A program that lowers the excise tax on qualified domestic producers and importers of beer, wine and spirits is winding down at the end of the year and the alcohol beverage industry is lobbying Congress to keep it going.
“It’s extremely important to our members,” said Alison Leavitt, managing director of the Wine and Spirits Shippers Association. “It provides them with a significant tax savings, and it’s been a job creator.”
The 2017 Craft Beverage Modernization and Tax Reform Act (CBMA), which was part of the Tax Cuts and Jobs Act, reduced the federal excise taxes paid on alcohol beverages based on quantitative limits.
For example, CBMA lowered the excise tax rate for distilled spirits from $13.50 to $2.70 on the first 100,000 gallons produced annually by each producer. Other similar excise tax reductions apply to beer and wine.
“We have never had a producer-driven allocation tax reduction,” Leavitt said. “There’s nothing like it out there.”
She said that CBMA has benefited both large and small alcohol beverage producers domestically and overseas. In fact, it is the first reduction in federal excise tax since the American Civil War.
However, the legislation only lowered the excise tax on alcoholi beverages for a period of two years, ending Dec. 31, 2019.
The Wine and Spirits Shippers Association, along with the American Craft Spirit Association, Beer Institute, Brewers Association, Wine Institute, Wine America, Distilled Spirits Council and the National Association of Beverage Importers, is now lobbying Congress to extend the law or make it permanent.
The Senate’s proposed Craft Beverage Modernization and Tax Reform Act of 2019 (S. 362) and a corresponding bill in the House (H.R. 1175) have strong bipartisan support in both chambers, including 70 co-sponsors in the Senate and 288 co-sponsors in the House.
While domestic alcohol beverage producers were able to immediately take advantage of CBMA through the Alcohol and Tobacco Tax and Trade Bureau (TTB) at the start of 2018, importers of these products and their customs brokers waited until Oct. 16, 2018, for Customs and Border Protection to provide its procedures and requirements for CBMA.
The National Customs Brokers and Forwarders Association of America (NCBFAA) said the CBMA requirements for determining and collecting the excise tax for imported alcohol products have “created a needlessly cumbersome process requiring a complex matrix of information which cannot be processed in CBP’s automated system, ACE [Automated Commercial Environment]. Instead, the entire process must be handled offline — an antiquated, resource-intensive exercise for both the trade and CBP.”
CBMA claim filings must include a CBMA spreadsheet, controlled group spreadsheet and the assignment certification.
The NCBFAA added that 77% of CBMA claims submitted to CBP today contain missing or incorrect information, which it said, “speaks to the unworkability of this process.”
“Customs brokers can assist the importers in filing claims, as well as the post summary corrections and protests for those entries that have liquated, to receive their tax refund. However, the importers, retailers and distributors who take advantage of the tax refund must ensure that they have received the proper support documentation from their foreign supplier,” said Geoff Powell, president of C.H. Powell Co. and NCBFAA chairman.
The two-year duration for CBMA provided no incentive for CBP to spend the millions of dollars that would be required to automate the excise tax refunds in ACE, Powell said.
During the NCBFAA’s Government Affairs Conference in September, the association’s members met with lawmakers on Capitol Hill and lobbied for CBMA’s permanent extension to allow CBP to properly allocate funds for the ACE functionality.
“If the CBMA does in fact become extended long term or permanent, there is discussion that CBMA tax refund requests could be programmed to be handled similar to quotas in that foreign suppliers’ reduced taxes could be captured in ACE,” Powell said. “When different importers, retailers or distributors file claims against their supplier decided allocations, this can be captured and tracked through ACE to ensure proper tax reductions are provided.”
Leavitt said if Congress commits to a one-year extension of CBMA, the alcohol beverage industry will continue to lobby for a permanent extension of the legislation, including the necessary funds for CBP to automate the process in ACE.