Beer battle foams over on Capitol Hill
Brewers large and small are descending on Capitol Hill to drum up support for competing bills aiming to ease taxes on sectors of the beer industry.
The dispute pits the world’s largest beer producers against smaller craft beer makers.
While it’s hardly a new fight, recently reintroduced legislation has resulted hundreds of congressional office visits by lobbyists in perhaps the most vicious scuffle over co-sponsors the industry has ever faced.
At odds are the Fair BEER Act and the Small BREW Act, which both aim to lower federal excise taxes for small beer producers. However, key differences in the bill hold major financial implications that have split the beer industry in two.
“We work cooperatively on many other issues facing the beer industry,” said Brewers Association CEO Bob Pease.
“But we don’t see eye-to-eye on tax policy.”
The Brewers Association, which represents small and mid-size breweries from its home base in Colorado, is throwing its weight behind the Small BREW Act.
Meanwhile, the Beer Institute, who represent the purveyors of Budweiser and Miller, and the National Beer Wholesalers Association are also holding meetings to encourage lawmakers to support their preferred legislation, and “educate” them about what it says are problems with Small BREW.
“If we’re going to have tax reform, we should make it fair, equitable and comprehensive. It’s got to be cross the industry,” said Chris Thorne, vice president of communications for the Beer Institute. “Our bill recognizes the differences between those groups.”
On Thursday, Sens. Ben Cardin (D-Md.) and Susan Collins (R-Maine) reintroduced the Small BREW Act in the Senate with 25 bipartisan lawmakers signing on in support.
It provides an excise tax break for small brewers in the United States, while also expanding the definition of a small brewer — which is currently capped at one who produces less than two million barrels. Under this legislation, a company producing less than six million barrels per year will qualify for small brewer status under the tax code.
While the craft brewers argue the change is needed to keep pace with the growth of the industry, the biggest producers have argued that the increase equates to a carve-out for a select number of breweries. The makers of Yuengling and the Boston Brewing Company, which makes Sam Adams, are among a small group of brewers that produce just more than two million barrels of beer annually.
“I will go down with the ship saying that Boston Beer is a heck of a lot closer to a DC Brau or a Dogfish Head than they are to” MillerCoors and Anheuser-Busch In-Bev, Pease said.
The Beer Institute represents beer companies of all sizes, but is primarily known for members MillerCoors and Anheuser-Busch In-Bev, multi-national corporations that produce about 90 percent of the beer, by volume, that is consumed in the United States.
The larger trade group is pushing for the Fair BEER Act, which had its introduction in the House this week and features changes from previous versions of the bill.
Introduced by Rep. Steve Womack (R-Ark.) and Rep. Ron Kind (D-Wis.) on Thursday, the legislation sets up a tiered system in which the smallest beer producers, which represent about 90 percent of the industry in terms of the number of companies, pay no excise taxes.
After that, brewers producing between 7,144 and 60,000 barrels see their rates cut in half, to $3.50 per barrel. Those making more than 60,000 and up to two million would pay $16 per barrel. Anyone producing more than two million barrels of beer each year would pay $18 per barrel — the current rate.
“The Fair BEER Act allows members of Congress to support microbrewers, national craft brewers and major brewers and importers. It doesn’t force Congress to pick winners and losers, and it simplifies excise tax code,” said Beer Institute CEO Jim McGreevy.
The Fair BEER Act would also extend these tax rates to importing producers, including popular brands such as Corona and Heineken. A Senate version will be introduced in the coming weeks.
Pease acknowledges that the changes make the bill more closely aligned with what the Brewers Association would support than previous iterations of the big producers’ legislation. But he takes issue with the importer provision — which supporters say is necessary to help make the legislation compliant with trade norms.
In a Republican-controlled Congress, tackling such a nuanced tax reform bill could be a challenge.
The trade groups, however, are pouring their resources into the fight. Many member companies have in-house and outside lobby shops working on the issue, while the trade groups each have help as well.
The Beer Institute has lobbyists from WilmerHale and Thorsen French Advocacy working on their behalf, while the National Beer Wholesalers Association has Mehlman Castagnetti Rosen Bingel & Thomas and Raffaniello & Associates.
The Brewers Association, which prefers to have craft brewers show up themselves on Capitol Hill, also has help from McDermott Will & Emery. The organization also just hired a Washington office lead, Katie Marisic, from the National Association of Federal Credit Unions.
Even as Congress debates the issue of beer taxes, there are still high-level talks happening between the industry groups.
“We’re setting this up so that we can have the debate with the Brewers Association,” McGreevy said. “It’s a good debate to have at this moment in time in the industry.”
Pease, of the Brewers Association, says that he and McGreevy talk frequently. They even spoke before the bill supported by the Beer Institute was first introduced in the House this week.
While he said that, ultimately, lawmakers have to decide whether brokering a compromise is necessary, “a deal is always possible.”