands the Alcohol Threshold for Table Wine
Under current law, still wine is taxed at different rates based on alcohol content. Still wine containing not more than 14% alcohol by volume is taxed at $1.07. Still wine above 14% and less than 21% alcohol by volume is taxed at $1.57 per gallon. It is important to note that for labeling purposes alcohol content in wine may vary from the stated amount within certain tolerances, however no such tolerances exist for tax purposes. The bill would provide that wines up to 16% alcohol by volume qualify for the $1.07 tax rate, raising the threshold for table wine from 14% to 16%.
Increases Carbonation Tolerance Levels for Low Alcohol Wines
Current law provides a tolerance for still wine of 0.392 gram of carbon dioxide per hundred milliliters of wine, which is generally taxed at $1.07 per wine gallon. Wines exceeding this limitation are taxed as “sparkling wine” at either $3.30 or $3.40 per wine gallon. The bill would increase that tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine for wines produced primarily from grape or solely from honey and water (mead), which do not contain any other fruit and contains no more than 8.5% alcohol by volume.
WineAmerica has been working diligently with our alcohol association partners, as well as other related commodities, to pass the bill. The legislation is supported by the Brewers Association, Beer Institute, WineAmerica, Wine Institute, Distilled Spirits Council of the United States, American Craft Spirits Association, American Farm Bureau, National Association of Manufacturers, Hop Growers of America, National Barley Growers Association, National Barley Improvement Committee, Winegrape Growers of America, Can Manufacturers Institute, and Glass Packaging Institute.
A complete list of sponsors for the House version of Craft Beverage Modernization and Tax Reform Act of 2017 can be found here. Details about the Senate version can be found here.
For more information about the Craft Beverage Modernization and Tax Reform Act, please contact Michael Kaiser, Vice President, email@example.com.