WASHINGTON, DC — WineAmerica has long taken a leadership role in advocating for the Craft Beverage Modernization and Tax Reform Act (CBMTRA), and last night learned that the essential tax benefits of CBMTRA will be made permanent as part of the year-end omnibus and Covid-19 relief package announced by Congressional leadership. The CBMTRA was initially enacted in 2017 and was set to expire on December 31, 2020.  The CBMTRA reduces federal excise taxes for all American wineries. In a time of uncertainty, the new certainty that these tax rates will remain in effect will now allow the wineries to focus proactively on the challenges which lie ahead.

“After WineAmerica’s years of work to make permanent the federal excise tax rates under the Craft Beverage Modernization and Tax Reform Act, we are delighted that it has finally been achieved,” said Jim Trezise, President of WineAmerica. “This newfound certainty about future tax rates will let wineries confidently plan future investments in employees, facilities, and marketing, benefiting the national, state, and local economies. We thank our beverage coalition partners and the hundreds of supporters in Congress for this major breakthrough. Diversity is our Strength, Unity is our Power.”

The CBMTRA had unprecedented bipartisan support in both chambers of Congress, including 77 Senators and 351 Representatives who became cosponsors. WineAmerica would like to specifically thank the following House Members and Senators for their support and leadership in making the CBMTRA permanent:

House Speaker Nancy Pelosi (D-CA)

House Minority Leader Kevin McCarthy (R-CA)

House Ways and Means Chairman Richard Neal (D-MA)

House Ways and Means Ranking Member Kevin Brady (R-TX)

Co-Chair of the Congressional Wine Caucus, Rep. Mike Thompson (D-CA)

Co-Chair of the Congressional Wine Caucus, Rep. Dan Newhouse (R-WA)

Lead House sponsor of the CBMTRA, Rep. Ron Kind (D-WI)

Lead House co-sponsor of the CBMTRA, Rep. Mike Kelly (R-PA)

Senate Majority Leader Mitch McConnell (R-KY)

Senate Minority Leader Charles Schumer (D-NY)

Senate Finance Chair Charles Grassley (R-IA)

Senate Finance Ranking Member and Lead Senate sponsor of the CBMTRA, Ron Wyden (D-OR)

Lead Senate co-sponsor of the CBMTRA, Senator Roy Blunt (R-MO)

The CBMTRA reduces federal excise taxes for all American wineries. In a year of uncertainty, the certainty of knowing federal taxes won’t increase will allow the industry to focus on the challenges that the new year will bring.

The House and Senate are expected to vote on the legislation today, with the President’s signature following soon after.

Contact: Michael Kaiser, Vice President of Government Affairs at mkaiser@nullwineamerica.org or 202-223-5172.

Shutdown Survey…Excise Tax Extension…Bond Requirement…New Members…Winning Wine

If you are not already a member of WineAmerica, join now!

Shutdown Affects Wineries 

Need a COLA? You’re out of luck.

As the partial government shutdown enters its fifth week, wine industry members needing Certificate of Label Approvals or other help from the Tax and Trade Bureau are out of luck, since the Treasury Department, TTB’s parent agency, is one of those shut down.

As a result, last week WineAmerica conducted an online survey sent to all American wineries in order to assess the actual impact so we can share it with members of Congress and the Administration. The inability to get approved COLA’s has a ripple effect, since wineries may not sell their product without them, delaying their cash flow as well as the various taxes that federal and state governments rely on. And, of course, consumers can’t enjoy the wines.

It’s a lose-lose-lose situation.

Priority #1: Excise Tax Extension

While many government agencies are shutdown, WineAmerica staff and lobbyists have been busy working on Capitol Hill with our beverage coalition partners on getting an extension to the Craft Beverage Modernization and Tax Reform Act (CMBTRA) or, far better, making it permanent.

Otherwise, one year from now, excise taxes for wineries of all sizes will go up dramatically.

