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)

Special Year-End Edition

Merry Shutdown…?

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

Background Music (Andy Williams): “It’s the most won-der-ful time of the year…”

Twas the week before Christmas

And all through the House

The Members were voting

And continuing to grouse

Ah yes, after the ongoing border wall kerfluffle and the on-and-off threats of a government shutdown, here we are on the Friday before Christmas with continuing uncertainty about whether the Departments of Agriculture, Justice, State, NSA and others will be shut down and nearly a million government employees won’t be paid for as long as the shutdown lasts.

About 10 days ago, President Trump held a live TV meeting in the White House with Senator Chuck Schumer and Representative Nancy Pelosi during which he told them that if he didn’t get funding for his border wall, he’d be “proud” to shut down the government, and wouldn’t blame them (to their glee).

Then the atmosphere temporarily softened, and the Congress and President seemed to agree on a regular feature of Washington politics called a “Continuing Resolution” (CR), which some describe as “Kick the Can down the Road” when they can’t come to agreement on time. So Congress passed a CR to keep the government functioning until they have the chance to argue again.

Not so fast: After the House and Senate passed the CR, the President said he wouldn’t sign it, so it’s now back in the lap of Congress with border wall money, but that’s not likely to get passed. And, most recently (this morning’s tweet), the President threatened that it would be a “very long” shutdown if he didn’t get his way.

The deadline, when those government agencies actually run out of money, is midnight tonight, so we won’t have to wait too much longer to know the outcome.

Background Music (Children’s Choir): “Si-lent night, ho-ly night, all is calm, all is bright…”

It’s amazing what a nice, peaceful town Washington can be when the politicians go home for the holidays. Actually, a number of those who didn’t get re-elected never even returned to DC after the election (but still collected their paychecks, of course).

Now they’ll soon all be gone, and Washington will become quite a civilized place.

Background Music (Everyone, a tad tipsy): “Should auld ac-quain-tance be for-got, and ne-ver brought to mind…”

So now that 2018 will soon be just a memory, we head into a new year with a new balance of power in Washington, and the question of whether civility, compromise, and competence will ever return. Let’s hope that 2019 will be a…

Happy New Year!

2018: A Very Good Year

It seems like yesterday, but was actually a year ago that the 2017 Tax Cuts & Jobs Act was passed, including within it the federal excise tax reductions for wine, beer and spirits created by the Craft Beverage Modernization and Tax Reform Act.

Then just yesterday, the President signed the massive five-year Farm Bill that will continue to fund wine industry priorities in the areas of research, export promotion, and block grants, among many other things.

These two events are like bookends reflecting the work WineAmerica staff and lobbyists Meyers & Associates have been doing over the past few years. The success is very gratifying because it helps the industry we serve.

As Frank Sinatra would have crooned, “It Was A Very Good Year.”

As we wind up 2018 and prepare for 2019, it’s worth briefly looking backward at accomplishments and forward at challenges.

Tax Reform: For a year now, American wineries of all sizes have been saving significant money on federal excise taxes due to inclusion of the Craft Beverage Modernization and Tax Reform Act (CBMTRA) in the Tax Cuts & Jobs Act.

WineAmerica worked closely with Wine Institute and beverage coalition partners in the beer and spirits sectors for over two years to achieve this success. Coordination with our grassroots State and Regional Associations Advisory Council, plus Oregon and Washington groups, also helped to get widespread support in Congress–with 305 Representatives and 55 Senators co-sponsoring the bill, a rare bipartisan show of support in today’s 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.

WineAmerica Vice President Michael Kaiser is the resident expert in this area.

 *****

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.

*****

Farm Bill: As reported last week when Congress passed it, the five-year Farm Bill is a big deal for the American wine industry, in part because its multi-year timeframe allows planning for research and promotion.

There are many provisions that could benefit our industry, but the most vital ones–funding for research, export promotion, and block grants–all ended up very well. Now our staff and lobbyists can take a few years off from this issue until negotiations begin on the 2023 Farm Bill.

