On December 20, 2019, President Donald Trump signed into law the Further Consolidated Appropriations Act, 2020, which, among other items, extends the provisions of the Craft Beverage Modernization (CBMA) portion of the Tax Cuts and Jobs Act of 2017 (TCJA) through December 31, 2020. An earlier version of the bill was signed into law in December 2017 to reduce the rate of excise taxes on beer, wine and distilled spirits and increases the credit against tax for domestic producers of wine, sparkling and carbonated wine, as well as hard cider. However, those cuts were slated to expire at the end of 2019.
The change in law was, and is, good news for alcohol producers as the savings could be significant, particularly for the bigger producers. The rates of reduction in excise tax are outlined in the TCJA by alcohol type and volume, and certain definitions tied to alcohol content were modified in 2017. By way of example, under the CBMA, a winery producing 12,600 cases annually will save $3,000; 50,000 cases would save $20,010; 105,000 cases save $184,030; and over 315,390 cases would save $451,700. Also under the CBMA, brewers who produce fewer than two million barrels annually pay $3.50 per barrel for their first 60,000 barrels and $7 per barrel after that. If an extension had not been reached, those brewers would have paid $7 for each barrel. Larger brewers pay $16 per barrel on their first six million barrels and $18 per barrel after that. If tax relief had not been extended, those producers would have paid $18 on all barrels. The CBMA also provides the country’s 2,000-plus craft spirits producers tax relief as the distilled spirits industry would have faced a 400 percent tax hike come January 1, 2020, without legislation.
If you have any questions, please contact any member of the Bose McKinney & Evans Hospitality and Alcoholic Beverage Law Group.