A host of small distilleries breathed tentative sighs of relief this week as Congress demonstrated signs of life on a liquor tax cut set to expire at the end of the year.
Squirreled away within a $1.4 trillion spending deal U.S. House lawmakers passed Tuesday is a one-year extension on the incentive — an 80 percent cut on federal excise taxes paid on distilleries’ first 100,000 proof gallons per calendar year.
The U.S. Senate must approve that deal by Friday — when current funding expires — to avert both a government shutdown and a sudden 400 percent increase on the liquor taxes, the first payment on which is due January 15.
Jeff Quint, owner of Cedar Ridge Winery and Distillery in Swisher, said he visited most of the Iowa Congressional delegation’s Washington, D.C., offices in June to discuss the tax cut, and met directly with Republican Sen. Chuck Grassley.
“I knew based on that conversation that he was well aware of the importance of that bill to the Iowa economy for our 15 to 16 new distilleries ... but that’s just one small piece of the puzzle,” Quint said.
“There are plenty of bills that plenty of people are behind and they don’t move.”
Distilleries, including Cedar Ridge, weren’t sure Congress was going to extend the liquor tax cut as recently as last weekend, and a “monstrous effort” from multiple national spirits advocacy groups was needed to get the ball rolling, Quint said.
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If the tax cut were to expire, he estimated Cedar Ridge would have to pay an extra $320,000 on the 32,000 proof gallons it aims to sell in 2020. The tax cut lowers the excise tax on each of the first 100,000 proof gallons from $13.50 to $2.70.
Both Quint and Ryan Burchett, co-owner of Mississippi River Distilling Co. in Le Claire, said the tax cut — formally called the Craft Beverage Modernization and Tax Reform Act — has helped their businesses add full- and part-time jobs.
Cedar Ridge currently has 24 full-time and 28 part-time employees and, Quint said, now that he’s “optimistic” the liquor tax cut will be extended, he plans to make two new job offers over the next two weeks.
Burchett said Mississippi River Distilling had three full-time and five part-time employees in 2017, before Congress approved the liquor tax cut as part of the broader Tax Cuts and Jobs Act.
Those figures have doubled in the two intervening years, and though the numbers might appear small, Burchett said they make a difference in smaller Iowa communities.
The tax cut is “an absolutely meaningful way that the federal government is supporting small businesses, and it’s not having a huge effect on the Alcohol and Tobacco Tax and Trade Bureau because it’s only isolated to the first small bit of production,” he said.
Burchett said he’s relieved Congress appears to have reached a spending agreement.
“The prospect of slapping it back on and raising our taxes fourfold certainly was not an appetizing situation for us,” he said.
But Burchett said he’s concerned Congress currently is “kicking the can down the road,” to Dec. 31, 2020, and hopes the tax cut will one day become permanent.
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“The proof is in the pudding with what’s happening in the industry across the country,” he said, of the incentive’s value for distilleries.
The nationwide number of craft distillers grew to 1,835, or by 15.5 percent, in August 2018 following the tax cut, according to the latest data from the American Craft Spirits Association, Park Street and International Wine and Spirits Research.
The craft distilling industry in 2017 encompassed $3.7 billion in sales, or an annual growth rate of 29.9 percent, the groups reported.
Quint also said lawmakers were “kicking the can” in extending the tax cut but that he sees this as a positive.
“We’re very glad it’s alive for another year, so now, next year, you’ll see us again working to make it permanent,” he said.
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