The new tax reform bill will affect your brewery in a good way. The Tax Cuts and Jobs Act included the Craft Beer Modernization and Tax Reform Act (CBMTRA), which brings relief to breweries on several levels. The first and most immediate relief is financial: a reduction in federal excise taxes.
Smaller breweries—producing less than 6 million barrels per year—will now pay $3.50 per barrel, down from $7 per barrel, on the first 60,000 barrels, and then $16, down from $18, on barrels 60,001 to 2 million. Larger breweries will pay $16, down from $18, per barrel across the board.
The Brewers Association estimates that this law will save smaller breweries (under six million barrels per year) approximately $80 million and larger breweries $62 million.
However, a provision that is getting much less press will likely have a bigger impact on how beer is produced creatively. The CBMTRA allows brewers to transfer beer in bond between brewers who are not owned by the same corporation or other entity. “In bond” means the beer is moved between facilities without paying tax. Pre-CBMTRA, beer could only be transferred between two unrelated breweries if:
1. It was packaged;
2. The brewery that brewed the beer paid the taxes on it; and
3. It was in the receiving brewery’s pub or stored in a segregated area with a wholesale permit.
Loosening these restrictions could have a significant impact on collaborations and general brewing relationships. For example, in a collaboration, one brewery can now do all the brewing and then transfer part or all of the beer to another brewery for additional modification. In Janene Grace’s blog post on this issue from 2015, she uses the example of efficiency, in which Brewery A is better equipped to brew the beer but does not have space for barrel-aging, and Brewery B has space but inadequate brewing equipment. Under the CBMTRA, Brewery A can brew the beer and then transfer it, in bond, to brewery for aging—a solution that was unavailable to Ms. Grace.
Notably absent from the CBMTRA is a provision from the original bill addressing ingredients. That original draft included a directive that the ingredients “generally recognized as a traditional ingredient in the production of fermented beverages” be codified. In 2015, the TTB issued a ruling that provided a list of exempt ingredients would no longer require a formula filing. Before that, a brewery using “fruit, fruit juice, fruit concentrate, herbs, spices, honey, maple syrup, or other food materials” in a beer was required to file for formula approval or apply for an exemption on a case-by-case basis.
It was time-consuming and inconsistent. The ruling brought the TTB somewhat current with what the industry considered “traditional ingredients.” The earlier draft of the CBMTRA called for the U.S. Code to be amended to state that “wholesome fruits, vegetables, and spices suitable for human food consumption” be recognized as “traditional ingredients,” potentially broadening the list of exempted ingredients. For now, fruit and other additions will continue to be governed by the 2015 ruling.
With proper tax guidance, you can save your business (and yourself) a tremendous amount of money, and potentially, some serious legal trouble. Our attorneys can help your business understand how you'll be affected by the new Tax Plan. Contact us for more information.
 https://craftingastrategy.com/blog/collaboration-brews-regulatory-concerns (last visited: 1/18/2018).
 TTB Ruling 2015-1, https://www.ttb.gov/rulings/ttb-ruling-2015-1-malt-beverage-formulas.pdf (last visited: 1/17/2018).
 https://www.ttb.gov/rulings/ttb-ruling-2015-1-attachment-1.pdf (last visited: 1/17/2018).
 27 C.F.R. § 25.55