WASHINGTON, D.C. — Bipartisan legislation introduced by U.S. Rep. Andy Barr (R-KY) to help secure much-needed tax relief for Kentucky’s bourbon industry recently became law as part of a larger year-end appropriations package.
“Throughout my time in Congress, I have made the creation of a level playing field for our bourbon distillers a priority,” Rep. Barr said on Jan. 21. “A lower excise tax allows distillers to invest in their products, create more jobs, and creates a better economic environment across central Kentucky.”
Rep. Barr in September 2019 introduced the Advancing Growth in the Economy through Distilled Spirits Act, or the AGED Spirits Act, H.R. 4284, with bill sponsor U.S. Rep. John Yarmuth (D-KY). The legislation permanently extends the exemption for the aging process of distilled spirits from the production period for purposes of capitalization of interest costs, according to the text of the bill.
President Trump in December 2020 signed the measure into law as part of the Craft Beverage Modernization and Tax Reform Act (CBMTRA), which was incorporated into the $2.3 trillion COVID-19 relief and government funding package.
As a provision within the CBMTRA, Rep. Barr’s H.R. 4284 permits bourbon distillers to deduct interest expenses associated with production in the year it is paid, not when the bourbon is bottled and sold, according to a bill summary provided by his office.
The bill also lowers the Federal Excise Tax (FET) rates for distillers and aged spirits. The FET rates were set to expire on Dec. 31, 2020, unless Congress acted to make them permanent or to provide an extension. If the CBMTRA had not been passed, excise taxes on small breweries would have increased from $3.50 to $7 per barrel on Jan. 1. For distilleries, the taxes would have skyrocketed by 400 percent.
The bill also received support from several associations, including The Kentucky Distillers’ Association and The Brewer’s Association.