CBMTRA was one of very few bills that had strong bipartisan support, with 55 Senate and 305 House co-sponsors from both sides of the aisle–unheard of in today’s Washington. The way DC works (or sometimes doesn’t), we now have to start all over, and so we have.

The beverage coalition–including associations representing wine, beer, spirits, and cider–met last week with key members of the both chambers and secured the originating sponsors: Representatives Ron Kind (D-WI) and Mike Kelly (R-PA), and Senators Roy Blunt (R-MO) and Ron Wyden (D-OR). Senator Wyden originated the bill a couple years ago, and Senator Blunt got it inserted into the broader Tax Cuts and Jobs Act. 

The next step is enlisting other co-sponsors from around the country, and we will work with our colleagues in the State and Regional Associations Advisory Council to reach out to their elected officials in Washington.

The bill includes a series of tax credits which lower the effective tax rate on various levels of production, and may be used on sparkling wines as well as table wines. In addition, for tax purposes the alcohol by volume (ABV) limit for table wines was increased from 14% to 16%.

However, the bill is also set to expire on December 31, 2019 which, if that occurred, would reverse all the benefits.See the chart below to assess how much you are saving now (and would lose if we don’t extend this).

Glitch Fix: Alas, as often happens when complex bills are rushed through Congress at midnight, technical errors occur, and this one was no exception.

The problems had to do with the application of the new tax system to custom crush facilities and bonded wine cellars, and could have had very damaging effects. Once again, WineAmerica worked closely with Wine Institute and the Napa Valley Vintners Association to start fixing the glitches, some of which have already occurred.

It is important to note that when all the glitches are fixed, the corrected system will be retroactive to January 1, 2018, so wineries will eventually be made whole.

WineAmerica Vice President Michael Kaiser is the resident expert in this area. (mkaiser@nullwineamerica.org)

We take care of your business climate so you can take care of your business.

Federal Bond?

Do you need a federal bond for your winery?

That question was addressed in WineAmerica’s “Weekly Harvest” e-newsletter for members that goes out at the beginning of each week. Next Monday’s edition will include information about the structure of the excise tax reform in the CBMTRA. Both subjects are typical of the practical, timely, helpful information members get each week.

For a limited time only, we’re sending it beyond our membership base to all wineries in the country to demonstrate WineAmerica’s value. (If you didn’t get it, contact tgood@nullwineamerica.org and ask that she send it and add you to our e-list).

Oh, about the bond requirement: The bottom line, in simplistic terms, is that wineries with less than $50,000 of excise tax liability in 2018 don’t need a federal bond, but there are also TTB reporting requirements before you can benefit from this savings. So make sure you read the newsletter carefully, and contact Michael Kaiser with any questions (mkaiser@nullwineamerica.org).

Elimination of the federal bond requirement for some wineries is just another example of the money-saving policies that WineAmerica has successfully advocated for over the years. Others include the CBMTRA, the Small Producer Tax Credit, and Repeal of the Special Occupational Tax.

As a result of all this, a 10,000-gallon winery saves over $11,000 each year–and their WineAmerica dues are only $500. Talk about a great Return on Investment!

WineAmerica: We Save You Money

Welcome New Members

Since the last edition of this newsletter, we have been pleased to welcome three new members: Marker Cellars Family Winery (TX), Lakeland Winery (NY), and Zugibe Vineyards (NY). As a New Yorker, I’m proud that my state has the most WineAmerica members of any state, but I would also love to see that change because other states boosted their support.

Secrets of Success: Prioritization, Persistence, and Partnerships form the key blend in moving legislation over the finish line. Our WineAmerica team clearly articulates the wine industry’s needs, keeps repeating that message, and joins with other groups to make it all happen.

Another reason for WineAmerica’s effectiveness in the area of national grassroots public policy is the large number of winery members from 44 states–which means 88 U.S. Senate offices and hundreds in the House of Representatives. The map below shows states where our members are from (other than those shown in white which have none–though we’re working on them!)

