U.S. Congress To Pass the Craft Beverage Modernization and Tax Reform Act

As the U.S. Congress is set to  pass the latest in COVID-19 stimulus relief, the Craft Beverage Modernization and Tax Reform Act (CBMTRA) was added to this bill that will make the existing federal excise tax rates for small and independent breweries permanent. News arrived late Sunday night that both the U.S. House and U.S. Senate have agreed upon a $900 Billion COVID relief package that also includes CBMTRA as part of it.

The current Federal Excise Tax (FET) rates for small and independent breweries were set to  expire on December 31, 2020. If no action is taken and the current FET expires, the rate could increase as much as 100%. On top of this, breweries in Oregon will likely face a state tax increase as well for the 2021-23 biennium that is being led by the Oregon Health Authority.

The passage of CBMTRA is expected to take place on Monday, December 21. Once passed, CBMTRA represents an expected annual savings of $80 million for craft breweries, in addition to savings from other alcoholic beverage makers such as distillers facing a potential 400% tax increase, wine makers, and cider makers.

Here are additional details from the Brewers Association’s press release…

“The  Brewers Association  expresses our gratitude to the 116th Congress, especially our legislative champions in the House and Senate—Reps. Ron Kind (D-WI) and Mike Kelly (R-PA), Chairman Richie Neal (D-MA), and Sens. Ron Wyden (D-OR), Roy Blunt (R-MO), and Rob Portman (R-OH)—and our allies in Congress on both sides of the aisle for including the Craft Beverage Modernization and Tax Reform Act in this must-pass legislation,” said Bob Pease, president and CEO of the Brewers Association, which has led the fight to extend current federal excise tax rates.

“For the past several decades, America’s craft brewing industry has been growing tremendously and adding thousands of jobs across the country. Like other small businesses, many small breweries, brewpubs and taprooms have been devastated by the economic fallout from the COVID-19 pandemic,” Pease said. “This legislation and programs like the Paycheck Protection Program are vital lifelines to help small brewers weather this unprecedented health and economic challenge. We strongly believe that America’s small-brewing industry can return to its incredible growth and vitality, but we need to get through these immediate challenges. This bipartisan legislation will help our members do so, and we deeply appreciate Congress recognizing this.”

With the assistance of its members in every congressional district in America, the Brewers Association has become the most formidable advocate in the alcohol beverage industry in Washington, D.C. In this Congress, for example, bipartisan legislation to make the federal excise tax rates permanent is supported by 77 members of the Senate and 351 members of the House.

The CBMTRA has been a key issue for the Brewers Association, which has lobbied for an excise tax recalibration since 2009. By including the CBMTRA language, congressional leaders acknowledged the profound impact the reduced excise tax rate has had on the growth and trajectory of a uniquely American entrepreneurial success story, recognizing that allowing the lower rates to expire would be extremely detrimental to the 8,300 small breweries, brewpubs, and taprooms across the country. Prior to COVID’s initial outbreak in the U.S. back in March, craft breweries employed more than 160,000 workers at their breweries alone and including related industry roles, the total impact was 580,000 jobs. Craft brewing’s economic impact surpassed $82 billion in 2019 and more than 25,000 jobs were created by craft breweries in 2018 and 2019.

“This is much-needed good news for America’s small and independent craft brewers, which like much of the food and beverage industry have been hit hard by the pandemic. The last thing we needed was for our taxes to double. The passing of this act helps ensure that we can continue to invest in our employees and in growing our businesses,” said Dan Kleban, owner, Maine Beer Company, Freeport, ME. “I want to thank our legislative champions, including Sens. Susan Collins (R-ME) and Angus King (I-ME) who have been fearless advocates for us, recognizing that we are an instrumental part of America’s manufacturing industry. Their work in fighting for this relief will better position us to ramp up production and open up taps once the pandemic subsides.”

“With CBMTRA finally being made permanent, we will now at least have certainty on our tax liability and better plan around capital investments. These tax savings go a long way for small breweries like ours, especially during these unprecedented times,” said Julie Verratti, chief brand officer and founder, Denizens Brewing Company, Silver Spring and Riverdale Park, MD.

Introduced by Sens. Ron Wyden (D-OR) and Roy Blunt (R-MO)  and by Reps. Ron Kind (D-WI) and Mike Kelly (R-PA), Congress overwhelmingly supported the lower FET rates, with more than half of Congress co-sponsoring the Craft Beverage Modernization and Tax Reform Act (S. 362/H.R. 1175), including 77 Senate and 351 House co-sponsors (as of  Dec. 15, 2020).

Read Senate Finance Committee Ranking Member Ron Wyden’s statement here.

The passage of CBMTRA represents a collective annual savings of $80 million for craft breweries.