On December 27, the president signed into law the year-end legislative package that includes targeted COVID-19 relief and language from the Craft Beverage Modernization and Tax Reform Act (CBMTRA), making the existing federal excise tax rates for small and independent breweries permanent.
The COVID-19 package should provide many breweries much-needed assistance to weather the next few months, with the CBMTRA providing certainty and continued savings. The Brewers Association applauds the passage of this bill.
Securing permanent federal excise tax recalibration for small brewers has been a top priority for the Brewers Association since 2009. The temporary lower rates were due to expire on December 31 unless Congress extended them or made them permanent. Inclusion of the CBMTRA in the year-end legislation is the direct result of the hard work and efforts of the Brewers Association, state guilds, and our member breweries. Our advocacy at the local and federal levels has helped demonstrate the important role that the brewing industry plays in our country’s economy. In fact, 77 Senators and 351 House members signed on to legislation in the 116th Congress to make the excise tax rates permanent.
By including the CBMTRA, congressional leaders acknowledged the profound impact the reduced excise tax rate has had on the growth and trajectory of a uniquely American industry, recognizing that allowing the lower rates to expire would be extremely detrimental to the 8,300 small breweries, brewpubs, and taprooms across the country. The passage of CBMTRA represents an annual savings of $80 million for craft breweries.
The CBMTRA language in the legislation will:
Make the federal excise tax rate of $3.50 per barrel permanent on the first 60,000 barrels and $16 on all subsequent barrels for domestic brewers producing fewer than 2 million barrels annually.
Preserve the federal excise tax rate of $16 per barrel on the first 6 million barrels for all other brewers and all beer importers.
Keep the excise tax at $18 per barrel after the first 6 million barrels.
Allow the transfer of beer between bonded breweries. Beer may be removed from one brewery to another brewery, without payment of tax upon transfer, and may be mingled with beer at the receiving brewery or otherwise finished and packaged.
Modifies the single taxpayer rule for beer, wine, and spirits.
A breakdown of the text that includes the CBMTRA can be found here.
The package also includes a $900 billion bipartisan COVID relief package with additional Paycheck Protection Program (PPP) funding and small-business support lobbied for by the Brewers Association, including:
An additional $284 billion for first and second Paycheck Protection Program (PPP) loans, and $20 billion for the Economic Injury Disaster Loan (EIDL) grants for low-income communities.
Allowing the hardest-hit small businesses to receive a second forgivable PPP loan. Eligibility would be limited to small businesses with 300 or fewer employees that can demonstrate at least a 25 percent reduction in gross receipts in the first, second, third or fourth quarter of 2020 relative to the same 2019 quarter. Stipulations are in place for businesses who were not open in 2019. Businesses must also show that they have or will use the full amount of their first PPP loan. Maximum amount of a “second draw” PPP loan is $2 million.
Borrowers of a PPP second draw loan would be eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period.
The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.
Expansion of PPP eligibility to small 501(c)(6) organizations like state brewers guilds (if they meet the requirements stipulated in the legislation)
Eligibility for PPP loans will only be for businesses that were open by February 15,2020.
Businesses that received PPP loans and had them forgiven will be allowed to deduct the costs covered by those loans on their federal tax returns, consistent with congressional intent in the CARES Act. The provision clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan. This provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness
Repealing the CARES Act provision that requires PPP borrowers to deduct their EIDL emergency grant from their PPP loan forgiveness amount.
Creating a process to give existing EIDL grant recipients who received less than the full $10,000 grant amount to reapply for the difference.
Forgivable expenses are expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely.
Creates a simplified application process for loan forgiveness for loans less than $150,000.
Provides an additional $3.5 billion for Section 1112 of the CARES Act, which covered payment of principal, interest, and associated fees on qualifying SBA 7(a), 504, and microloans.
Restaurants and hospitality industry businesses in NAICS code group 72 that qualify for PPP loans will be eligible for 3.5 times the monthly payroll (an increase from the 2.5 times monthly payroll in the CARES Act). Some, but not all, breweries will be eligible for this, depending on their NAICS code.
Authorizes $15 billion for the SBA to make grants to eligible live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives who demonstrate a 25 percent reduction in revenues.
The bill will also impact individuals by providing $600 in one-time stimulus checks to adults and children within a certain income threshold, and an additional $300/week in unemployment payments through March 14th.
You can view a breakdown of the COVID-19 legislation here.
This legislation contains significant assistance for America’s small and independent breweries, and we worked hard to secure inclusion of those provisions. But there is still more work to be done. The Brewers Association will continue to advocate for additional COVID relief for our member breweries.