Law Offices of John P. Connell, P.C.: Large breweries and smaller “craft” breweries are battling over which recently introduced tax bill should be backed by Congress. The excise tax for brewers producing more than 2 million barrels of beer annually is currently $18 per barrel, with each barrel up to 60,000 taxed at $7 and each additional barrel beyond that taxed at $18. At the beginning of 2013, however, two separate bills were introduced to Congress, both purporting to create tax breaks for brewers based on their brewery’s size, or annual barrel production per year.
On February 5, 2013, U.S. Representative Jim Gerlach, of Pennsylvania’s 6th District, introduced the Small Brewer Reinvestment and Expanding Workforce Act, or “Small BREW” Act, to the U.S. House of Representatives (See House Bill 949). This Bill is intended to aid craft breweries in competing with larger breweries by reducing the excise tax to $3.50 for each barrel of beer produced up to 60,000 and $16 for each additional barrel up to 2 million. Craft breweries across the country have been known to show support for this Act, arguing it has potential to not only redesign the parameters for measuring just what constitutes a “small” brewery, but also is likely to create new jobs and thus bolster the economy. Larger breweries, on the other hand, have been known to show opposition to this Act, claiming a differently structured tax break would have more potential.
On May 9, 2013, to counter the proposed “Small BREW” Act, Senator Benjamin Cardin of Maryland introduced the Brewer’s Excise and Economic Relief Act of 2013, or “BEER” Act, to the U.S. Senate (See Senate Bill 917). Proposed on behalf of larger breweries, this Bill is intended to cut a tax break for all brewers and beer importers, by reducing the excise tax to zero for each barrel of beer produced up to 15,000; $3.50 for each additional barrel up to 60,000; and $9 for each additional barrel up to 2 million. While this Act will reduce taxes for craft breweries and larger breweries alike, some craft breweries continue to back the previously proposed “Small BREW” Act.
Craft breweries hope the relief granted by the “Small BREW” Act would put them on more of an even playing field against the market-dominating large breweries. As of March 2013, the Brewers Association reported a total of 2,416 operating breweries in the United States; 2,360 of which are craft breweries. Still, large breweries dominate the country’s market share, capturing 94% of the beer market.
Large breweries, on the other hand, want to enjoy a tax break as well. These large breweries have argued that pushing for different bills will only divide the beer industry further, thereby slimming the chances that either bill is enacted. For this reason, while all large breweries have taken a stance against the “Small BREW” Act, only some craft breweries have rejected the “BEER” Act. Regardless, it is widely believed by reporting sources that neither bill will pass.
CONTRIBUTED BY COURTNEY N. McGEE
© Law Offices of John P. Connell, P.C., 2013.