Lower Excise Taxes on Craft Beer and Spirits May End at Year's End

The act would have to be renewed -- or made permanent -- with a bill starting in the House, since it is a revenue measure, but the CBMA's biggest supporter is Senate Finance Committee ranking member Ron Wyden, D-Ore. A spokeswoman for the senator issued a statement on his behalf that said: “Extending benefits for craft beverage producers, as well as other expiring tax provisions, is a top priority. I’m working with Chairman [Chuck] Grassley, Chairman [Richard] Neal and Ranking Member [Kevin] Brady, and am hopeful that we will come to an agreement on a year-end package.”

Jon Traub, a managing director at Deloitte and former staff director for Republicans on the House Ways and Means Committee, said in a phone interview with International Trade Today that CBMA will likely be included in a tax extenders package, since Wyden is highly placed and a strong supporter. There are 27 tax breaks that already expired, and five more, including CBMA, that expire at the end of this year. But the problem remains -- will there be an extenders package at all? There wasn't last year.

“I could make a really compelling case for why they won’t get done, and I could also make a really compelling case for why they will get done, and I’m not sure which one I believe more at this point,” Traub said.

The case for inaction has many arguments -- that impeachment is sucking all the oxygen out of the room; that there are only three weeks left before Congress goes home for Christmas; and that there's little evidence that the House and Senate can put together a compromise that would establish the current fiscal year's budget. If there is no spending omnibus, it's a lot less likely an extenders package can hitch a ride on the must-pass continuing resolution -- though not impossible, Traub said.

But even if there is an omnibus, or even partial omnibus, he said it's unclear that the spending bill would be popular enough “to pull other items behind it.”

One of the elements the potential legislation would be making technical fixes to is the Republican tax cut package that passed in the previous Congress. Right now, Traub said, Democrats are trying to see what they can extract from Republicans in exchange for agreeing to those fixes. But he said he thinks Democrats are still negotiating among themselves on what the ask should be. "That delicate dance is going on even as we speak," he said. Some popular tax proposals among Democrats cover green energy, refundable child tax credits, and a more generous earned income tax credit. But, he said, the last two "may boost the [deficit] score card so big that it begins to collapse under its own weight."

The argument that an extenders package will get done in December also has several points. One, that Congress usually does it, and two, the fact that it was neglected last year lends some urgency. "We’re now almost two full years of expiration," Traub said. "I don’t think we’ve ever had extenders extended beyond two years. Members know the longer they go here the harder it is to do retroactively later." It's harder, both because the argument for economic incentives is hard to make for actions that happened years ago, and because of the need for companies to amend several years of tax returns.

Also, Grassley is a major champion of extenders because of his interest in tax breaks for biodiesel, Wyden is a strong booster of the craft beer tax break, and Ways and Means Chairman Neal likes the New Markets tax credit, he said. Moreover, Congress has to act again to delay the medical device excise tax that was part of the way Obamacare was to be funded, so perhaps extenders could travel with that. "That is one of those items that has substantial lobbying muscling beside it," he said.

But Grassley has been more and more pessimistic that extenders will get done. He said on a late October press call that "I don't see the interest of Democrats in tax extenders like they've traditionally had." He said that while there are negotiations going on about an extenders package, he emphasized again that there's not the bipartisan push for extenders he has normally experienced.

The Brewers Association is pushing for "Congress to take care of this issue now," the trade group said in an emailed statement. "We plan our budgets and brew schedules well in advance not on a day-by-day basis. In other words, the legislation really must either be extended or made permanent before Dec. 31.

"If the current rates do expire and are then reimplemented at a later date in 2020, it would put an enormous strain on [small producers]. The strain would not just impact beer either, it would also affect wine and spirits.

"The Brewers Association continues to work closely with Congressional leadership to make sure [CBMA] stays on their radars as a top priority, and we remain optimistic that together with our champions in Congress, and across the beverage alcohol industry, we can get this passed before it expires.”

Traub said that if the extenders don't move, he doubts there will be relief until the lame duck session in late 2020. "I think you have to worry if it doesn’t get done in December -- how many bills will be moving in an election year that can carry tax? Very, very few."