Federal Excise Tax Overview

Craft Beverage Modernization and Tax Reform Act

On Dec. 20, 2017, the United States Congress passed legislation that included a two-year provision of the Craft Beverage Modernization and Tax Reform Act (CBMTRA), which lowered the federal excise tax (FET) for breweries, wineries, and distilled spirits producers for a period of two years and is set to expire on Dec. 31, 2019.

In February 2019, Senators Ron Wyden (D-OR) and Roy Blunt (R-MO), and Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) re-introduced the CBMTRA (S. 362/H.R. 1175) with the goal of making the lower FET permanent.

Short survey: How Do Lower Federal Excise Taxes Impact Your Brewery?

How CBMTRA could impact your brewery

For breweries, the FET was reduced to $3.50/barrel (from $7/barrel) on the first 60,000 barrels for domestic brewers producing less than two million barrels annually, and reduced to $16/barrel (from $18/barrel) on the first six million barrels for all other brewers and all beer importers. The provisions maintain the current $18/barrel rate for barrelage over six million.

Additionally, CBMTRA allows the transfer of beer between bonded facilities. Previous law allowed beer to be transferred between commonly owned breweries without payment of tax. Under the new provisions, all breweries may transfer beers between bonded facilities without tax liability, something that benefits small unaffiliated brewers and gives them the flexibility to collaborate on new beers without facing a tax liability.

Who is allowed to transfer?

  • Independently owned breweries where the transferor has divested itself of all interest in the beer so transferred, and the transferee has accepted responsibility for payment of the tax.
  • Breweries that are owned by the same person/entity.
  • A brewery that owns a controlling interest in another brewery.

New tax rate is now in effect

CBMTRA went into effect on Jan. 1, 2018 and will “sunset” on Dec. 31, 2019. The Alcohol and Tobacco Tax and Trade Bureau (TTB) provided their guidance. The Brewers Association (BA) will continue to monitor developments at TTB and within the broader alcohol beverage industry so that we can provide additional information as soon as it becomes available.

Next steps for your brewery

Making CBMTRA permanent is a priority for the Brewers Association. BA staff will continue to lobby on the issue and there are many ways that you can help:

  • Keep track and share information with the BA. Make note of the changes that you make in your brewery, employees that you hire, new equipment that you purchase etc. Participate in surveys like the Beer Industry Production Survey (BIPS) and let us know how many barrels you are producing, what type of entity your brewery is registered as (LLC, LLP, pass-through, etc.) and other things that can help us when we are advocating on the Hill.
  • Invite your members of Congress to visit your breweries.
  • Participate in Hill climbs with your state guild and the Brewers Association.