LOUISVILLE, Ky. (WDRB) – A federal tax cut that will save breweries and distilleries a lot of money is at risk.
Breweries and distilleries have benefited from the benefits of the law on modernization and tax reform of craft beverages since 2017. It offers a federal tax cut that will allow them to reinvest money in their businesses, but it will expire on December 31st.
“In addition to the battles we’ve already looked at over COVID, it would be a death knell for many breweries,” said Ted Mitzlaff, CEO of Louisville’s Goodwood Brewing.
The pandemic hit the industry hard. Many breweries have had to close their taprooms and restaurants several times this year and are still faced with reduced capacity restrictions. Sales revenues have also declined.
“I think getting kicked while you’re down would be just such a concept,” said Nathaniel Gravely, president and owner of Gravely Brewing in Louisville. “We are definitely down, along with many other companies in our industry.”
The law cuts federal excise tax per barrel in half for small craft breweries that produce less than 2 million barrels a year. The law means they pay $ 3.50 a barrel for the first 60,000 barrels they produce. That rate would double for breweries if the law is not renewed or extended.
“At a time like this, when it’s tight and every dollar counts, it’s huge,” said Mitzlaff. “In 2019 … we saved about $ 40,000 in taxes that went straight to reinvesting in the company and hiring more people. So if we lost, the real victims here would be our people.”
Distilleries would also see a significant tax hike if the law expired. Including that, federal excise tax on the first 100,000 gallons of a burner will be reduced from $ 13.50 to $ 2.70.
“No one could have planned 2020 the way it was obvious, but it really, really needs to be renewed or expanded in the future because next year is all about recreation,” Gravely said.
United States Rep. John Yarmuth, D-Ky., Said the tax rule has support in Washington.
“There is really not much partisan argument about it,” Yarmuth told WDRB News on Saturday. “Virtually everyone agrees that this was a positive thing; we should continue.”
But the legislature has a lot to do in the coming days. If the tax rule is not renewed, Yarmuth expects it to be implemented in January as part of a tax expansion package.
“I am confident that the supply will be renewed,” he said. “It just can’t be ready before the end of the year.”
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