Craft beer’s huge boom has put a lot of pressure on congress men and women to pass legislation that will further the benefits states are experiencing from the craft beer tourism. With nearly 2,000 more breweries in planning across the US, the economic impacts are huge. The biggest pieces of legislation being discussed are the Small BREW Act and the Fair BEER Act. Both of which define tax breaks for breweries, but in their own respective ways.
It is generally thought that the Small BREW Act is supported by smaller breweries and the Fair BEER Act is supported by macro breweries. As we reported on earlier, Senator Wyden of Oregon is also looking to pass the Craft Beverage and Modernization and Tax Reform Act. This act would not only decrease tax burdens on breweries it would also decrease the amount of red tape breweries have to cut through to do the job of brewing beer.
One consequence of how the act defines breweries is that it would strip the larger “craft” breweries of their craft beer status. Currently, the Brewers Association defines a craft brewery by three rules.
Annual production of 6 million barrels of beer or less (approximately 3 percent of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships.
Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer.
A brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Flavored malt beverages (FMBs) are not considered beers.
In 2010 The Brewers Association raised the bar to 6 million barrels to allow Samuel Adams to retain the label of craft beer. The Modernizaton Act defines “craft” breweries as
- The craft brewers, those producing under 2 million barrels per year would get the deepest tax cuts.
- The mid-size brewers, those producing 6 million barrels or less, get a slight tax break.
- The macro brewers, which don’t get a tax break beyond their first 6 million barrels of production.
In doing this breweries like Samuel Adams, Yuengling, Magic Hat, Pyramid and others would no longer be defined as craft for tax purposes. It would leave them in the odd position of being defined as craft by the Brewers Association, but not by the government. Samuel Adams has been growing at a rate of 20% a year and could enter macro brewery status in a few years.