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H.R. 1175 (116th): Craft Beverage Modernization and Tax Reform Act of 2019

Craft beer is surging in popularity, so how should the federal government tax it?


Craft beer is taking up an ever-larger percentage of the total beer production pie. Sales of craft beer increased 8% last year to $26.0 billion, now constituting a record 23.3% of the total U.S. beer market.

Craft beer is defined as a product made by a “small and independent brewer,” meaning annual production of less than 6 million barrels and owned less than 25% (or not at all) by a larger conglomerate. That includes such well-known companies as Yuengling and Gordon Biersch.

The industry’s taxes were cut in 2017 with the tax reform bill, but the provisions expire after two years, meaning this December. Members of both parties are now trying to make many of the craft brewery provisions permanent — one of the few provisions of the largely Republican-led tax cut bill that many Democrats support.

What the bill does

The Craft Beverage Modernization and Tax Reform Act would:

  • Maintain the $3.50 per barrel tax on the first 60,000 produced, for any brewery producing less than 2 million barrels total. That was halved from the prior $7.50 per barrel tax.
  • For any brewery producing more than 2 million barrels total, maintain the $16 per barrel tax on the first 6 million produced. That’s down from the prior $18 per barrel tax.
  • Increase the number of ingredients that could be included in a beer without requiring government approval by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

It was introduced in the House as bill number H.R. 1175 by Rep. Ron Kind (D-WI3), and in the Senate as bill number S. 362 by Sen. Ron Wyden (D-OR).

What supporters say

Supporters argue that the bill brings taxes and regulations for the industry into the modern age, especially as it’s surging in popularity.

“Here in Wisconsin, our craft brewers produce over one million barrels of beer a year. Not only are our breweries a source of pride and a large part of our state’s culture, but they also support our local economies and create jobs,” Rep. Kind said in a press release. “I am proud to introduce this bipartisan bill, which will help grow our craft breweries, open new markets, and create good-paying, meaningful jobs here in Wisconsin.”

“People around the world enjoy Oregon wine, craft beer, cider and spirits — providing not only a serious source of home state pride but also a huge boon to our state’s economy,” Sen. Wyden said in a separate press release. “By modernizing burdensome rules and taxes for craft beverage producers, this legislation will level the playing field and allow these innovators to further grow and thrive.”

What opponents say

Opponents counter that federal taxes of craft beer should be raised, to mitigate the social and health effects of what they deem to be excessive American alcohol consumption — similar to sharply rising taxes on cigarettes in many states over the past decade.

“Federal alcohol excise taxes have not been raised since 1991, and… this failure to maintain a responsible level of taxation with an inflation index not only costs the government up to $7 billion per year, it also strips away an effective means to control alcohol use through price increases,” the group Alcohol Justice said in a press release.

“Researchers estimate that doubling the federal excise tax would result in a 35% decrease in alcohol-related mortality, an 11% reduction in deaths from automobile crashes, and measurable drops in sexually transmitted infections, violence, and crime. Big Alcohol tax cuts will instead increase all alcohol-related harms.”

Odds of passage

The Senate version has attracted 16 bipartisan cosponsors, an even eight Democrats and eight Republicans. It awaits a possible vote in the Senate Finance Committee.

The House version has attracted 14 bipartisan cosponsors, also an even seven Democrats and seven Republicans. It awaits a possible vote in the House Ways and Means Committee.

Last updated Mar 1, 2019. View all GovTrack summaries.

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Feb 13, 2019.

Craft Beverage Modernization and Tax Reform Act of 2019

This bill modifies the tax treatment of certain alcoholic beverages to

exclude the aging period from the production period for beer, wine, or distilled spirits for purposes of determining whether a taxpayer can expense, rather than capitalize, interest costs paid or incurred during the production period; reduce excise tax rates on beer and distilled spirits; permit the transfer of beer between bonded facilities without payment of tax; increase the amount of the small wine producer tax credit and expand the categories of producers covered by such credit; allow an adjustment to the producer credit for hard cider; and modify the alcohol content limitations that apply to certain wines for tax purposes. The Department of the Treasury must amend applicable regulations with respect to the use of wholesome products suitable for human consumption in the production of fermented beverages.

The bill also increases funding for the Alcohol and Tobacco Tax and Trade Bureau.