Congress to mull new definition of craft beer

There are competing proposals currently in Congress to significantly cut the federal excise tax – or eliminate it altogether – depending on the size of the brewery. The most recent one is by Senator Ron Wyden, a Democrat from Oregon, who in early June 2015 introduced the Craft Beverage Modernization and Tax Reform Act into Congress.

If passed, the bill would not only cut excise taxes imposed on brewers, it would also finally settle who is a craft brewer and who is not.

The law would essentially redefine the tax structure for small to mid-sized brewers and would group them into three categories, based on a new excise regime.

According to media reports, the craft brewers, which produce less than 2 million barrels (2.4 million hl) per year, would get the deepest tax cuts. The mid-size brewers, which produce 6 million barrels (7 million hl) or less, get a slight tax break. The macro brewers, which produce in excess of 6 million barrels, would not get a tax break.

The Beer Institute, a national trade group representing the big brewers, was quoted as being “delighted” with Senator Wyden’s act.

The group says the Wyden proposal would reduce the federal excise tax to USD 3.50 (EUR 3.20) per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually. It would also reduce the federal excise tax to USD 16 per barrel on the first 6 million barrels for all other brewers and all beer importers, while seeing the excise tax kept at the current USD 18 per barrel rate for brewers whose output is in excess of 6 million barrels.

What this means is tax breaks for the small-to medium-sized craft brewers.

The new proposed excise regime would essentially group brewers for tax purposes. However, and this is the catch, it would leave a number of big-name craft brewers out of the first category and put them into a higher tax bracket. That includes Boston Beer Company, the brewer of Samuel Adams beer, which produces 4.1 million barrels (including non-beer beverages such as Angry Orchard cider and Twisted Tea), as well as Yuengling (2.7 million barrels) and North American Breweries (about 2.6 million barrels) with its Magic Hat, Pyramid and other brands.

Until now, to be labelled a craft brewer, breweries had to fit within the definition put forth by the Brewers Association (BA), which involves barrels of production, percentage of a brewery owned by a non-craft brewer and more “traditional” aspects.

The BA, as the industry’s self-regulating body, has been accommodating to its big members in the past. It raised the barrel-production limit to 6 million from 2 million in 2010 to allow Boston Beer to lay claim to the craft beer title.

Boston Beer has hiked its volumes in recent years, averaging more than 20 percent growth annually. If it stays on course, it could possibly find itself in the 6-million-plus macro brewer league in less than three years and thus lose its title of largest U.S. craft brewer.

Now that’s a worry. But all isn’t lost yet as Senator Wyden’s act and all the other proposals still have to wind their way through Congress. Outcome? Uncertain.