*****

Trade Policy: The major result this year was part of the USMCA (United States-Mexico-Canada Agreement) which amended and replaced NAFTA. WineAmerica worked with Wine Institute to ensure that American wines could be sold in British Columbia, Canada grocery stores, which previously was forbidden.

International trade remains a very broad and challenging area, especially with respect to China, but WineAmerica will continue monitoring issues and advocating policies beneficial to American wineries.

*****

Music Licensing: WineAmerica Vice President Tara Good has been working diligently for several years to protect American wineries from unfair and predatory practices by Performing Rights Organizations such as ASCAP and BMI.

In October, the Music Modernization Act included language that protects Justice Department Consent Decrees on those companies. Tara has also negotiated with both companies directly, resulting in a winery-specific license from ASCAP as well as a 10% discount for WineAmerica members.

 *****

ADA Website Compliance: Late in the year, the New York Wine & Grape Foundation alerted WineAmerica to a new regulatory/legal issue involving winery website compliance with the Americans with Disabilities Act (ADA).

WineAmerica informed the broader industry about the issue, including through our State and Regional Associations Advisory Council, and drafted guidelines for member wineries.

*****

Membership: Perhaps because of all those and other accomplishments, 2018 was the strongest year in WineAmerica’s history for generating new memberships.

We gained over 50 new members from around the country, bringing our total to over 500 in 44 states. In addition, many new members are marquee wineries such as Channing Daughters and Wolffer Estate in New York, Duplin in North Carolina, Ste. Michelle Wine Estates in Washington, Chateau Montelena and Tablas Creek in California. We even got Bear Creek Winery & Resort in Alaska!

We also gained several new members in the SRAAC, including the Atlantic Seaboard Winery Association, Finger Lakes Wine Alliance, Napa Valley Vintners Association, and Willamette Valley Wineries Association.

*****

A Look Ahead

We accomplished a lot in 2018, but we have just as much to do in the coming year.

Tax Bill Extension: This is priority #1, because if we don’t get it extended beyond December 31 or made permanent, all the tax benefits wineries have enjoyed this year will be gone. (We will also be working on the remaining tax bill glitches at the same time.)

Trade Policy: Congress still needs to approve the USMCA, so we will be working to make that happen.

Music Licensing: There is always more work to do on this, both from regulatory and legislative standpoints.

Immigration Policy: This may be the most complex and contentious of all issues, but that doesn’t mean we can ignore it. We need to keep advocating for a stable, reliable, motivated migrant labor force for the American wine industry.

TTB Liaison: They have asked for comments on the AVA system and label-related issues, which we will be coordinate on behalf of the American wine industry.

Spray Drift from Other Crops: This seems to be an increasingly widespread problem with wineries in many areas of the country. WineAmerica will be conducting a survey at the beginning of the year to assess the extent of the problem, and possible solutions.

Membership Development: WineAmerica is stronger today than it has been in many years, thanks to an engaged Board of Directors, excellent staff, superb lobbyists, and all of our members. But we still need to grow, and we welcome wineries and winery associations from all over the country to join us.

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

*****

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 member of WineAmerica, join now!

Diversity is our Strength. Unity is our Power.

May you have a wonderful holiday season, and sprinkle random acts of kindness on many others.

Cheers!

Jim Trezise

President, WineAmerica

1.31.2017

On Monday January 30th, leading House and Senate Members reintroduced the Craft Beverage Modernization and Tax Reform Act. This comprehensive bill would drastically reduce the federal excise tax (FET) burden on wineries, breweries and distilleries. Every congressional district in the United States includes a brewery, winery, distillery, importer or industry supplier, all of whom operate under an outdated tax structure.  A reduction in the FET will result in consumers benefiting from greater choice and allow businesses to invest in product development, improve infrastructure and stimulate employment in communities across the country. WineAmerica strongly supports the passage of the Craft Beverage Modernization and Tax Reform Act.

