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December 27, 2019

Maine craft breweries get a break with extension of federal excise tax

File Photo / Maureen Milliken Expansion and renovation at the Freeport headquarters of Maine Beer Co., shown in this 2019 photo, were made possible by a lower federal excise tax, co-owner Dan Kleban has said. New legislation may make the tax break permanent.

Extension of a lower federal excise rate tax for craft brewers will continue to boost the industry in Maine, brewers both locally and nationally said.

The extension keeps the per-barrel excise tax $3.50 for 60,000 barrels or fewer for brewers who produce less than 2 million barrels a year. The rate will be in effect until Dec. 31, 2020. The rate is $16 on the first 6 million barrels for those who produce more than 2 million barrels a year, as well as on beer importers. Brewers who produce more than 6 million barrels pay $18 a barrel.

According a study last year, 87% of Maine brewers produce fewer than 1,613 barrels a year. There were 153 licensed craft brewers in Maine as of October, according to the Maine Brewers' Guild.

“The savings resulting from the adjusted FET rates have had a huge impact on the brewing industry here in Maine,” Dan Kleban, co-owner of Maine Beer Co., said in a news release from the Brewers Association, a Boulder, Colo.-based trade group.

“Our company was already in the midst of an expansion when this bill passed, and the savings allowed us to reinvest in the business, our employees and the environment," Kleban said. "Growth in Maine’s brewing industry has helped boost other economies throughout the state; creating new agricultural opportunities, helping increase tourism and even shaping beer science programs in our local colleges. In uncertain financial times, these savings help create a stronger economic future here in Maine.”

National job growth

“The lower FET rates have been a boon to small and independent brewers located in all 50 states and nearly every congressional district,” said Bob Pease, president and CEO of the Brewers Association. “These savings empowered brewers to reinvest in their businesses and resulted in an annual tax savings of more than $80 million.”

Nationally, brewers reinvested capital saved by creating thousands of new jobs, buying new equipment, expanding their operations and improving employee benefits, Pease said. Some 15,000 craft brewing jobs were created nationally in 2018, for a total of more than 150,000 — "the largest job increase on record for small brewers," he said.

Pease said the Brewers Association will work with Congress to make the rates permanent by making the Craft Beverage Modernization and Reform Act permanent. The act was part of the December 2017 tax package, but was originally only in effect through the end of this year.

“While this stop-gap extension provides some relief for the coming year, making these recalibrated excise tax rates permanent would go a long way in providing certainty and stability in a competitive business climate,” said Pease.

The Craft Beverage Modernization and Tax Reform Act is supported by 73 senators and 332 members of the House, who have signed on as cosponsors, including all four members of Maine's delegation.

Wide-ranging impact in Maine

In Maine, brewers directly employed 1,910 people in 2017, paying more than $54 million in wages. That year, the industry added $260 million to the state's economy, according to a study by the University of Maine, released by the Maine Brewers' Guild in January.

The number of breweries has grown since then from 133 to 153, according to the guild.

The lower excise tax rates for breweries that produce less than 2 million barrels a year apply to all of Maine's craft brewers, even the larger ones. The Brewers Association economic impact figures for 2018 said the state's breweries produced 357,438 barrels last year, a figure based on 119 breweries.

Allagash, of Portland, for instance, will produce an estimated 100,000-plus barrels this year, sales director Naomi Neville told Brewbound earlier this month. Shipyard, also of Portland, expected to produce 160,000 barrels.

Maine Beer brewed 19,000 barrels in 2018, and Kleban told Mainebiz he hoped, with the expansion of both the production area and tasting room, completed this year, the company would ramp up to 50,000. Lone Pine, in Gorham, said earlier this year it planned about 13,000 barrels.

At the other end of the spectrum are brewers like Corner Point Brewing, in Berwick, which brews about 600 barrels a year, according to Jamie Blood, owner and head brewer. He spoke before the state Legislature in the spring, when a law that redefined small brewer was being considered.

The craft brewery and distillery law, which passed in June, changed the definition of a small craft brewer from a company with annual production of 1,600 barrels to 30,000 barrels a year. 

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