North Coast wineries, breweries getting another year of federal excise tax break

The U.S. House of Representatives on Tuesday passed a massive spending package that extends for one year the big break on federal excise taxes for wineries, breweries and distilleries that were slated to expire at the end of 2019.

The tax cuts were originally part of the 2017 $1.5 trillion federal tax cut measure, but only applied for the past two years as congressional tax writers limited the time frame as they juggled competing demands from a wide array of industries, from biofuel producers to builders of eco-friendly homes.

The new measure, which is expected to gain Senate approval, gives alcohol producers the additional year of the tax reduction amounting to about $665 million less for federal coffers, according to the federal Joint Committee on Taxation.

“The craft beverage bill has been an incredible boost for our industry, and this extension allows us to continue investing in our wineries by buying new equipment, remodeling tasting rooms, hiring new employees and more,” said Hank Wetzel, founder and family partner of Alexander Valley Vineyards in Healdsburg and chairman of Wine Institute trade group. “All of this benefits local communities in the form of jobs, tax revenue and support for the hospitality industry.”

The package primarily benefits distillers, who pay a much higher federal excise tax than breweries and wineries and had no reduced rate prior to 2018. But it benefits all alcohol producers, including cideries, though it is skewed to help smaller manufacturers.

For example, the measure retains a new tiered tax credit system designed to help smaller wineries. Wineries pay an excise tax of between $1.07 and $3.40 per gallon. Under the measure that was extended, there will remain a $1 per gallon tax credit for the first 30,000 wine gallons; 90 cents per gallon for the next 100,000 wine gallons; and 54 cents per gallon for the next 620,000 wine gallons. It also applies the tax credits to sparkling wine and provides the lowest excise tax rate for wines with an alcohol content up to 16%. The old cap used to be 14%.

“This will allow producers to invest in energy-efficient and other new equipment, upgrade facilities and grow the workforce so they can continue to thrive and compete on a global scale,” Rep. Mike Thompson, D-St. Helena, said in a statement. Thompson has been a key sponsor of the measure.

Beer is generally taxed at the federal level at $18 per barrel, the equivalent of ?31 gallons.

The measure continues a rate of $16 per barrel for the first 6 million barrels of beer either produced domestically or imported. U.S. brewers who produce less than 2 million barrels annually would be eligible for a rate of $3.50 per barrel on the first ?60,000 barrels.

Russian River Brewing Co. in Windsor would save about $140,000 next year from the federal excise tax break if it produces up to 40,000 barrels, co-owner Natalie Cilurzo said.

“Guess what we will probably spend that on? A freakin’ generator,” Cilurzo said in a text, referencing backup costs incurred from the October PG&E power shut-offs and the possibility the brewery will buy instead of rent a generator for next year’s wildfire season.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.