We are happy to announce that Arielle J. Albert and Barbara J. Kwon have been made Partners of the firm Danow, McMullan and Panoff, P.C.
CHANGES TO FEDERAL ALCOHOLIC BEVERAGE TAXES
On December 22, 2017, President Donald J. Trump signed into law the Tax Cuts and Jobs Act of 2017, which makes changes to the Internal Revenue Code of 1986, including provisions related to beverage alcohol industry. All changes were effective January 1, 2018. The passage of the act included the Craft Beverage Modernization and tax Reform Act which also took effect on January 1, 2018 but incorporated a sunset provision so that all taxes will revert back to the 2017 levels on January 1st, 2020. The benefits of the new law vary depending upon the type of beverage alcohol produced.
In the case of distilled spirts removed during the calendar years 2018 and 2019 for consumption and sale the applicable tax is $2.70 per proof gallon on the first 100,000 proof gallons and $13.34 per proof gallon on the next 22,130,000 proof gallons. The lower tax applies to all beverages distilled in the United States. Foreign manufactures can also elect to take advantage of the reduced tax rate on distilled spirits. The Secretary of the United State Department of Treasury is charged with developing procedures for the foreign distillers to assign the reduced rate to their importers in such a way as to keep track of which importer gets the first 100,000 proof gallons and which get the next 22,130,000. Unless the rate reduction is extended, commencing January 1st, 2020 the tax on distilled spirits will return to $13.50 per proof gallon. In addition, it appears that distilled spirits transferred in bond during the calendar years 2018 and 2019 can take advantage of the special bulk transfer rules in Section 5212 without regard to weather the distilled spirits are sufficient in volume to be classified as bulk distilled spirits.
Still wine containing not more than 14% alcohol by volume removed prior to December 31, 2017 was taxed at $1.07 per wine gallon. For wine removed after December 31, 2017 and before January 1st, 2020 the $1.07 rate will apply to wine containing not more than 16% alcohol by volume. Wine with more than 16% alcohol by volume will be taxed at $1.57 per wine gallon. That is the same rate that applied to wine above 14% before January 1st 2017.
There is also a credit allowable in 2018 and 2019 that can be taken for those wines that do not qualify for the lower tax discussed above including still wine containing more than 21 percent but not more than 24 percent alcohol by volume. Champagne, sparkling wine, artificially carbonated wine and hard cider also qualify for this credit. The credit applies to the first 750, wine gallons removed during each applicable calendar year. Foreign manufacturers can take advantage of the credit by making an election to assign the credit to their importers. The Secretary of the Treasury is required to set up procedures to accomplish this without duplicating the credit when there is more than one importer.
The credit for wine other than hard cider is an amount equal to the sum of $1 per wine gallon on the first 30,000 wine gallons, plus 90 cents on the next 100,000 wine gallons and 53.5 cents per wine gallon on the next 620,000 wine gallons. A different credit is available on hard cider.
Beer that was heretofore taxed at $18 per barrel is also is subject to reduced rate. The first 6 million barrels of beer removed for consumption and sale during the calendar years 2018 and 2019 will be taxed at a rate of $16 per barrel. Any additional beer removed will be taxed at $18 per barrel. A barrel cannot contain more than 31 gallons. As with distillers, foreign manufactures can take advantage of the reduced rates through a system to be set up by the Secretary of the Treasury that allows the Brewer to assign a number of barrels to each of its importers.
In the case of a brewer who produces not more than 2 million barrels of beer during the calendar year, the per barrel rate of the tax imposed will be $3.50 on the first 60,000 barrels of beer which are removed in such year for consumption or sale and which have been brewed or produced by such brewer at qualified breweries in the United States.
 Keven Danow is an attorney representing members of all three tiers of the Beverage Alcohol Industry and member of the firm of Danow, McMullan & Panoff, P.C. 275 Madison Ave, NY, NY. 10022. (212 3703744). Website: dmppc.com; email: email@example.com. Arielle Albert is a partner of the firm of Danow, McMullan & Panoff, P.C. and is admitted in New York and New Jersey. This article is not intended to give specific legal advice. Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.