Last night, Senate Finance Committee Chairman Orrin Hatch (R-UT) released his Chairman’s markup of the long-awaited major tax reform proposal, which included a landmark provision to create tax fairness for the country’s 1,589 small, independent craft distillers. Current tax policy allows for a reduced excise tax rate for small producers of beer and wine, however, craft distillers are charged at the same rate as major corporate suppliers, creating a huge disparity within the industry.

With 54 Senate co-sponsors, S. 236, the Craft Beverage Modernization and Tax Reform Act, introduced earlier this year by Sen. Ron Wyden (D-OR) and Sen. Roy Blunt (R-MN), has now been rolled into the Senate plan.

The legislation would for the first time create a reduced Federal Excise Tax (FET) for craft distillers producing less than 100,000 proof gallons a year.  This would provide parity with craft brewers and small vintners, who have enjoyed a reduced FET based on their smaller size for many years.

The craft distilling industry is growing, with, on average, one distillery opening per day.  There are craft spirits distilleries operating in the U.S. in all 50 states, employing close to 20,000 people.  Investments in the industry in the last decade have now reached over $600 million, according to the Craft Spirits Data Project (2017).

“The resurgence of craft distilling over the last fifteen or so years has been tremendous, and fair tax treatment will ensure we have opportunity to compete, not just in our local communities, but in the global market as well,” says Mark Shilling, president of the American Craft Spirits Association. “In an competitive global economy, we are an industry that is proudly bringing manufacturing back to America, creating jobs, growing tourism, supporting local farmers and other small businesses, and Federal Excise Tax reduction is paramount to continuing to allow us to do just that.”

Margie A.S. Lehrman, executive director of ACSA, adds, “The burdensome Federal Excise Tax is a substantial impediment to economic growth in the craft spirits industry, but this bipartisan commitment to ‘fixing’ this injustice is promising.  The Congress understands the reinvestment opportunities, allowing craft spirits producers the chance to expand their production capacity, add new jobs, and expand their tourism and tasting room facilities. This is a clear “win” for American economic growth.”

The Distilled Spirits Council released its own statement today related to Senate Finance Committee’s Action:

“We commend the Senate Finance Committee for recognizing the excessive tax burden faced by the more than 1,200 operating distilleries nationwide, as well as the important role distilleries of all sizes play in generating jobs, supporting agriculture and boosting tourism. With more than half the cost of a typical bottle of spirits resulting from taxes and fees, a reduction in the federal excise tax will stimulate further investment and job creation in communities across the country. This common-sense and much-needed amendment is widely supported by nearly 300 cosponsors in the House and 54 in the Senate.  We will work with the other Senate cosponsors to ensure that this amendment is included in the final bill that passes the Senate.”