Last December, Representatives Richie Neal (D-MA) and Kevin Brady (R-TX) co-sponsored a bill “to amend the Internal Revenue code of 1986 to provide a reduced rate of excise tax on beer produced domestically by certain small producers.”
Representatives Neal and Brady, and, as of this writing, 31 other representatives, want to help out small brewers. First, let’s talk about what “small” means, then we’ll get into how this help will occur.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) considers a small brewery to be one producing less than 2,000,000 barrels (bbl) of beer annually. FYI, that’s a lot of beer. If a brewery with a 50 bbl system – like Great Divide, for example – were to brew 3 batches a day, 365 days a year, that would be 164,250 barrels a year. And they don’t do that. The can’t without a lot more fermentation tanks. Boston Beer Co. (aka Sam Adams) recently passed the 2,000,000 barrels a year mark.
Just for overall reference, here are the estimated production levels of some breweries. These numbers either come from the brewery themselves or Wikipedia (I know, I know..), and the data ranges from 2007 through 2009. It’s just to give you a general idea of where these breweries stand.
- Great Divide – 12,070 bbls (2009) (source – brewery)
- Stone Brewing Company – 98,500 bbls (2009) (source)
- Bell’s Brewery – 90,000 bbls (2007) (source)
- New Belgium – 493,200 bbls (2008) (source)
- Flying Dog Brewery – 60,000 bbls (unconfirmed source)
- Boston Beer Company – 2,020,000 bbls (2009) (source)
- Crabtree Brewing Company – 900 bbls (2009) (source – brewer)
- Dogfish Head Brewery – 97,000 bbls (2009) (projecting 113,000 for 2010) (source – brewery)
- MillerCoors – 49,500,000 bbls (source)
The point being small is relative. Many of the big craft brewers just barely break the 60,000 bbl annual production mark. My example, Great Divide, isn’t even close to that line, and they make a lot of beer.
Currently, breweries pay $7/bbl for the first 60,000 bbls, and $18/bbl for any additional barrels, up to 2,000,000 bbls. This reduced rate for under 60,000 bbls came into being in 1976, under H.R. 3605. (Check out the Brewers Association’shistorical memo when this passed.) Up to that point, there was a flat rate tax of $9/bbl for every barrel, as long as the brewery produced under 2,000,000 bbls annually. H.R. 3605 created a reduced rate of $7/bbl for the first 60,000 bbls, which is still in place today. Obviously, the second tier of the tax has increased since then.
H.R. 4278 would cut the excise tax for the first 60,000 bbls in half, saving brewers $3.50 a barrel. It would also lower the second step from $18 to $16.
For a brewery producing exactly 60,000 bbls annually, this bill would save them $210,000. If Great Divide produced the exact same amount under the bill, they would save $42,245. Consider that a new 50bbl fermenting vessel is about $25,000 after shipping, installation, all the other stuff that goes with it, etc. Figure that a full time employee making $15/hr would receive about $30,000 annually in wages. I realize I’m using pretty simple math here, and not taking into account taxes and other fees on equipment and employees. However, it’s easy to see how this tax cut will make up for itself pretty quickly.
More jobs AND more beer. Cheers!