News & Features

Tester Proposes Permanent Extension of Tax Credit for Small Breweries, Distilleries

Craft Beverage Modernization and Tax Reform Act, originally signed in 2017, is scheduled to expire at end of year

A bill backed by U.S. Democratic Sens. Jon Tester of Montana and Ron Wyden of Oregon would make permanent a reduction in excise taxes for small breweries and distilleries around the country, including the more than 80 craft breweries in Montana.

The Craft Beverage Modernization and Tax Reform Act was first signed into law in 2017 and is set to expire on Dec. 31, 2019. The law cuts the excise tax rate in half, to $3.50 per barrel on the first 60,000 barrels produced, for small breweries. The law also reduces taxes by $2 per barrel for larger breweries, up to two million barrels.

Cole Schneider, co-owner of Kalispell Brewing Co., estimated his annual tax savings at about $3,500 since the law was first enacted. While that amount represents less than 1 percent of the company’s annual gross revenue, it is far from insignificant for a small-margin business like craft brewing. Kalispell Brewing Co. has grown to a 12-employee operation and produces nearly twice as much beer as it did in 2014, Schneider said, but even the amount it produces now (about 1,000 barrels per year) is nowhere near the threshold for a higher excise tax rate.

“I did not go into craft brewing to make a fortune,” Schneider said. “I do this because I love it … We operate with pretty tight margins, and that 3,000-plus dollar tax relief is something that we can definitely feel.”

There are more than 80 craft breweries in Montana, according to a release issued by Tester’s office, and those breweries employee more than 2,700 people. The release also notes that breweries purchase more than 3 million pounds of malt grain from Montana farmers, adding $400 million to the state’s economy each year.

Additional regulations in the law simplify the process by which labels are approved by regulators, and lower the excise tax on small distillers from $13.40 to $2.70 per gallon for the first 100,000 gallons produced.

“Montana’s breweries and distillers use local grain to make some of the best spirits in the world,” Tester said in a release. “Easing excessive taxes and regulatory burdens will let brewers and distillers continue to grow and innovate, while strengthening our economy and creating jobs across the state.”

According to the Brewers Association, a nonprofit advocacy group for small and independent craft brewers, making the current legislation permanent, as Sen. Tester proposes, would save craft brewers approximately $49 million per year and “help strengthen our nation’s smallest brewers and support their efforts to maintain and generate jobs.”

Schneider echoed those thoughts, saying the money Kalispell Brewing Co. has been able to save has been put right back into the business and the local economy.

“Most breweries in the U.S. are small businesses that can benefit from tax relief like this,” he said. “We’re able to hire more people and make capital investments, and put that money back into the community. It’s beneficial not just for craft breweries but for the industries and communities that support them.”