On Wednesday, December 20, 2017, the United States Congress passed the Tax Cuts and Jobs Act (the “Act”), which was subsequently signed into law by the President this morning. Among many other changes, the Act will have a substantial effect on our member brewers, large and small. The Act goes into effect on January 1, 2018. The most substantial impact for our member brewers will be in the amount of federal excise tax that will be paid on beer, beginning in January and moving forward.
The Act has lowered the federal excise tax on beer substantially, and our member brewers will stand to save thousands of dollars annually on their federal excise taxes. The Act reduced the federal excise tax on beer in the following manner:
- On the first 60,000 barrels of production of brewers producing less than 2 million barrels annually, a brewery will remit federal excise taxes of $3.50 per barrel, which is down from $7.00 per barrel. For many of our small member brewers, your federal excise tax bill will be cut in half, giving you the options to reinvest those savings in your businesses or employees.
- From 60,000 barrels to 6 million barrels, the federal excise tax rate was lowered to $16.00 per barrel, which is down from $18.00 per barrel, for all other brewers and beer importers.
- For barrelage over 6 million barrels, the current $18.00 federal excise tax rate remains the same.
It is clear that the beer provisions Act were enacted to aid the country’s small to medium sized breweries, while maintaining, or minimally lowering, the federal excise tax rate for large producers. The Brewers Association estimates that the Act represents more than $142 million in annual savings. Although we have not heard much from Pennsylvania’s legislature on the Brewer’s Tax Credit, if is to be implemented at some point in 2018, you could have increased tax benefits from reinvesting your federal excise tax savings into capital expenditures at your brewery, which could potentially (if enacted in the same form as before) be used to lower your Pennsylvania excise tax bill. The new federal excise tax rate has no capital expenditure requirement and is simply a reduced rate through 2019.