(States in purple represent WineAmerica’s membership, and we were delighted to recently turn Alaska purple.)

If you are not already a WineAmerica member, we encourage you to join today.

Winning Wines

There was no WineAmerica Perspectives last week because I was in Cloverdale, CA judging at the San Francisco Chronicle Wine Competition, the nation’s largest with nearly 7,000 entries from all around the country. As always, it was very well run and a lot of fun to taste all kinds of wines, not to mention enjoying wonderful dinners at night.

The “Chronicle”, as we call it, is also fair, given the fact that wines from virtually everywhere and of every type are not only given serious consideration, but often win top awards. For example, of the top eight wines in various categories, five were from California (where the vast majority of entries originated), but the other three from New York, Texas, and Virginia.

Wine–The All-American Art Form!

Cheers!

Jim Trezise

President, WineAmerica

(Interested in receiving this email? Contact tgood@nullwineamerica.org)

Craft Beverage Reform and Tax Modernization Act Introduced as Amendment to FAA Bill

by Michael Kaiser

4.7.16

Senators Ron Wyden (D-OR) and Roy Blunt (R-MO) have introduced the Craft Beverage Modernization and Tax Reform Act (CBMTRA) as an amendment to the Federal Aviation Administration (FAA) reauthorization bill. The FAA, like any independent federal agency, is required to be reauthorized every few years by Congress in order to be fully funded. Often times, other policy items (or riders) are added by amendment to an unrelated bill in order to secure passage. The FAA reauthorization is currently being debated in the Senate and could be voted on as early as next week.

As we reported last year, the CBMTRA is a comprehensive alcohol excise tax reform bill containing tax provisions for every alcohol commodity. WineAmerica was neutral on the bill as originally written (see our initial analysis here), but worked over the course of the Summer and Fall of 2015 to secure an agreement that was more beneficial to the American wine industry. The bill was close to being added to the FY 2016 Omnibus Appropriations Bill but that effort fell short at the last minute. The bill has now been revived this past week.

The specific provisions for wine are as follows:

Expands Tax Credits for All Wineries

Under present law, wine is subject to an excise tax of between $1.07 and $3.40 per gallon, based on alcohol content and carbonation level. Qualifying small domestic wineries producing 250,000 wine gallons or less are eligible for a tax credit (Small Producer Tax Credit) generally equal to 90 cents per gallon on the first 100,000 gallons produced, with that benefit phasing out between 150,000 gallons and 250,000 gallons. This provision removes the phase out and replaces the credit with a new tiered credit system for wine produced in the U.S. or imported as follows:

• 1.00 credit for the first 30,000 wine gallons produced
• $0.90 credit for the next 100,000 wine gallons produced (30,001 to 130,000)
• $0.535 for the next 620,000 wine gallons produced (130,001 to 750,000)
• All wine produced over 750,000 will be taxed at the regular rate.
• In addition, this provision removes the existing prohibition against claiming the credit for naturally sparkling wines.

Expands the Alcohol Threshold for Table Wine

Under current law, still wine is taxed at different rates based on alcohol content. Still wine containing not more than 14% alcohol by volume is taxed at $1.07. Still wine above 14% and less than 21% alcohol by volume is taxed at $1.57 per gallon. It is important to note that for labeling purposes alcohol content in wine may vary from the stated amount within certain tolerances, however no such tolerances exist for tax purposes. The CBMTRA would provide that wines up to 16% alcohol by volume qualify for the $1.07 tax rate, raising the threshold for table wine from 14% to 16%.

Increases Carbonation Tolerance Levels for Low Alcohol Wines

Current law provides a tolerance for still wine of 0.392 gram of carbon dioxide per hundred milliliters of wine, which is generally taxed at $1.07 per wine gallon. Wines exceeding this limitation are taxed as “sparkling wine” at either $3.30 or $3.40 per wine gallon. The CBMTRA would increase that tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine for wines produced primarily from grape or solely from honey and water (mead), which do not contain any other fruit and contains no more than 8.5% alcohol by volume.