Senate Introduction

The Senate version of the bill (S.236) was introduced by Senator Ron Wyden (D-OR). Senator Wyden has been the main architect of this bill and originally conceived it in June 2015. He was joined by eleven of his fellow Senators on the new version of the bill. This bipartisan piece of legislation features six Democrats and six Republicans as original co-sponsors, they are:

Democrats
Tammy Baldwin- WI
Michael Bennet- CO
Thomas Carper- DE
Robert Casey- PA
Debbie Stabenow- MI
Ron Wyden- OR

Republicans
Roy Blunt- MO
Shelly Moore Capito- WV
Cory Gardner- CO
Jerry Moran- KS
Rob Portman- OH
Pat Roberts- KS

Senator Blunt of Missouri has also been tireless in his support for the bill, he is the chief sponsor on the Republican side.

House Introduction

The House version of the bill (H.R. 747) was once again co-sponsored by Reps. Erik Paulson (R-MN-3) and Ron Kind (D-WI-3). They are joined by a diverse and bipartisan group:

Democrats:
Earl Blumenauer (OR-3)
Peter DeFazio (OR-4)
Ron Kind (WI-3)
Chellie Pingree (ME-1)
Mike Thompson (CA-5)

Republicans
Mark Amodei (NV-2)
Tom Emmer (MN-6)
Mike Kelly (PA-3)
Patrick McHenry (NC-10)
Dan Newhouse (WA-4)
David Reichert (WA-8)
Patrick Tiberi (OH-12)

Major Provisions for Wine

The major tax relief provisions specific to wine are nearly identical to the previous amended version of the bill, with some minor additions:

Expand Excise Tax Credit for 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 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. Hard cider is taxed as wine, subject to lower rates and a reduced credit amount. This provision removes the phaseout and replaces the credit with a new tiered credit system for wine produced in the U.S. or imported as follows: $1.00 for the first 30,000 wine gallons, $0.90 for the next 100,000 wine gallons, and $0.535 for the next 620,000 wine gallons. In addition, this provision removes the existing prohibition against claiming the credit for naturally sparkling wines. Conforming expansions are made to the cider credit. Find an estimate of your new tax rate here

Expand Alcohol Threshold for Certain Wines

Under current law, still wine is taxed at different rates based on alcohol content. Still wine containing not more than 14 percent ABV is taxed at $1.07. Still wine above 14 percent and less than 21 percent ABV is taxed at $1.57 per gallon. For labeling purposes only, alcohol content in wine may vary from the stated amount within certain tolerances, however no such tolerances exist for tax purposes. This proposal would provide that wines up to 16 percent ABV may qualify for the $1.07 tax rate, in order to provide more certainty for wine producers.  

Increased Carbonation Tolerances for Certain Low ABV Wines

Present 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. This provision 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, which do not contain any other fruit and contains no more than 8.5 percent ABV.

Reduce Compliance and Tax Burdens for all Producers, and Improve Excise Tax Administration

The bill exempts beverage producers from complex capitalization rules for aged products, removing the requirement that bottle aging be considered in production time.  The bill also continues TTB funding increases that were secured in for FY 2016 of $5 million for label and formula approval and $5 million for fair trade practice enforcement. The increases are to be authorized for FY 2017 and FY 2018, along with an additional $5 million for the cost of implementing the bill, including new federal permit approvals.

Next Steps for WineAmerica

With the reintroduction of the bill, WineAmerica will now begin the process of securing additional co-sponsors. At the end of the last legislative year, the bill had nearly 300 House co-sponsors and 53 Senators. Along with our alcohol industry partners, our goal will be to match or exceed the totals from 2016. Concurrently we will be meeting with the relevant House and Senate Committees as the agenda for tax reform is set. We look forward to working with our members and Congress to to ensure the FET burden on the beer, wine and spirits sector is at the forefront of the discussion.

The new bond exemption is for wineries that expect to have not more than $50,000 in excise taxes imposed in calendar year 2017. Additionally, to qualify for the exemption wineries must have been liable or no more than $50,000 in federal excise taxes in 2016. Because eligibility for the bond exemption depends in part on a taxpayer’s expected tax liability, taxpayers who are eligible for the bond exemption and who want to operate without a bond must notify TTB and obtain TTB approval. New applicants must notify TTB that they are eligible for the bond exemption during the initial application process. Existing taxpayers who wish to apply for the bond exemption must do so by amending their permit.

