Craft brewers push bills to serve up new tax reduction
“We could buy a fair amount of capacity for that,” said New Belgium chief executive Kim Jordan, noting the increased hiring of brewers, packagers and sales reps that would follow.
Unfortunately for Jordan and others like her, passage of the Small BREW Act probably is a few years off at best, even if the issue is one that remains central to the craft brewing industry’s agenda this year.
At the Craft Brewers Conference last month, Brewers Association chief operating officer Bob Pease noted how brewers’ promotion of the Small BREW Act has given craft brewers a rapport with their elected officials that has reaped rewards on other issues. Still, the craft beer industry would like the Small BREW Act to be more than just a rallying cry that gets them in front of congressmen.
“I’d like to pass the tax bill,” Pease said.
First introduced in 2009, the Small Brewer Reinvestment and Expanding Workforce Act would lower the excise tax rates paid by small brewers and expand the federal government’s definition of small brewers. The Brewers Association, the Boulder-based trade association of craft brewers, provided the framework for the legislation, and the bill has been a cause for the surging industry ever since.
However, despite widespread support in Congress, the bill never has made it to a vote in either the House of Representatives or the Senate. The Small BREW Act also has its detractors, who believe the bill unfairly excludes the nation’s large brewers such as Anheuser-Busch InBev and MillerCoors.
Currently, the federal excise tax on beer is $18 per barrel for all brewers making more than 2 million barrels per year. For brewers producing fewer than 2 million barrels, their first 60,000 barrels are taxed at $7 per barrel, with the rest taxed at $18 per barrel. That structure has been in place since 1991.
The Small BREW Act would change the definition of a small brewer from one that brews fewer than 2 million barrels to one that brews fewer than 6 million so that any brewer below that threshold would enjoy the graduated tax structure. The bill also would lower the rate small brewers pay to $3.50 per barrel on their first 60,000 barrels, and to $18 on barrels 60,001 to 2 million. Any production above 2 million barrels would remain at $18.
The Brewers Association estimates that passage of the bill would cost the federal government about $65 million per year in revenue, but argues that those losses would be offset by increased production and the creation of thousands of new jobs at the country’s approximately 2,800 breweries.
“We are the quintessential small Main Street business,” Pease said.
The benefits to craft breweries, which have boomed along the Front Range in the past two decades, are clear – and not just at places such as New Belgium, the country’s third-largest craft brewer in 2013 at nearly 800,000 barrels.
On a smaller scale, at Boulder’s Upslope Brewing, owner Matt Cutter projected production of 18,000 to 20,000 barrels this year, which would mean a tax savings of about $70,000 if the Small BREW Act were signed into law. That would amount to nearly 2 percent of the company’s 2013 revenue, and allow for more hiring, Cutter said.
As the nation’s large brewers gradually lose market share and sales to craft beer, the idea of giving the little guys an exclusive tax break doesn’t sit well. The Beer Institute, a Washington, D.C.-based beer industry trade association, has since 1991 pushed separate legislation called the Brewers Excise and Economic Relief (BEER) Act.
For brewers producing fewer than 2 million barrels, the BEER Act would eliminate the excise tax for the first 15,000 barrels brewed and reduce the tax to $3.50 on barrels 15,001 to 60,000. Above 60,000, the tax would be $9 per barrel. For all brewers producing more than 2 million barrels, the tax would drop from $18 to $9 per barrel for all production, returning to pre-1991 levels.
Chris Thorne, vice president of communications for the Beer Institute, said the Small BREW Act’s expansion of the small-brewer definition is unnecessary, arguing that a brewery selling more than 2 million barrels per year already is established in the competitive landscape and doesn’t need additional tax advantages over larger brewers. The BEER Act, he said, does a more equitable job of looking out for brewers of all sizes.
“It’s not fair to the industry,” said Thorne, who also noted that the Small BREW Act favors one class of beer drinkers over another.
“If you’re going to have policy, it’s got to be comprehensive to the industry.” he said.
Given its own legislative support, Thorne said, the BEER Act has been a sound deterrent over the years to those who might wish to raise the excise tax on beer further.
Jordan, as a Brewers Association board member and a member of its government affairs committee, has spent many hours promoting the Small BREW Act. While acknowledging the superior tax savings small brewers would enjoy under the BEER Act versus the Small BREW Act, neither she nor Pease view passage of the BEER Act as likely. For one thing, the government would lose an estimated $1.6 billion to $1.8 billion in annual revenue, the vast majority of which would go to just two companies, Anheuser-Busch InBev and MillerCoors.
With the state’s brisk craft beer scene in addition to the presence of Coors in Golden and Anheuser-Busch in Fort Collins, Colorado’s congressional delegation almost universally supports both the BEER and Small BREW acts as co-sponsors. Sen. Mark Udall, D-Colo., sponsored the current version of the BEER Act, but also is a co-sponsor of the Small BREW Act. Udall communications director Mike Saccone stopped short of choosing sides or listing pros and cons of either bill.
“They both strive toward the same goal, which is lowering the tax burden on brewers and allowing them to invest in their employees and businesses,” Saccone said. “Certainly in Colorado, both the macro breweries and micro breweries are important to our economy. That’s why Sen. Udall supports both of these approaches.”
Pushing for the Small BREW Act has given craft brewers a chance to tell their story to elected officials and illustrate the job growth in the industry. That in turn has given the craft brewers a better understanding of how to navigate the political system as it relates to other issues in what is a highly regulated industry.
Passage of the bill, however, remains a major hurdle.
The Small BREW Act has 156 co-sponsors in the House of Representatives and 40 in the Senate. Senate Finance Committee chair Ron Wyden, D-Ore., also happens to be co-chair of the Senate Small Brewers Caucus. But Pease acknowledged that without being attached to some sort of larger tax reform bill – a stretch itself in the highly partisan Congress – the Small BREW Act’s path to a vote could last a few more years.
“We’re kind of in the third or fourth inning of a nine-inning game,” Pease said.
Joshua Lindenstein can be reached at 303-630-1943 or firstname.lastname@example.org. Follow him on Twitter at @joshlindenstein.
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