While the Brewers Association shared its view on the recently introduced BEER Act, the Beer Institute, the national trade association for the American brewing industry, representing both large and small brewers, as well as importers and industry suppliers, took to the newswire to present its own take on the legislation. But first, a quick breakdown of the proposal:
Introduced by Reps. Steve Womack, R-Ark., and Ron Kind, D-Wis., the Fair Brewers Excise and Economic Relief Act of 2015 (Fair BEER Act) creates a graduated federal excise tax structure while trying to maintain a “level playing field.”
Under the Fair BEER Act, all brewers and beer importers would pay a rising scale of federal excise tax:
- No excise tax on the first 7,143 barrels;
- $3.50/barrel on barrels 7,144-60,000;
- $16/barrel on barrels 60,001-2 million; and
- $18/barrel on every barrel above 2 million.
According to the institute, by imposing this “laddered” approach to all brewers and beer importers, the legislation reforms the overall tax structure to provide the greatest relief to the very smallest brewers. More than 90 percent of permitted brewers produce 7,143 barrels or less and would see their excise tax rates reduced from $7/barrel to zero. The 7,143 barrel threshold was designed to meet the definition of a “small brewer” set forth by the U.S. Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB), the agency which regulates the alcohol industry.
By applying comprehensive reform across brewers, the legislation removes barriers to growth, the Beer Institute explained in a press release. Under current law, small brewers are defined as those which produce up to 2 million barrels, and are taxed at $7/barrel on the first 60,000 barrels and $18 on every barrel thereafter. Current law imposes an $18/barrel federal beer tax on all suppliers of more than 2 million barrels annually.
“Our tax policies shouldn’t discourage the growth and continued success of an industry that supports jobs for more than 2 million Americans, and it shouldn’t pick the winners and losers in the market,” said Congressman Womack. “This comprehensive reform bill supports brewpubs, microbrewers, national craft brewers, major brewers and importers alike and encourages their entrepreneurial spirit, which is exactly the spirit we need to get America’s economic engine going again.”
“The beer industry has shaped our heritage and history in Wisconsin, and plays a crucial role in our state’s economy,” said Congressman Kind. “Here in Wisconsin and across the nation, brewers are employing our workers and creating new jobs, and this pro-growth, bipartisan bill will help them continue to expand and produce high-quality products.”
“This bill is important for reforming a hidden tax that most beer drinkers don’t even know they pay, and because it removes barriers to industry growth,” said Jim McGreevy, president and CEO of the Beer Institute. “The Fair BEER Act deserves support, because it offers fair reform of the federal beer tax, but it reaches that reform without completely changing the industry structure.”
Companion legislation is expected to be introduced in the U.S. Senate shortly.
History of the federal excise tax on beer
Existing federal excise taxes on beer are set at a rate of $18/barrel for brewers of more than 2 million barrels (62 million gallons, or the equivalent of 110 million six-packs) and all beer importers. Since the late ’70s, growth in the small brewing sector has been encouraged by tax credits offered to brewers which produce less than 2 million barrels, cutting their excise tax rate to $7/barrel on the first 60,000 barrels and allowing them a far lower overall effective tax rate on all barrels up to 2 million.
Today, there are more than 3,300 breweries in the United States. More than 90 percent of those brewers produce fewer than 7,143 barrels annually, meeting the definition of a small brewer set by the TTB. Many of those small brewers are brewpubs.
For more information, visit the Beer Institute website.