Jan 5, 2018Congress passes first wine excise tax cut in 80 years
WineAmerica, the national association of American wineries, recently praised the passage of federal alcohol excise tax reform legislation as a new opportunity for growth of the American wine industry.
According to Wine America, The Tax Cuts and Jobs Act, signed by President Donald Trump, includes key provisions of the Craft Beverage Modernization and Tax Reform Act that will reduce federal excise taxes on wine, beer, and spirits. WineAmerica and its beverage coalition partners enlisted 304 House and 55 Senate co-sponsors from both parties.
“We are grateful to all legislative supporters, but particularly Senator Roy Blunt, R-Missouri, who led the majority support, Senator Rob Portman, R-Ohio, for adding our bill into the broader Senate legislation, and Sen. Ron Wyden, D-Oregon, who was the original champion of the entire concept and the language,” said WineAmerica President Jim Trezise. “On the House side, Representative Kevin Brady, R-Texas, as chairman of the Ways and Means Committee played a crucial role.”
The bill will save all wineries, regardless of size, significant money through an excise tax credit mechanism which reduces the effective rate. For example, while the federal excise tax on table wine will remain unchanged at $1.07 per gallon, there will be a new tax credit of $1.00 on the first 30,000 gallons produced, making the effective tax rate $0.07 (seven cents) per gallon. The tax credit on the next 100,000 gallons produced is $0.90, and between 130,000 and 750,000 gallons produced the tax credit will be $0.535. The tax credit limits out at a ceiling of 750,000 gallons. The legislation also increases the allowable alcohol level for table wine from 14 percent to 16 percent, reflecting the tangible impact of climate change on grape ripening in some states.
“The federal excise tax provisions are programmed to expire on Dec. 31, 2019, which means WineAmerica and its beverage coalition partners will need to work with Congress on making the new rates permanent. WineAmerica’s coalition consists of the American Craft Spirits Association, the Beer Institute, the Brewers Association, the Distilled Spirits Council, and the Wine Institute,” a news release stated.
“There are nearly 10,000 wineries across all 50 states, and the vast majority are small, family-owned farms and businesses, so this is a welcome development for growing our entire industry,” said Trent Preszler, Ph.D., CEO of Bedell Cellars on Long Island and chairman of the WineAmerica Board of Directors. “The excise tax savings will allow wineries to invest money back into their businesses in countless ways, whether that’s hiring new employees, buying oak barrels, or planting vineyards. Ultimately, such investments will help American wineries be more competitive in the global marketplace.”
WineAmerica recently unveiled a national economic impact study showing that the American wine industry generated a $220 billion benefit to the American economy in 2017, including 1.7 million jobs and $75.8 billion in wages. Of the total impact, $58.8 billion involved the “supplier” sector which includes goods and services like tractors and vineyard supplies; tanks and barrels; packaging and transportation; plus finance, insurance and real estate. Many of these sectors stand to benefit as wineries invest their savings from the tax reduction.
“We also thank WineAmerica Vice President Michael Kaiser and government affairs advisors Larry Meyers and Fran Boyd of Meyers & Associates for all their great work on this initiative,” said Trezise. “WineAmerica specializes in national grassroots public policy advocacy involving our members from all around the country, and these are the people who bring it all together.”
For more details about the actual Tax Cuts and Jobs Act and the Craft Beverage Modernization and Tax Reform Act, contact Michael Kaiser ([email protected], 202-223-5172)
The Wine Institute also applauded the recent Congressional action to enact the first reduction in wine excise taxes in over 80 years and only the second reduction in the nation’s history. The comprehensive tax legislation (H.R. 1) passed by the House and Senate includes a two-year version of the Craft Beverage Modernization and Tax Reform Act (H.R. 747/ S. 236), which will provide significant benefits for all wineries.
“The Craft Beverage bill will help propel the growth of wineries across the nation, including the nearly 5,000 in California, most of which are small and family owned,” said Robert P. “Bobby” Koch, President and CEO of Wine Institute. “Wineries are some of the most heavily taxed and regulated businesses in the country and this will provide meaningful relief from some of these burdens.”
Wine Institute has been working since 2015 to pass the Craft Beverage legislation and during that time over 300 Representatives and 55 Senators signed on to sponsor the bill, which was introduced by Sen. Ron Wyden, D-Oregon, and Sen. Roy Blunt. R-Missour,. Sen. Rob Portman, R-Ohio, offered the amendment that added the Craft Beverage bill to the broader tax reform legislation.
“This would not have happened without the leadership, hard work and perseverance of Senators Wyden, Blunt and Portman, and we are grateful for their support of wineries throughout the country,” added Koch.
The legislation will reduce excise tax payments for every winery in the country by expanding the value of the existing producer credit and doing away with the phase-out that currently prohibits many wineries from receiving any benefit. The excise tax burden for small- and medium-sized wineries will be reduced by 55 percent-70 percent. The bill will also allow for the innovation of new products. The wine provisions went into effect on Jan. 1, 2018.
“These changes will allow our member wineries to further invest in their businesses, which in turn generates substantial benefits for local communities in the form of jobs, tax revenue and support for the hospitality industry,” said Steve Lohr, CEO of J. Lohr Vineyards & Wines and Chairman of Wine Institute.
Key highlights for wine include:
- Expands the excise tax credit for all wineries. The legislation does away with the existing phase out based on production size and allow all wineries to claim a credit of between $.535 and $1 per gallon on the first 750,000 gallons of production. The total value of the full credit is $451,700 per year, based on producing the full 750,000 gallons.
- Allows sparkling wine to qualify for the credit. For the first time, sparkling wine is eligible to receive the tax credits mentioned above.
- Increases the Alcohol by Volume (ABV) allowed for the $1.07 tax rate from 14% to 16% ABV. Wines with 14 percent to 16 percent ABV are currently taxed at $1.57 per gallon and will now be taxed at the still wine rate of $1.07.
- Increases the carbonation allowed in certain low alcohol wines (8.5 percent ABV or less) taxed at the $1.07 rate from .392 to .64 grams of carbon dioxide per hundred milliliters.