Craft Beverage Modernization and Tax Reform Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 1175 To amend the Internal Revenue Code of 1986 to reform taxation of alcoholic beverages. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 13, 2019 Mr. KIND (for himself, Mr. KELLY of Pennsylvania, Mr. BLUMENAUER, Mr. HIGGINS of New York, Mr. PANETTA, Mr. LAHOOD, Mr. DEFAZIO, Ms. PINGREE, Mr. TIPTON, Mr. MCHENRY, Mr. BRINDISI, Mr. WENSTRUP, Mr. REED, Mr. GOMEZ, and Mr. FERGUSON) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to reform taxation of alcoholic beverages. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Craft Beverage Mod- 4 ernization and Tax Reform Act of 2019’’. 5 SEC. 2. PERMANENT EXTENSION OF CERTAIN PROVISIONS. 6 (a) PRODUCTION PERIOD FOR BEER, WINE, AND 7 DISTILLED SPIRITS.— 8 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 2 •HR 1175 IH (1) IN GENERAL.—Paragraph (4) of section 1 263A(f) of the Internal Revenue Code of 1986, as 2 added by section 13801(a) of Public Law 115–97, is 3 amended to read as follows: 4 ‘‘(4) EXEMPTION FOR AGING PROCESS OF 5 BEER, WINE, AND DISTILLED SPIRITS.—For pur- 6 poses of this subsection, the production period shall 7 not include the aging period for— 8 ‘‘(A) beer (as defined in section 5052(a)), 9 ‘‘(B) wine (as described in section 10 5041(a)), or 11 ‘‘(C) distilled spirits (as defined in section 12 5002(a)(8)), except such spirits that are unfit 13 for use for beverage purposes.’’. 14 (2) EFFECTIVE DATE.—The amendment made 15 by this subsection shall apply to interest costs paid 16 or accrued in calendar years beginning after Decem- 17 ber 31, 2017. 18 (b) REDUCED RATE OF EXCISE TAX ON BEER.— 19 (1) IN GENERAL.—Paragraph (1) of section 20 5051(a) of the Internal Revenue Code of 1986, as 21 amended by section 13802(a) of Public Law 115–97, 22 is amended to read as follows: 23 ‘‘(1) IN GENERAL.— 24 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 3 •HR 1175 IH ‘‘(A) IMPOSITION OF TAX.—A tax is here- 1 by imposed on all beer brewed or produced, and 2 removed for consumption or sale, within the 3 United States, or imported into the United 4 States. Except as provided in paragraph (2), 5 the rate of such tax shall be— 6 ‘‘(i) $16 on the first 6,000,000 barrels 7 of beer— 8 ‘‘(I) brewed by the brewer and 9 removed during the calendar year for 10 consumption or sale, or 11 ‘‘(II) imported by the importer 12 into the United States during the cal- 13 endar year, and 14 ‘‘(ii) $18 on any barrels of beer to 15 which clause (i) does not apply. 16 ‘‘(B) BARREL.—For purposes of this sec- 17 tion, a barrel shall contain not more than 31 18 gallons of beer, and any tax imposed under this 19 section shall be applied at a like rate for any 20 other quantity or for fractional parts of a bar- 21 rel.’’. 22 (2) REDUCED RATE FOR CERTAIN DOMESTIC 23 PRODUCTION.—Subparagraph (A) of section 24 5051(a)(2) of the Internal Revenue Code of 1986, as 25 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 4 •HR 1175 IH amended by section 13802(b) of Public Law 115–97, 1 is amended— 2 (A) in the heading, by inserting ‘‘$3.50 A 3 BARREL’’ before ‘‘RATE’’; and 4 (B) by striking ‘‘$7’’ and all that follows 5 through ‘‘January 1, 2020)’’ and inserting 6 ‘‘$3.50’’. 7 (3) APPLICATION OF REDUCED TAX RATE FOR 8 FOREIGN MANUFACTURERS AND IMPORTERS.—Sub- 9 section (a) of section 5051 of the Internal Revenue 10 Code of 1986, as amended by section 13802(c) of 11 Public Law 115–97, is amended— 12 (A) in subparagraph (A)(i)(II) of para- 13 graph (1), as amended by paragraph (1) of this 14 subsection, by inserting ‘‘but only if the im- 15 porter is an electing importer under paragraph 16 (4) and the barrels have been assigned to the 17 importer pursuant to such paragraph’’ after 18 ‘‘during the calendar year’’; and 19 (B) in paragraph (4)— 20 (i) in subparagraph (A), by striking 21 ‘‘paragraph (1)(C)’’ and inserting ‘‘para- 22 graph (1)(A)’’; and 23 (ii) in subparagraph (B), by striking 24 ‘‘The Secretary’’ and inserting ‘‘The Sec- 25 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 5 •HR 1175 IH retary of the Treasury, in consultation 1 with the Secretary of Health and Human 2 Services and the Secretary of the Depart- 3 ment of Homeland Security,’’. 4 (4) CONTROLLED GROUP AND SINGLE TAX- 5 PAYER RULES.