Small BREW Act vs. Fair BEER Act

By |2018-10-18T13:31:23+00:00February 26th, 2015|

There are some pretty big acts being proposed in Congress right now each of them would have an impact on the cost of your craft beer and the cost of doing business as a small craft brewery. We’ve already described the Small BREW Act a while back, but here’s a basic rundown of what it would do:

Under current federal law, brewers making less than 2 million barrels annually pay $7 per barrel

[BTT emphasis] on the first 60,000 barrels they produce, and $18 per barrel on every barrel thereafter. The Small BREW Act seeks to establish a new rate structure that is reflective of the evolving craft brewing industry. If enacted, the rate for the smallest brewers and brewpubs would be $3.50 on the first 60,000 barrels [BTT Emphasis.] For production between 60,001 and 2 million barrels, the rate would be $16.00 per barrel. For production over 2 million barrels, the federal excise tax would not change from its current $18 rate per barrel. Brewers with an annual production of 6 million barrels or less would qualify for these tax rates.

But there is now a competing act, called the Fair BEER Act. This is argued to have been proposed and organized by Big Beer interests.

A quarter of the Senate have signed onto the BREW Act, but Big Beer isn’t sitting this fight out. Within 24 hours of the introduction of the BREW Act, a pair of U.S. House members dropped The Fair BEER – Brewers Excise and Economic Relief – Act. It removes taxes for the first 7,143 barrels and then basically extends the Small BREW Act to Big Beer.

Why does this benefit Big Beer? Because the Fair BEER Act would create NO cap for breweries to receive a tax break. Thereby extending the definition and tax incentives to what have been traditionally defined as “small breweries.” Current law gives breaks to breweries producing under 2 million barrels a year.

Under the Fair BEER Act, all brewers and beer importers would pay a rising scale of federal excise tax:

  • No excise tax on the first 7,143 barrels;
  • $3.50/barrel on barrels 7,144-60,000;
  • $16/barrel on barrels 60,001-2 million; and
  • $18/barrel on every barrel above 2 million.

But it isn’t that simple. Supporters of the Small BREW Act acknowledge the Fair BEER Act would actually save them more.

Therein lies the divide in the industry. The Brewers Association, the trade group dedicated to craft brewers, favors the Small Brew Act. The Beer Institute, a trade group that includes macro-brewers as well as importers and suppliers, supports the Fair Beer Act.

Brewers Association CEO Bob Pease acknowledged that craft brewers would save more under the Fair Beer Act, but he thinks the Small Brew Act is a more realistic proposal – estimated to save $64 million a year in taxes versus $113 million under the Fair Beer Act.

How do the Acts Differ?

All About Beer gives us a very detailed description of this.

While the Small BREW Act limits the barrels a brewer can produce to qualify for the proposed tax rate, the Fair BEER Act would apply to all brewers, including industry giants like AB InBev and MillerCoors. According to an infographic from the Brewers Association, these two bills could have widely differing impacts on everything from beer industry jobs to the cost of the tax rate cuts.

Another major difference is the definition of a small brewer, which the Brewers Association wants to change to 6 million. The Beer Institute, however, says that thousands of breweries have opened in the past decade with the 2 million level in place and thus sees no need to change it.

The National Beer Wholesalers Association (NBWA) also has reservations about the definition change.

“We’re concerned that the legislation could change the industry structure by creating a new, unrealistic definition of a small brewer,” says Craig Purser, president and CEO of the NBWA. “… If Congress wishes to reform excise taxes for brewers, it should do so in a way that reflects current government and industry classifications.”

Finally, the Fair BEER Act accounts for importers, while the Small BREW Act does not. The Small BREW Act wants to solely support American jobs and small breweries, but because the Fair BEER Act would cover all players in the beer industry, it includes importers as well. The Beer Institute has concerns about a trade challenge if tax reform does not include importers.

Here’s a great infographic from the Brewers Association breaking down the differences…graphically.

So what do you think? What Act would you support passing through Congress?

Interesting enough to tell your friends? Do it!

About the Author:

Scott Pelton
I'm Co-Owner of Tap Trail and the Editor of the Tap Trail website. Let's have a pint! Email me at scott@taptrail.com.