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Brewers toast tax feud’s end

Key players in the U.S. alcohol industry are coalescing behind tax reform legislation that could end a long-running dispute between beer industry titans such as Miller and Bud and rising craft brewers like Dogfish Head and DC Brau.

The Craft Beverage Modernization and Tax Reform Act has a little something in it for the wine, alcoholic cider and distilled spirits industries, but its creation was driven primarily by a prolonged battle between two beer trade groups.

The Brewers Association, which represents smaller breweries, and the Beer Institute, which counts MillerCoors and Anheuser-Busch InBev among its members, had championed opposing bills aimed at lowering the tax burden for their members.

“We work cooperatively on many other issues facing the beer industry. But we don’t see eye to eye on tax policy,” Brewers Association CEO Bob Pease told The Hill earlier this year.

But now, he and James McGreevy III, the head of the Beer Institute, say the compromise legislation, introduced by Sen. Ron Wyden (D-Ore.), has unified them on the issue.

In a joint interview with Pease, McGreevy said the Craft Beverage Act is a mash-up of the two bills they supported, the Small Brewer Reinvestment and Expanding Workforce (BREW) Act and the Fair Brewers Excise and Economic Relief (BEER) Act.

It would cut the excise tax for domestic breweries that produce less than 2 million barrels of beer, or less, annually to $3.50 per barrel for the first 60,000 barrels produced, from the $7 per barrel producers pay now.

After that, brewers – both domestic and international – would pay $16 per barrel up to 6 million produced, a $2 per barrel discount. After that, breweries would pay $18 per barrel, which is what they currently pay.

“We’re supporting this one because we think it’s good policy,” McGreevy said. “If you’re selling beer in the United States, you can benefit from this graduated excise tax.”

The accord comes as a surprise to some Capitol Hill offices that witnessed previous infighting among beer companies, which reached such a fever pitch in recent years that lawmakers and staff started pushing lobbyists out of their offices.

“Many members indicated their aggravation with an industry that they previously supported being so divided between brewers, wholesalers, unions and barley growers – factions that should be playing on the same team, but are now at each other’s throats,” said one lobbyist who requested anonymity in order to speak freely. “The message was quite clear: Fix this problem.”

It worked.

The two men credit the staff of Wyden and Republican lead Sen. Roy Blunt (Mo.) for coming up with the bill, but ultimately compromise between the groups themselves was necessary.

“The past bills got a lot of ink, but this is what industries do when they want something out of government,” said Pease. “They work together.”

Wyden, the ranking member of the Senate Finance Committee and co-chairman of the Senate Bipartisan Small Brewers Caucus, not only helped broker the deal, but also used the bill as a way to fold in elements of other legislation that targeted excise taxes for other alcoholic beverages.

“We’re in offices every day talking to members and staff, picking up five or six folks in a day,” McGreevy said, adding that the legislation has gained significant traction since being introduced over the summer.

The bill has 20 co-sponsors in the Senate. House companion legislation, introduced by Rep. Erik Paulsen (R-Minn.), has 97 co-sponsors.

The National Beer Wholesalers Association, which became a major player on the sidelines of the debate over the other pieces of beer legislation, supports the Wyden bill, says Laurie Knight, NBWA’s chief lobbyist.

The industry group has an extensive grassroots network and its opposition to the Small BREW Act created some hurdles in the bill gaining more support.

When looking at co-sponsoring the new Craft Beverage Act, congressional offices have the NBWA on speed dial.

“We view it as a good unifying piece of legislation that addressed the concerns that our members had with the BREW Act in a constructive way,” Knight said.

While the warring between beer groups has subsided – and the U.S. Association of Cider Makers, the Oregon Winegrowers Association, and the American Craft Spirits Association have signed on in support – the legislation still faces potential opposition from key groups, including the Wine Institute and the Distilled Spirits Council of the United States (DISCUS).

Both groups are asking lawmakers for a more equitable excise tax cut for the wine and spirits industry.

“There is something fundamentally wrong with legislation that provides hundreds of millions of dollars in tax benefits to large, foreign beer and spirits conglomerates while providing relatively little benefit for American wineries,” Wine Institute CEO Robert Koch wrote in a letter to members of Congress in August.

Frank Coleman, senior vice president of public affairs at DISCUS, called the legislation “a starting point for further conversation about making alcohol taxation more fair and regulation more efficient.”

Leaders on the Senate Finance Committee have already reached out for input on how it would make the Craft Beverage Act better, Coleman said.

DISCUS prefers language included in the Distillery Innovation and Excise Tax Reform Act, which includes more graduated cuts to excise taxes for distillers.

Another stumbling block for getting the legislation passed could be its price tag.

There has been no official government scoring of the Wyden legislation, but outside analysts put its cost at hundreds of millions. That could make it difficult to attach to some form of must-pass legislation by the end of the year, because lawmakers would likely debate over its inclusion and how to pay for it.

Still, Pease and McGreevy each say the economic benefits vastly outway the costs and vow to continue the fight.

“I’m a patient man,” Pease said.

Source: The Hill