Hello everyone,
(Photo of Painted Stave distillery, Smyrna)
The clock is ticking on a piece of legislation that has provided a sizable boost to the craft brewing and distilling business.
The Craft Beverage Modernization and Tax Reform Act was passed as part of the 2017 tax bill but is set to expire at the end of the year. The bill reduces the federal excise tax for smaller brewers and distillers.
In the case of Delaware, the tax aids all craft brewers. Dogfish Head does pay a higher tax rate after producing the first 60,000 barrels covered under the tax break.
The state’s three distilleries would see their taxes go up from $2.70 a gallon to a whopping $13.50. Craft breweries would pay $18 for every 30 gallons brewed, compared to the current figure of $7 for each 30-gallon barrel.
The craft business was thriving prior to the tax break. But based on what I have seen around Delaware, brewers, cideries, and distillers are investing more capital into new and existing enterprises, thanks in part to higher margins that come with the lower tax rate.
While the craft industry is consolidating for bigger players such as Dogfish, the opposite is taking place as the number of locally owned brewpubs and breweries continue to grow. The tax break obviously helps.
Efforts are underway to make the tax incentive permanent, with the vast majority of Senate and House members lining up in support.
Unfortunately, the legislation could get lost at the end of the year rush of reauthorizations. It is time to get down to business and pass the legislation that actually aids small enterprises.
Meanwhile, the Delaware General Assembly should wake up to the impact of this industry and end ridiculous restrictions, such as the three microbrewery ownership limit.
Thanks in part to pressure from entrenched alcohol beverage interests that bottled up legislation, one of the state’s most successful innovators (Iron Hill) chose to add a production site in Exton, PA.
Here’s a non-alcoholic toast to a productive day.
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