Late Monday night the House and Senate voted to pass a $2.3 trillion federal spending package that included targeted COVID-19 relief as well as language from the Craft Beverage Modernization and Tax Reform Act (CBMTRA), making the existing federal excise tax rates for small and independent breweries permanent.
The next stop is the president’s desk. Once passed, the COVID-19 package should provide many breweries much-needed assistance to weather the next few months, with the CBMTRA providing certainty and continued savings.
Securing permanent federal excise tax recalibration for small brewers has been a top priority for the Brewers Association since 2009. The temporary lower rates were due to expire on December 31 unless Congress extended them or made them permanent. “Inclusion of the CBMTRA in the year-end legislation is the direct result of the hard work and efforts of the Brewers Association, state guilds, and our member breweries,” said Bob Pease, president and CEO, Brewers Association. “Thank you to everyone for a true community grassroots effort, and to our legislative champions in Congress.”
By including the CBMTRA, congressional leaders acknowledged the profound impact the reduced excise tax rate has had on the growth and trajectory of a uniquely American industry, recognizing that allowing the lower rates to expire would be extremely detrimental to the 8,300 small breweries, brewpubs, and taprooms across the country. The passage of CBMTRA represents an annual savings of $80 million for craft breweries.
The CBMTRA language in the legislation will:
- Make the federal excise tax rate of $3.50 per barrel permanent on the first 60,000 barrels and $16 on all subsequent barrels for domestic brewers producing fewer than 2 million barrels annually.
- Preserve the federal excise tax rate of $16 per barrel on the first 6 million barrels for all other brewers and all beer importers.
- Keep the excise tax at $18 per barrel after the first 6 million barrels.
- Allow the transfer of beer between bonded breweries. Beer may be removed from one brewery to another brewery, without payment of tax upon transfer, and may be mingled with beer at the receiving brewery or otherwise finished and packaged.
- Modifies the single taxpayer rule for beer, wine, and spirits.
The package also includes a $900 billion bipartisan COVID relief package with additional Paycheck Protection Program (PPP) funding and small-business support lobbied for by the Brewers Association, including:
- An additional $284 billion for first and second PPP loans, and $20 billion for the Economic Injury Disaster Loan (EIDL) grants for low-income communities.
- Allowing the hardest-hit small businesses to receive a second forgivable PPP loan. Eligibility would be limited to small businesses with 300 or fewer employees that can demonstrate at least a 25 percent reduction in gross receipts in the first, second, third or fourth quarter of 2020 relative to the same 2019 quarter. Stipulations are in place for businesses who were not open in 2019. Businesses must also show that they have or will used the full amount of their first PPP loan. Maximum amount of a “second draw” PPP loan is $2 million.
- Expansion of PPP eligibility to small 501(c)(6) organizations who employ fewer than 300 people and whose lobbying activities do not comprise more than 15 percent of overall activity. State brewers guilds who fit these criteria would be able to apply for PPP loans.
- Businesses that received PPP loans and had them forgiven will be allowed to deduct the costs covered by those loans on their federal tax returns, consistent with congressional intent in the CARES Act.
- Repealing the CARES Act provision that requires PPP borrowers to deduct their EIDL advance from their PPP loan forgiveness amount.
- Creating a process to give existing EIDL grant recipients who received less than the full $10,000 grant amount to reapply for the difference.
- Forgivable expenses are expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely.
- Loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.
- Provides an additional $3.5 billion for Section 1112 of the CARES Act, which covered payment of principal, interest, and associated fees on qualifying SBA 7(a), 504, and microloans.
- Restaurants and hospitality industry businesses in NAICS code group 72 who qualify for PPP loans will be eligible for 3.5 times the monthly payroll (an increase from the 2.5 times monthly payroll in the CARES Act).
- The bill will also impact individuals by providing $600 in one-time stimulus checks to adults and children within a certain income threshold, and an additional $300/week in unemployment payments through March 14th
This legislation contains significant assistance for America’s small and independent breweries, and we worked hard to secure inclusion of those provisions. But there is still more work to be done. The Brewers Association will continue to advocate for additional COVID relief for our member breweries. We will keep you updated on the legislation as it progresses.