Raise your mugs, craft beer drinkers and give a hearty “here-here” to the members of the congressional small brewers caucuses, which are not groups of lawmakers who gather for Capitol Hill happy hours.
Rather, members of the House Small Brewers Caucus and the Senate Bipartisan Small Brewers Caucus are leading an effort to reform federal regulations to help the craft beverage industry grow and modernize. Members include Wisconsin Democrats Tammy Baldwin and Ron Kind.
“Wisconsin’s brewers have been at the center of our culture and anchors of local communities since our state’s beginning,” said Baldwin, a U.S. senator from Dane County. “Wisconsin beer makers not only brew famous lagers, they create jobs and spur investment in communities throughout the state. They employ Wisconsinites in every corner of the state and reinvest their profits back into their local economies and we need to be investing in them.”
In addition to Baldwin, Kind — a representative from the La Crosse area — and others in the state’s congressional delegation back several measures introduced this session to provide tax relief to brewers, cider makers, vintners and distillers, and to reduce their regulatory burdens.
The state famous for producing beer boasts about 114 craft breweries that have an annual economic impact of $856 million, according to 2013 data. The brewers produce about 859,874 barrels of craft beer each year — the ninth largest number in the country.
TAXED, THEN TAXED AGAIN
One federal measure, the Fair BEER Act, would lower or even eliminate the excise tax imposed on brewers.
“Excise taxes are taxes that we pay on our production that are in addition to every other tax that small businesses pay,” said Gary Fish, owner of Deschutes Brewery in Bend, Oregon, the state with the highest number of craft brewers.
The Fair BEER Act — that’s the Fair Brewers Excise and Economic Relief Act — is sponsored by Kind in the House and Baldwin in the Senate. It would eliminate the federal excise tax for brewers producing up to 7,143 barrels per year, a tax that currently stands at $7 per barrel. Brewers producing 7,144–60,000 barrels would pay $3.50 per barrel — a 50 percent decrease. Above that, producers would pay $16 per barrel up to 2 million. After that, the tax would stand at $18 per barrel, its current rate.
Another measure, the Small BREW Act, specifically deals with craft brewers. As the bill is formally known, the Small Brewer Reinvestment and Expanding Workforce Act would stimulate regional economies with a reduction in the excise tax on each barrel of beer brewed by small brewers. Specifically, the measure would reduce to $3.50 the per-barrel rate on the first 60,000 barrels. For production of 60,001 to 2 million barrels, the rate would be $16 per barrel. Above that, the current rate of $18 would be imposed.
Lowering the excise tax is important to small brewers, who say their margins are tight. Because of different economies of scale, small brewers have higher costs for raw materials, production, packaging, marketing and distribution than multinational brewers.
Adjusting the excise tax would allow small brewers nationwide to annually reinvest about $70 million in growing their businesses, according to Baldwin’s office. In addition, the Small BREW Act would enable Wisconsin craft brewers to reinvest more than $1.5 million into their businesses each year, Baldwin’s office says.
Still, among lawmakers and within the beer industry, there’s a lack of unity behind either the Small BREW or the Fair BEER acts. So federal lawmakers are serving up another bill. Like a lager, it has wide appeal. “The beer-specific provisions of this bill will help brewers and beer importers of all sizes,” said Jim McGreevy, president and CEO of the Beer Institute.
Introduced earlier this summer, the Craft Beverage Modernization and Tax Reform Act aims to help smaller makers of craft beverages and builds upon key provisions in the excise tax bills introduced earlier.
In the Senate, Democrat Ron Wyden of Oregon introduced the new bill, with Baldwin and Republican Roy Blunt of Missouri as lead co-sponsors.
Kind, the Democratic lead sponsor of the Fair BEER Act, and U.S. Rep. Erik Paulsen, R-Minn., the lead on the Small BREW Act, introduced the House version, which has more than 70 co-sponsors. Its bipartisan backing includes right-wing Republican Glenn Grothman.
The CBMTR Act also has the backing of the Brewers Association, a nonprofit trade group of small and independent U.S. brewers and beer enthusiasts, and the Beer Institute, a national trade association that represents brewers, importers and suppliers. In addition, the measure has support from the U.S. Association of Cider Makers and the American Craft Spirits Association.
“This would be very good for us,” said Brad Stillmank of Stillmank Brewing Co. in Green Bay. “We are very solid behind this. … This is all dollars that can be reinvested.”
Specifically, the Craft Beverage Modernization and Tax Reform Act would:
• Reduce the excise tax by half on the first 60,000 barrels from domestic brewers producing fewer than 2 million barrels per year.
• Reduce to $16 the excise tax on the first 6 million barrels for all other brewers and beer importers.
• Simplify beer formulation and label approvals, in part by exempting common beer ingredients from a lengthy government approval process.
• Remove restrictions on tax-free transfers of beer and repeal “unnecessary” inventory restrictions.
• Relax restrictions on alcohol content and carbonation content as well as expand the list of allowable ingredients for cider makers.
• Expand wine producer tax credits.
• Establish reduced excise taxes for small craft distilleries.
• Repeal prohibition of home hobby distilling.
• Exempt 90 percent of craft beverage producers from biweekly tax filings and bonding requirements.
“Our laws should be helping breweries and other craft beverage makers grow, not cut them off with red tape and taxes,” Wyden said.
CRAFT BEER FUELING ECONOMIC GROWTH
Wyden and Baldwin recently got together with craft brewer Fish and Jeff Hamilton, president of Sprecher Brewing Co. in Glendale, Wisconsin, for a Google Hangout session.
About 400 people watched the politicians and the brew-makers talk about beer and business, jobs and economics, red tape and regulations.
Fish pointed out that the reform bill would remove a requirement that small brewers file their taxes every two weeks instead of quarterly.
The federal legislation, Fish said, “could drive the industry to greater heights. Really, this is something that the cost is minimal, the benefit is substantial and, again, I think it is something that has long been needed.”
Baldwin and Hamilton focused on the entrepreneurial spirit of craft brewers and their impact on other sectors of the economy.
“We have a lot of … industries and manufacturing that serve the beer business,” Hamilton said, saying the boom in craft brewing is spurring growth in agriculture, manufacturing, retail, restaurants and more.
Over the summer, Baldwin visited breweries in Green Bay, La Crosse and Milwaukee. She said, “All of these small-business owners and brewmasters have stressed that growth for Wisconsin craft brewing means an increase in employment opportunities and economic growth that benefits the broader Wisconsin economy.”
Hamilton, with a glass of beer beside his left hand, and Baldwin, speaking from her Senate office, also observed the impact craft brewers have on communities, helping to revitalize buildings and neighborhoods.
“They are bringing new life and new commitment to communities across Wisconsin,” Baldwin said. “And this is really a measure that is bringing so many together.”
By the numbers …
Market share of craft-brewed beer by dollars.
Market share of craft-brewed beer by volume in 2014.
Barrels of beer produced by craft brewers in 2014.
Retail value of craft beer sold in 2014.
A majority of Americans live at least that close to at least one craft brewer.
The amount of beer Wisconsin craft brewers produce for each Wisconsinite of legal drinking age.
Source: Brewers Association
Meaning what …
Small brewer: Annual production of 6 million barrels of beer or less.
Independent brewer: Less than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member that is not a craft brewer.
Source: Brewers Association