WineAmerica supports the passage of the Craft Beverage Modernization and Tax Reduction Act. This is the first time wine, beer and spirits have all been supportive of the same federal tax reform package. We commend Senators Wyden and Blunt for introducing the CBMTRA as an amendment to the FAA reauthorization bill and look forward to working with them and our industry partners to ensure passage in the Senate and then turn our focus to the House of Representatives.

***

Questions? Contact Michael Kaiser, Director of Public Affairs, mkaiser@nullwineamerica.org.

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations.  As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy

As we reported on late last year, the Fiscal Year 2016 Omnibus Appropriations Bill several provisions that impacted the wine industry. One of the provisions will drastically change how many small wineries will file their federal excise tax.

Currently alcohol producers liable for not more than $50,000 per year in federal excise taxes to file and pay such taxes on a monthly basis. The new law allows for those wineries to now file and pay their taxes on a quarterly basis, rather than by month. Additionally, those producers liable for not more than $1,000 per year may pay taxes annually, rather than quarterly. The provision also exempts such producers from IRS bonding requirements.

What that means is that wineries that are liable for $50,000 or less in federal excise taxes will be exempt from the requirement to file a bond covering operations or withdrawals of wines for non-industrial use. This will be a saving of $1,000 per year for most American wineries. TTB is in the process of writing the new regulations for both of these tax provisions and they will be implemented on January 1, 2017.

WineAmerica worked to secure passage of the Omnibus Appropriations Bill which included this provision, as well as the increased funding for the label approval program at TTB. This is just one example of the work that WineAmerica does in Washington, DC that benefits the entire American wine industry.

Reach out to Michael Kaiser, Director of Public Affairs here at WineAmerica with any questions. mkaiser@nullwineamerica.org

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations.  As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

Happy Holidays from all of us at WineAmerica. We had a very productive and successful year and we look forward to 2016. We will be back in the new year with a full slate of work on such issues as music licensing requirements and federal excise tax reform.

Congress wrapped up their work for the year today with the passage of the Fiscal Year 2016 Omnibus Appropriations Bill, sending it to the President’s desk for final signature. The bill fully funds the federal government until September 30, 2016. The bi-partisan agreement features several provisions relevant to the American wine industry.

• TTB Funding: The bill features $106,439,000 in appropriations funding for TTB. This is $5,000,000 more than last fiscal year, with that money dedicated to label and formula approval.
• COOL Repeal: The bill repeals the mandatory country of origin labeling requirements for certain cuts of beef and pork. The repeal of the COOL rule will protect the American wine industry from costly tariffs placed on wine exported into Canada and Mexico.
• Tax Filing Requirements: Alcohol producers liable for not more than $50,000 per year in federal excise taxes to file and pay such taxes on a quarterly basis, rather than by month. Additionally, those producers liable for not more than $1,000 per year may pay taxes annually, rather than quarterly. The provision also exempts such producers from IRS bonding requirements.
• Definition of Hard Cider: The provision defines hard cider for purposes of alcohol excise taxes as a wine with an alcohol content of between 0.5 percent and 8.5 percent alcohol by volume, with a carbonation level that does not exceed 6.4 grams per liter, which is derived primarily from apples, apple juice concentrate, pears, or pear juice concentrate, in combination with water. The previous alcohol content limit for hard cider was 0.5 percent to 7 percent.
• Market Access Funding: The bill fully funds the USDA Market Access Program (MAP) at $200 million.  MAP funds are key for states expanding their wine sales into foreign markets.

If you have any questions about these provisions or any other part of the bill, please contact Michael Kaiser, Director of Public Affairs at mkaiser@nullwineamerica.org.