We recently provided you with an update on this blog site on the Craft Modernization Tax Reform Act (the Act) pointing to the broad bi-partisan support of Capital Hill for making the Act permanent. To review, the Act went into effect approximately two years ago greatly reducing the excise tax liabilities of craft producers of beer, wines and spirts. The implementation of the Act and the inherent cost savings allowed craft producers to grow their businesses leading to increases in the number of permitees, an increase in the number of people employed by these producers, and as well an increase in revenue and profitability for virtually all stakeholders.

The Act was temporary in nature and is set to expire December 31. However, and as mentioned, the Act enjoyed broad bi-partisan support on the Hill and was expected to be made permanent thorough the implementation of new legislation. The New York Times reported that there were 324 co-sponsors in the House and 73 in the Senate who favored the act becoming permanent. Currently, tax reform in general is a hot and contentious topic on Capitol Hill and the Craft Modernization Act has fallen victim to the larger tax reform debate. Others have also argued that the Act reduces tax liabilities of large producers contrary to its stated objective and oppose its continuation on those grounds.

There is less than two short weeks for the Act to gain the full support it needs for passage. If passage does not occur, small producer tax liability will increase by 400% (as has been reported) with payment of the same due virtually immediately. Producers, distributors, retailers and ultimately consumers will take a financial hit. The recent political climate has not helped the industry in broad terms. Increased tariffs on wine and spirts and their manufacturing components have caused economic distress to all market participants. Now a potential 400% hike in excise tax is sure to cause further industry wide grief.

Stop the Presses-Another Update

Just as we were sending the above blog off for publication Congress granted a reprieve to craft producers and granted a one year extension for the for the Tax Reform Act. The Act became part and parcel of a broader package of tax and spending matters that Congress is to vote on before the end of the week and is expected to pass in order to avoid a government shut-down.

Although most craft-producers were hoping that the Act would be made permanent, the one year extension has brought a sense of relief. Clearly, the 2020 effort will focus on making these tax reductions permanent.