Brewers, Winemakers And Distillers Have A Little-Known Reason To Cheer Federal Covid Relief

After promising to work all night until an agreement was reached, U.S. senators passed a bill close to midnight Monday that grants permanent federal excise tax (FET) relief to brewers, distillers, winemakers and other alcoholic beverage producers. The Craft Beverage Modernization and Tax Reform Act (CBMTRA), as it’s known, is part of the $2.3 trillion omnibus spending and COVID-rescue package the House of Representatives passed earlier Monday. The president has pledged to sign it.

American alcohol producers and their allies have spent the past ten or more years begging Congress to permanently grant them reprieve from the excise taxes beverage alcohol manufacturers must pay to the federal government on every gallon or barrel of liquid they make. In 2015, they convinced members of Congress to introduce the CBMTRA bill, which reduces the tax; in the years since, Congress has twice enacted the law on a temporary basis. 

The latest extension of the bill’s provisions was set to sunset on December 31. Lawmakers added CBMTRA permanence to the federal spending bill, which includes $900 billion for COVID assistance, on Monday.

The Beer Institute (BI), which lobbies for the interests of American breweries of all sizes, says failing to pass CBMTRA could have put thousands of breweries out of business. Considering COVID and its accompanying restrictions threaten to annihilate surviving small beverage producers over the winter, Athens, Georgia’s Southern Brewing co-founder Rick Goddard said in a recent BI forum that passage of CBMTRA was literally a matter of life or economic death for his brewing brothers and sisters. 

“Without making this excise tax relief permanent it will be very difficult to come out of the second half of this global pandemic with any idea how to move forward,” he said. The day of the forum, Goddard said he’d sent his employees home to quarantine for five to seven days upon learning that one of his front-of-house managers, who lives with one of his brewers, had tested positive for COVID. 

FET reform brought the Beer Institute and Brewers Association (BA) craft brewery trade group together for the first time in 2015 when they compromised on bridging the gaps between their two respective FET agendas and formed a consortium with the major trade associations representing wine, spirits, other beverage alcohol producers, sales, distribution and supply chain. Since then, they’ve worked in tandem to lobby Congress exhaustively on this issue. 

“Securing permanent federal excise tax recalibration for small brewers has been a top priority for the Brewers Association since 2009,” writes BA Federal Affairs Director Katie Marisic, who notes that, “The passage of CBMTRA represents an annual savings of $80 million for craft breweries.” 

The fact that COVID is continuing to put the beer and beverage industries in grave peril only added to the tension. With BI estimating more than 651,000 jobs to be lost to COVID by the end of this year, some might even say desperation.

“I’ll pay my taxes. But on top of everything else we worry about paying an extra tax on top of what we already pay on top of other industries (most of which don’t pay FET),” says Goddard. “It’s very, very difficult to plan and create an environment to make your employees comfortable that they’re going to have a job January 1st.”

BA CEO Bob Pease says 81% of his members took part in the federal Payroll Protection Program (PPP) program this year, which has been almost universally criticized for failing to provide nearly enough help to small food and drink companies. He also says the nation’s approximately 8,200 breweries applied the savings from the temporary CBMTRA provisions to create 25,000 new jobs between 2018 and 2019. 

Larry Horowitz, head of brewing at Louisville’s Ten20 Brewing, which opened this fall, wants to employ 100 people but so far has only hired 20 because of COVID. He told the BI forum that without CBMTRA, he expected his FET rate to double. 

“That’s roughly equivalent to a full-time employee,” he said. 

CMBTRA is exceedingly popular among members of Congress, perhaps owing a bit to the fact that every Congressional district in the country houses a craft brewery, not to mention any assortment of wineries, distilleries and the like. As testament, the bill bridges a bipartisan span of 350 sponsors in the House and 77 in the Senate. 

“I’ve seen firsthand how incentives for craft beverage producers have helped Oregon small businesses grow, hire and provide new benefits to their workers. Extending these breaks is especially important given how hard the pandemic has hit these small businesses,” primary Senate sponsor Ron Wyden (D-OR) wrote in a statement.

Upon passage, BI President and CEO Jim McGreevy wrote in a statement, “With the passage of permanent alcohol excise tax relief … brewers and beer importers and the millions of American jobs that depend on the beer industry, from farmers to restaurant workers, will have long-term tax certainty that will help them weather the COVID-19 pandemic.”

But he added that Congress needs to do more to save the industries that provide and support hospitality. 

“This legislation is a first step to helping the bar and restaurant industry recover, but more is needed to help our friends and neighbors who work in the hospitality industry who have been particularly impacted by the pandemic,” he wrote.

In a statement celebrating passage of both the COVID and FET relief bills put out by the Save the Beer Economy coalition of brewing, hospitality, agriculture, manufacturing and retail interests, National Restaurant Association (NRA) Executive Vice President Sean Kennedy said, “Restaurants and our partners at the craft brewers, distillers, and wineries that supply our bars appreciate the effort to extend this important tax relief… Drink sales, both in our restaurants and through delivery, have been a lifeline during the pandemic, and will continue to play an important role through recovery.”

Though suggesting more needs to be done, the NRA is cheering the COVID spending package for reviving PPP, which this time offers specific, favorable terms exclusively to restaurants. The organization also applauds Congress for increasing tax deductions for business meals, among a few additional tax breaks designed to aid eateries. 

However, a large assortment of critics in both parties and representing an array of interests deride the meal deduction as a baffling and useless perk that will benefit no one outside the “three martini lunch crowd” that tends to take its dollars to expensive corporate chains, many of which are under extraordinarily limited seating restrictions into the foreseeable future.

The Independent Restaurant Coalition, which has been lobbying for the “Restaurants Act” that calls for $120 billion in direct funds to independently owned restaurants, isn’t happy with the relatively limited amount of help they feel they receive in the spending package. 

However, independent restaurants with bars will, like their corporate counterparts, benefit indirectly from FET reform, as well.