Beer fight brewing over taxes

There’s a tax fight brewing between large beer companies and their smaller craft brethren on Capitol Hill.

The Beer Institute, which includes member companies such as Anheuser-Busch and MillerCoors, plans to “actively oppose” the Small Brewer Reinvestment and Expanding Workforce, or Small BREW Act, this year. 

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The Brewers Association — essentially the trade group for craft brewers — is lobbying for the bill, which would reduce the federal excise tax on beer from small producers. 

Chris Thorne, vice president of communications for the Beer Institute, says his trade group has dropped its neutral stance on the legislation because it divides the industry. 

“We are going to actively oppose this legislation,” Thorne said. “If the entire industry is unified and has one ask, we stand a far better chance of succeeding than when we have multiple bills to push.”

Thorne said his group opposes any tax increase on beer, but that all of the industry should unite behind one bill: the Brewer’s Employment and Excise Relief (BEER) Act, which is expected to be introduced later this year and would reduce excise taxes on beer produced by brewers large and small. 

Bob Pease, chief operating officer for the Brewers Association, said the Beer Institute has been uncomfortable with his group’s preferred legislation in the past. 

“That’s disappointing but not altogether unexpected,” Pease said. “They expressed discomfort in the past about various components in the bill so that’s why it doesn’t come as a total shock.”

If enacted, the Small BREW Act would cut the federal excise tax on beer from $7 a barrel to $3.50, which is placed on a small brewer’s first 60,000 barrels produced per year. After that initial 60,000 barrels, small brewers must pay $18 per barrel, which would be lowered to $16 under the bill. 

In addition, the bill would expand the tax code definition for a small brewer. Right now, brewers who produce up to 2 million barrels of beer per year are considered small brewers. The legislation would raise the limit to 6 million barrels per year. 

The Beer Institute said the bill amounts to a “giveaway” for a handful of profitable brewers. 

“We can’t support a policy that amounts to a giveaway to a handful of brewers that each are worth more than a billion dollars,” Thorne said. “If this bill was a pathway to market, why would you need this for a business that sells millions of cases a year?” 

The Brewers Association has microbreweries among its roughly 1,750 members, including well-known national brands like Brooklyn Brewery and The Boston Beer Co., which makes Samuel Adams. Those two companies are also part of the Beer Institute, reflecting the overlapping membership lists of the two groups. 

Small brewers argue that adjusting the excise tax would lead to another $60 million per year for a quintessentially American industry. 

“Our industry is an example of small, main-street American businesses creating jobs — manufacturing jobs in the United States, making an American product, putting Americans to work for the product that is by and large consumed in the United States,” Pease said.

The Small BREW Act was introduced last month by Rep. Jim Gerlach (R-Pa.) and already has 61 co-sponsors from both parties, according to congressional records. 

The BEER Act would create a bigger tax cut for the industry at large. Thorne said past versions of the bill would have reduced the beer excise tax from $18 per barrel to $9 for large brewers while also cutting the tax for small brewers from $7 per barrel to $3.50. 

The legislation has yet to be introduced this Congress, but Thorne said his group would be working to have the bill offered again this year.

“Our intent is to seed introduction of the BEER Act at some point,” Thorne said. “We expect that members of Congress that have historically been there for us in the past will be there for us again.” 

Pease said he saw that bill as “a defensive measure” meant to “forestall an excise tax increase.”

“We certainly do not oppose it. We would favor that bill, but we support our bill, and we are actively working for passage of our legislation,” Pease said.

The industry feuding comes as lawmakers are working on comprehensive tax reform. Trade associations for beer and other alcoholic beverages are worried that Capitol Hill will hike the excise tax to raise revenue to help ease budget problems.

“There’s not a big appetite on Capitol Hill to give a tax break to a wildly successful industry that already gets a tax break. There’s a risk because they are drawing attention to themselves when Congress is looking for revenue-raisers,” Thorne said about the small brewers. 

Others expressed concerns about the Small BREW Act as well. 

“While we oppose any increase in taxes on beer because they are regressive and are paid primarily by working men and women, we have concerns about any legislation that would seek a tax cut in the current fiscal environment,” said Mike Johnson, chief lobbyist for the National Beer Wholesalers Association, in a statement.

Lobbyists for spirits-makers said it’s the wrong time to push Congress on the excise tax.

 “Given the budgetary circumstances, we didn’t think it was worth going to the Hill to talk about rolling back federal alcohol excise taxes,” said Mark Gorman, senior vice president for government relations for the Distilled Spirits Council of the United States.

But others are seeing opportunity. Pease said he met with House Ways and Means Committee Chairman Dave Camp (R-Mich.) last year at a small Michigan brewery and they talked comprehensive tax reform.

“He mentioned that comprehensive tax reform was certainly his priority. He thought that could be one way for our issue to get addressed,” Pease said. “What we have been told for the last two or three years is that we need a vehicle to attach our provision to. If that’s comprehensive tax reform, that would be great.” 

Pease said he has met with other panel members and the trade group plans to submit comments to the committee on tax reform. 

Small brewers are also actively lobbying during their annual craft brewer conference, which is in Washington this year. On Tuesday, Pease helped lead what he called his trade group’s biggest-ever lobby day on Capitol Hill — 250 brewery owners from 45 states were scheduled to meet with staff in 90 Senate offices and about 250 House offices. 

Pease said brewers would be working to build relationships with their representatives, perhaps even strong enough to have a beer back home together.

“Even more importantly, get the lawmaker to go to the brewery,” Pease said. “When they get into a brewery, they get the manufacturing angle. You can see it.”