—Paragraph (5) of section 5051(a) of 6 the Internal Revenue Code of 1986, as amended by 7 section 13802(d) of Public Law 115–97, is amended 8 by striking ‘‘paragraph (1)(C)(i)’’ each place it ap- 9 pears and inserting ‘‘paragraph (1)(A)(i)’’. 10 (5) EFFECTIVE DATE.—The amendments made 11 by this subsection shall apply to beer removed after 12 December 31, 2017. 13 (c) TRANSFER OF BEER BETWEEN BONDED FACILI- 14 TIES.— 15 (1) IN GENERAL.—Section 5414 of the Internal 16 Revenue Code of 1986, as amended by section 17 13803(a) of Public Law 115–97, is amended to read 18 as follows: 19 ‘‘SEC. 5414. TRANSFER OF BEER BETWEEN BONDED FACILI- 20 TIES. 21 ‘‘(a) IN GENERAL.—Beer may be removed from one 22 brewery to another brewery, without payment of tax, and 23 may be mingled with beer at the receiving brewery, subject 24 to such conditions, including payment of the tax, and in 25 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 6 •HR 1175 IH such containers, as the Secretary by regulations shall pre- 1 scribe, which shall include— 2 ‘‘(1) any removal from one brewery to another 3 brewery belonging to the same brewer, 4 ‘‘(2) any removal from a brewery owned by one 5 corporation to a brewery owned by another corpora- 6 tion when— 7 ‘‘(A) one such corporation owns the con- 8 trolling interest in the other such corporation, 9 or 10 ‘‘(B) the controlling interest in each such 11 corporation is owned by the same person or per- 12 sons, and 13 ‘‘(3) any removal from one brewery to another 14 brewery when— 15 ‘‘(A) the proprietors of transferring and 16 receiving premises are independent of each 17 other and neither has a proprietary interest, di- 18 rectly or indirectly, in the business of the other, 19 and 20 ‘‘(B) the transferor has divested itself of 21 all interest in the beer so transferred and the 22 transferee has accepted responsibility for pay- 23 ment of the tax. 24 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 7 •HR 1175 IH ‘‘(b) TRANSFER OF LIABILITY FOR TAX.—For pur- 1 poses of subsection (a)(3), such relief from liability shall 2 be effective from the time of removal from the transferor’s 3 bonded premises, or from the time of divestment of inter- 4 est, whichever is later.’’. 5 (2) EFFECTIVE DATE.—The amendment made 6 by this subsection shall apply to any calendar quar- 7 ters beginning after December 31, 2017. 8 (d) REDUCED RATE OF EXCISE TAX ON CERTAIN 9 WINE.— 10 (1) IN GENERAL.—Section 5041(c) of the Inter- 11 nal Revenue Code of 1986, as amended by section 12 13804 of Public Law 115–97, is amended— 13 (A) in the heading, by striking ‘‘FOR 14 SMALL DOMESTIC PRODUCERS’’; 15 (B) by amending paragraph (1) to read as 16 follows: 17 ‘‘(1) ALLOWANCE OF CREDIT.— 18 ‘‘(A) IN GENERAL.—There shall be allowed 19 as a credit against any tax imposed by this title 20 (other than chapters 2, 21, and 22) an amount 21 equal to the sum of— 22 ‘‘(i) $1 per wine gallon on the first 23 30,000 wine gallons of wine, plus 24 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 8 •HR 1175 IH ‘‘(ii) 90 cents per wine gallon on the 1 first 100,000 wine gallons of wine to which 2 clause (i) does not apply, plus 3 ‘‘(iii) 53.5 cents per wine gallon on 4 the first 620,000 wine gallons of wine to 5 which clauses (i) and (ii) do not apply, 6 which are produced by the producer and re- 7 moved during the calendar year for consump- 8 tion or sale, or which are imported by the im- 9 porter into the United States during the cal- 10 endar year. 11 ‘‘(B) ADJUSTMENT OF CREDIT FOR HARD 12 CIDER.—In the case of wine described in sub- 13 section (b)(6), subparagraph (A) of this para- 14 graph shall be applied— 15 ‘‘(i) in clause (i) of such subpara- 16 graph, by substituting ‘6.2 cents’ for ‘$1’, 17 ‘‘(ii) in clause (ii) of such subpara- 18 graph, by substituting ‘5.6 cents’ for ‘90 19 cents’, and 20 ‘‘(iii) in clause (iii) of such subpara- 21 graph, by substituting ‘3.3 cents’ for ‘53.5 22 cents’.’’; 23 (C) by striking paragraphs (2) and (8); 24 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 9 •HR 1175 IH (D) by redesignating paragraphs (3) 1 through (6) as paragraphs (2) through (5), re- 2 spectively; 3 (E) by redesignating paragraph (9) as 4 paragraph (6); and 5 (F) by amending paragraph (7) to read as 6 follows: 7 ‘‘(7) REGULATIONS.—The Secretary may pre- 8 scribe such regulations as may be necessary to carry 9 out the purposes of this subsection, including regula- 10 tions to ensure proper calculation of the credit pro- 11 vided in this subsection.’’