New tax bill provides boost to booming beer industry

A piece of legislation passed by Congress last month as part of the federal tax reform plan is poised to benefit beer brewers across Montana.

The rule, dubbed the Craft Beverage Modernization and Tax Reform Act, will cut in half the excise tax levied on each barrel of beer craft brewers produce.

It applies to the first 60,000 barrels of beer produced by brewers who make fewer than 2 million barrels annually, criteria that encompass every brewer in Montana. No brewer in the Flathead Valley makes anywhere close to 60,000 barrels, so every barrel produced locally will see the excise tax lowered $7 to $3.50.

The rule is providing extra funds for a burgeoning industry, allowing brewers to put more money into capital investments or marketing campaigns.

It is also sparking controversy, and at least one local brewer thinks subsidizing an already booming industry while some federal programs are facing cuts should not be applauded.

MARCUS DUFFEY is the general manager at Great Northern Brewing Company in Whitefish and also sits on the board of the Montana Brewer’s Association. He said after the bill passed, members of the Montana Brewers Association got on a conference call and the reactions were all over the board.

“There were guys saying they were ashamed that we got this as part of this bigger bill and there were guys saying I’m thrilled with this, its great,” Duffey said.

He projects Great Northern will produce about 7,000 barrels of beer in 2018, which should translate to approximately $24,500 of savings. He said that is roughly the size of their current marketing budget, and while he isn’t sure what precisely those extra funds would be used for, he would love to see that increased or even doubled.

“Those are real dollars that we’ll reinvest in this company — either employees or equipment,” Duffey said. “The biggest thing is the excise tax is a tax above and beyond what we already pay from a corporate level in state and local taxes. Any relief on that is welcome.”

Duffey said he even spent time lobbying for the craft beverage bill while at the craft brewers convention in Washington D.C., and thinks it had a real impact on legislators.

“For me, it’s one of those things, leaving the bigger bill out of it, this alone is a great, great victory,” Duffey said.

Both the Montana Brewers Association and the national Brewers Association supported the craft beverage bill. Not all brewers in the state, however, are members of the brewers association.

DARIN FISHER is the co-owner and sole brewer at Backslope Brewing in Columbia Falls. For a variety of reasons he isn’t a member of the Montana Brewers Association, but if he were he would have counted himself among the disgruntled members on that conference call the day after the bill was passed.

He said craft breweries have been booming for several years now, and while subsidizing it further is good for his bottom line he has little faith it’s good for society.

“You are subsidizing a very successful industry and you can see the local effects of the federal government not having enough money in the Park Service and [for highways],” Fisher said. “If you look around the valley or around the state or around the nation, what are some of the most successful businesses that you see? Craft brewing.”

To receive these savings in the same year the Interior Department proposed a significant entrance-fee increase to multiple high-traffic national parks, including Glacier, is conflicting, Fisher said.

That’s why he didn’t lobby for the beverage bill nor does he revel in its passage.

Fisher’s brewery will produce about 300 barrels next year, so his savings will be right around $1,000.

He said he appreciates the progressive nature of the tax so it doesn’t purely help larger craft brewers, but also said his $1,000 won’t go all that far compared to brewers that measure their output in the thousands of barrels.

THE NEW laws will lower the bottom line for breweries but will also take more money from the federal general fund, where the beer excise taxes and other forms of sin taxes go, according to a report from the Tax Policy Center, a think tank that is a joint venture between the Brookings Institution and the Urban Institute based in Washington, D.C.

The national Brewers Association estimates that Montana brewers produce about 180,000 barrels of beer each year. With the newly lowered excise tax, that will lead to about $630,000 that won’t be available for federal spending and will instead stay with Montana brewers.

Nationwide, the Brewer’s Association estimates microbreweries produce about 5 million barrels annually. Since the organization defines microbreweries as those that produce less than 15,000 barrels, all of them will see a lowered excise tax for a total of about $17.5 million.

Many regional craft brewers produce more than 60,000 barrels, but so long as they produce under 2 million they will get their first 60,000 at a discount.

The rules also lowered excise taxes for distillers in every state.

It’s a small slice of the pie, but not significantly less than what the National Park Service projects to create in extra revenue with the entrance fee hike that’s aimed at helping to erase a $12 billion Park Service maintenance backlog.

When they announced the fee increase plan, the Interior Department estimated it could bring an additional $70 million in annual revenue.

The Craft Beverage Modernization and Tax Reform Act has an initial lifespan of two years, after which its impacts can be assessed and it can be either renewed or excise taxes may return to former levels.

Peregrine Frissell can be reached at (406) 758-4438 or pfrissell@dailyinterlake.com.