TTB amended its application forms (including the online equivalents submitted using TTB’s Permits Online system) to allow taxpayers to notify TTB that they are eligible for the bond exemption and request TTB approval to operate without a bond. For more efficient processing, TTB recommends that taxpayers who have previously applied using Permits Online, as well as all new applicants, use Permits Online to submit applications and amendments. Existing taxpayers who are not yet users of Permits Online should file this amendment by paper application. TTB cannot begin processing an existing taxpayer’s bond termination request until it receives the taxpayer’s final tax payments covering any remaining excise taxes incurred in 2016.

For more information or if you have specific questions please contact Michael Kaiser at mkaiser@nullwineamerica.org or 202-223-5172

***

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.

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

Washington, D.C. – Representatives Erik Paulsen (R-MN) and Ron Kind (D-WI) have introduced H.R. 2903, the Craft Beverage Modernization and Tax Reform Act. This bill mirrors Senator Ron Wyden’s (D-OR) bill introduced in the Senate earlier this month. H.R. 2903 has been referred to the House Ways and Means Committee for consideration.

Like the Senate bill, H.R. 2903 consolidates many of the provisions of the various beer, distilled spirits and cider bills into one comprehensive proposal, and incorporates a change in tax structure for the winery small producer tax credit.

The following tax provisions are included for wine:

• The alcohol content for table wine is changed from 7% to 14% alcohol by volume to 7% to 14.25% alcohol by volume.
• An expansion of the Small Producers Tax Credit eligibility from 250,000 gallons produced per year to 2,000,000 gallons produced per year.
• A credit of $1.00 per gallon on the first 30,000 gallons of still wine for all producers.
• A $.90 per gallon on the first 100,000 gallons of still wine (beyond the initial 30,000) if total production is less than 2,000,000 gallons per year.
• If production is between 1,000,000 and 2,000,000 gallons the credit is reduced 1% for every 10,000 gallons produced in excess of 1,000,000.
• The current tax rates for wines remain as is, and the credit is not available for sparkling or carbonated wines.

The bill will exempt the aging period of beer, wine, and spirits from certain capitalization rules. Under current law, taxpayers may generally deduct interest expense on a loan in the year in which it is incurred, along with certain costs of goods sold. Interest expense, and other direct and indirect costs related to the production of goods for sale, generally must be capitalized over the production period and recovered when the goods are sold. The IRS has held that producers of wine must include the time that wine ages in bottles as part of the production period, which concludes when the wine vintage is officially released to the distribution chain. In addition, those same rules apply to barrel aging of beer, wine, and distilled spirits. This proposal would exclude aging periods for beer, wine, and distilled spirits from the production period for purposes of these capitalization rules.

H.R. 2903 would also allow taxpayers with alcohol beverage tax liability of $50,000 or less to file quarterly, and would remove the bonding requirement for those taxpayers. A further modification would permit annual filing for those taxpayers expecting to owe less than $1,000 in alcohol excise tax.

Questions? Contact Michael Kaiser at mkaiser@nullwineamerica.org.

Washington, D.C. – Senator Ron Wyden (D-OR) has introduced S. 1562, “The Craft Beverage Reform and Modernization Act of 2015.” This bill would amend the current federal excise tax structure for all beverage alcohol. Senator Wyden has been consulting with the various alcohol commodity groups, including WineAmerica over the last few weeks. This proposal consolidates many of the provisions of the various beer, distilled spirits and cider bills into one comprehensive proposal, and incorporates a change in tax structure for the winery small producer tax credit.

The following tax provisions are included for wine:

• The alcohol content for table wine is changed from 7% to 14% alcohol by volume to 7% to 14.25% alcohol by volume.
• An expansion of the Small Producers Tax Credit eligibility from 250,000 gallons produced per year to 2,000,000 gallons produced per year.
• A credit of $1.00 per gallon on the first 30,000 gallons of still wine for all producers.
• A $.90 per gallon on the first 100,000 gallons of still wine (beyond the initial 30,000) if total production is less than 2,000,000 gallons per year.
• If production is between 1,000,000 and 2,000,000 gallons the credit is reduced 1% for every 10,000 gallons produced in excess of 1,000,000.
• The current tax rates for wines remain as is, and the credit is not available for sparkling or carbonated wines.

