Brewers Get a Reprieve With Excise Tax Extension

By: Brian Pedersen

First published in Lehigh Valley Business on January 17, 2020, which you may view if you have a subscription.

Brewers get a reprieve with excise tax extension

The extension of the excise tax on brewing is a win-win, says Chris Lampe, president of the Brewers of Pennsylvania and an owner of Weyerbacher Brewing Co. in Easton.

Brewers can breathe a little easier. And so can beer drinkers.

Congress enacted legislation that will avoid a massive tax hike on beer in 2020.

For now.

As 2019 ended, the Brewers of Pennsylvania and other beer industry groups lobbied Congress to pass the Craft Beverage Modernization and Tax Reform Act, or extend the current excise tax rate before Dec. 31.

They extended the tax.

Not doing so would have meant higher taxes for brewers across the state and potentially, higher prices for consumers. However, for brewers, the $3.50 per barrel tax will remain. Had Congress not acted, the tax would have returned to its $7 rate.

In a statement, Jim McGreevy, president and CEO of the Beer Institute, said the recently signed legislation extending excise tax relief for all brewers and beer importers provides brewers and beer importers the certainty they need to continue growing and reinvesting in their businesses.

“More than two-thirds of Americans across the political spectrum want excise tax relief for the beer industry, which supports more than 2.1 million American jobs,” McGreevy said. “As we look forward to 2020, Congress must continue working to pass the extremely popular bipartisan, bicameral Craft Beverage Modernization and Tax Reform Act, and make the current beer excise tax rates permanent.”

Making the current excise tax rates permanent for all brewers would avoid a repeat of the uncertainty leading up to the end of the year, uncertainty that affects decision-making, job growth and planning for all brewers.

“Obviously, people are very happy,” said Ted Zeller, general counsel for the Brewers of Pennsylvania and an attorney for Norris McLaughlin in Allentown. “There’s a whole segment of brewers who don’t know of any other tax. Their whole business model is formulated on the lower tax. This is what they perceive it will always be.”

Planning for a potential tax hike is something that brewers should do this year, said Zeller, who specializes in liquor law. There’s always the chance Congress may not act in time to extend the current rate again.

“Plan on it not being extended and then be happy when it is,” he said. “The industry is rapidly changing so we’ll see what this year brings. It’s a highly regulated industry and it’s very difficult to predict.”

Chris Lampe, president of the Brewers of Pennsylvania and an owner of Weyerbacher Brewing Co. in Easton, said the National Brewers Association has been working hard to get the excise tax extended again.

“I don’t know how it’s going to affect Weyerbacher this year,” Lampe said. “For brewers in general, it’s a win-win because you can use the credit to purchase equipment. If you purchase equipment you can roll money back into the business.”

For one growing brewery, the news of the extension proved particularly welcoming.

“It is so beneficial to craft brewing, to what we do,” said Fred Maier, co-founder and vice president of Susquehanna Brewing Co. in Pittston, Luzerne County.

With 35 full- and part-time employees, and seven years in business, Maier has been hiring more employees and constantly buying equipment to advance the business.

“We haven’t stopped buying new equipment,” he said. “We probably would have had to spend it regardless. We are always investing back into the brewery.”

Susquehanna Brewing recently installed a can production line, which he said was a necessary investment.

He wasn’t certain that the federal government would extend the excise tax and said he was thankful for what the brewers could get.

“We were making plans on kissing it goodbye,” Maier said. “Until it’s made permanent, we don’t act like it’s permanent.”