“Unprecedented” Alcohol Coalition Pushing Craft Beverage Tax Reform on Capitol Hill

President Trump and the Republican Congress have promised tax reform at the same time a beverage industry tax reform is gathering steam on its own. The industry is keeping an eye on the big picture, even as the Craft Beverage Modernization and Tax Reform Act has been introduced in both houses.

“What we think is going to happen is, there will be some very large proposal that would encompass everything,” said Michael Kaiser of WineAmerica, speculating that the alcoholic beverage provisions could be absorbed into the larger effort. “We don’t want to have to swallow some pill that we’re not really in favor of in order to get these other reforms through.”

The industry-specific bills are S.236 and H.R. 747. They expand tax credits for all producers of alcohol. For wine producers, they would alter the current federal excise tax scheme that’s based on wine gallon production. The bills would also push up the alcohol threshold for table wines, extending lower tax rate for the category to products with up to 16 percent ABV, from the current 14 percent. They also provide more flexibility for deducting interest expenses.

The industry coalition includes wine producers, distillers, and associations representing both large and small brewers. Kaiser credits Senator Ron Wyden (D-OR), who saw the two brewing factions submitting separate tax proposals, and tidied up the effort with a single bill.

“Not only did he do that, he added in benefits for the spirits industry as well as the wine industry rather than do this piecemeal, let’s have it all in one bill and get it done all together,” Kaiser told Grape Basin News in phone interview. “This is unprecedented that all the beverage industry lobbies are working together.”

There is bipartisan support in both houses, but no Nevada legislators have signed on.

Washington’s new direction is churning up other concerns. One of them is agricultural labor. Kaiser says WineAmerica supports comprehensive immigration reform, which doesn’t appear to be on the immediate horizon.

Trade issues are another.

“The largest single market for American wine outside the U.S. is Canada. We want to make sure there are no trade barriers,” Kaiser said. In addition, he says, there’s the possibility of a domestic glut.

“If you’re a small winery that doesn’t have any interest in getting your product out of the country you are competing for shelf space with larger producers who might export,” he said. “If they can’t export, those products are going to go on the shelf here, which could squeeze out some of the smaller producers here.”

In the face of a federal hiring freeze, WineAmerica is also pushing for continued funding of federal programs and agencies. The Department of Treasury oversees the Alcohol and Tobacco Tax Trade Bureau, for instance, where a slowdown could stall winery growth.

“They do everything from approve alcohol beverage labels, to collect taxes, to approve new permits for new producers,” he said.

Growers are also dependent on the U.S. Department of Agriculture’s Market Access program, and marketing and specialty crop grants. Kaiser says it’s critical to keep those programs in place.