The bill also will exempt the aging period of beer, wine, and spirits from certain capitalization rules. Under current law, taxpayers may generally deduct interest expense on a loan in the year in which it is incurred, along with certain costs of goods sold. Interest expense, and other direct and indirect costs related to the production of goods for sale, generally must be capitalized over the production period and recovered when the goods are sold. The IRS has held that producers of wine must include the time that wine ages in bottles as part of the production period, which concludes when the wine vintage is officially released to the distribution chain. In addition, those same rules apply to barrel aging of beer, wine, and distilled spirits. This proposal would exclude aging periods for beer, wine, and distilled spirits from the production period for purposes of these capitalization rules.

S. 1562 would also allow taxpayers with alcohol beverage tax liability of $50,000 or less to file quarterly, and would remove the bonding requirement for those taxpayers. A further modification would permit annual filing for those taxpayers expecting to owe less than $1,000 in alcohol excise tax.

Press Release, Wyden (D-OR): “The Craft Beverage Reform and Modernization Act of 2015” 

Questions? Contact Michael Kaiser at mkaiser@nullwineamerica.org

The TTB has issued new guidance on excise tax and operations report filing for wineries.

The TTB will now allow certain wineries to file their excise tax returns annually, rather than semi-monthly or quarterly. The requirements are: The proprietor has not given a bond for deferred payment of wine excise tax, and the proprietor:

• Paid wine excise taxes in an amount less than $1,000 during the previous calendar year.

• Is the proprietor of a newly established bonded wine premises and expects to pay less than $1,000 in wine excise taxes before the end of the calendar year.

“Not given bond for deferred payment” means you do not have an amount listed in the “deferral” space on the bond. The wine bond conditions allow up to $1,000 of the operations coverage on a wine bond of $2,000 or more to be used for deferral, so for an annual filer no additional deferral coverage would be needed. A bond of at least $1,000 and up to $1,999.99 provides $500 in automatic deferral coverage. If you show a deferral amount on the bond or would owe over $1,000 for the year, you do not qualify for annual filing.

Wineries that meet this requirement may file within 30 days of the end of the calendar year.

Proprietors of bonded wine premises operations must file the Report of Wine Premises Operations either monthly, quarterly, or annually. To qualify to file annually, a proprietor must:

• File an Excise Tax Return annually.

• Not expect the total of all bulk and bottled wine to exceed 20,000 gallons for any one month during the calendar year.

If you are not eligible to file an annual Excise Tax Return it means you are not eligible to file an annual Report of Wine Premises Operations. You also need to make sure you do not have more than 20,000 gallons of wine in any month. If you are eligible to file an annual Report of Wine Premises Operations, it is due January 15th of the year following the report year.

Questions? Contact Michael Kaiser at mkaiser@nullwineamerica.org or 202-223-5172.

See more articles from The News Post

Log-in as a member to learn more about these important issues

Problems logging-in? Email tgood@nullwineamerica.org

Last week featured three important proposals that would impact the American wine industry in a substantial way.  The Senate Finance Committee passed three tax proposals related to federal alcohol excise taxes. A cider bill would increase the alcohol and carbonation levels for hard cider. The TTB introduced a Notice of Proposed Rulemaking (NPR) changing how an American Viticultural Area (AVA) can be used on a wine label.

WineAmerica is monitoring all of these proposals. Over the next several weeks we will be meeting with members of Congress to insure that any new legislation benefits the American wine industry.

Excise Taxes

The Senate Finance Committee passed a bill making it easier for small wineries to file their federal excise taxes and a bill lowering excise taxes on small breweries.

Small BREW Act Amendment

Seeks to reduce the small brewer rate on the first 60,000 barrels.

Cider Classification

Cider bill would increase the alcohol and carbonation levels for hard cider.

TTB Proposes Major Change to AVA Labeling

New proposed TTB rule would open up the regulations for the use of American Viticultural Areas.

For more information, click here.

Questions? Contact Michael Kaiser at mkaiser@nullwineamerica.org or 202-223-5172.

See more articles from The News Post