. 12 (2) ALLOWANCE OF CREDIT FOR FOREIGN MAN- 13 UFACTURERS AND IMPORTERS.—Subsection (c) of 14 section 5041 of the Internal Revenue Code of 1986, 15 as amended by paragraph (1), is amended— 16 (A) in subparagraph (A) of paragraph (1), 17 by inserting ‘‘but only if the importer is an 18 electing importer under paragraph (6) and the 19 wine gallons of wine have been assigned to the 20 importer pursuant to such paragraph’’ after 21 ‘‘into the United States during the calendar 22 year’’; and 23 (B) in paragraph (6)— 24 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 10 •HR 1175 IH (i) in subparagraph (A), by striking 1 ‘‘paragraph (8)’’ and inserting ‘‘paragraph 2 (1)’’; 3 (ii) in subparagraph (B), by striking 4 ‘‘The Secretary’’ and inserting ‘‘The Sec- 5 retary of the Treasury, in consultation 6 with the Secretary of Health and Human 7 Services and the Secretary of the Depart- 8 ment of Homeland Security,’’; and 9 (iii) in subparagraph (C), by striking 10 ‘‘paragraph (4)’’ and inserting ‘‘paragraph 11 (3)’’. 12 (3) EFFECTIVE DATE.—The amendments made 13 by this subsection shall apply to wine removed after 14 December 31, 2017. 15 (e) ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR 16 APPLICATION OF EXCISE TAX RATES.— 17 (1) IN GENERAL.—Paragraphs (1) and (2) of 18 section 5041(b) of the Internal Revenue Code of 19 1986, as amended by section 13805 of Public Law 20 115–97, are each amended by striking ‘‘14 percent’’ 21 and all that follows through ‘‘January 1, 2020’’ and 22 inserting ‘‘16 percent’’. 23 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 11 •HR 1175 IH (2) EFFECTIVE DATE.—The amendments made 1 by this subsection shall apply to wine removed after 2 December 31, 2017. 3 (f) DEFINITION OF MEAD AND LOW ALCOHOL BY 4 VOLUME WINE.— 5 (1) IN GENERAL.—Subsection (h) of section 6 5041 of the Internal Revenue Code of 1986, as 7 added by section 13806 of Public Law 115–97, is 8 amended— 9 (A) in paragraph (2), by striking ‘‘the Sec- 10 retary shall’’ each place it appears and insert- 11 ing ‘‘the Secretary may’’; and 12 (B) by striking paragraph (3). 13 (2) EFFECTIVE DATE.—The amendments made 14 by this subsection shall apply to wine removed after 15 December 31, 2017. 16 (g) REDUCED RATE OF EXCISE TAX ON CERTAIN 17 DISTILLED SPIRITS.— 18 (1) IN GENERAL.—Subsection (c) of section 19 5001 of the Internal Revenue Code of 1986, as 20 added by subsection (a) of section 13807 of Public 21 Law 115–97 and amended by subsection (c) of such 22 section, is amended— 23 (A) in the heading, by striking ‘‘FOR 2018 24 AND 2019’’; 25 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 12 •HR 1175 IH (B) in paragraph (3)(B), by striking ‘‘The 1 Secretary’’ and inserting ‘‘The Secretary of the 2 Treasury, in consultation with the Secretary of 3 Health and Human Services and the Secretary 4 of the Department of Homeland Security,’’; and 5 (C) by striking paragraph (4). 6 (2) EFFECTIVE DATE.—The amendments made 7 by this subsection shall apply to distilled spirits re- 8 moved after December 31, 2017. 9 (h) BULK DISTILLED SPIRITS.— 10 (1) IN GENERAL.—Section 5212 of the Internal 11 Revenue Code of 1986, as amended by section 12 13808 of Public Law 115–97, is amended— 13 (A) by striking the last two sentences; 14 (B) by striking ‘‘Bulk distilled spirits on 15 which’’ and inserting ‘‘Distilled spirits on 16 which’’; and 17 (C) by striking ‘‘bulk distilled spirits for’’ 18 and inserting ‘‘distilled spirits for’’. 19 (2) EFFECTIVE DATE.—The amendments made 20 by this subsection shall apply to distilled spirits 21 transferred in bond after December 31, 2017. 22 (i) SIMPLIFICATION OF RULES REGARDING 23 RECORDS, STATEMENTS, AND RETURNS.— 24 VerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175 pbinns on DSK79D2C42PROD with BILLS 13 •HR 1175 IH (1) IN GENERAL.—Subsection (a) of section 1 5555 of the Internal Revenue Code of 1986 is 2 amended by striking ‘‘For calendar quarters begin- 3 ning after the date of the enactment of this sen- 4 tence, and before January 1, 2020, the Secretary’’ 5 and inserting ‘‘The Secretary’’. 6 (2) EFFECTIVE DATE.—The amendments made 7 by this subsection shall apply to any calendar quar- 8 ters beginning after February 9, 2018. 9 SEC. 3. USE OF WHOLESOME PRODUCTS SUITABLE FOR 10 HUMAN FOOD CONSUMPTION IN THE PRO- 11 DUCTION OF FERMENTED BEVERAGES. 12 (a) IN GENERAL.—Not later than the date that is 13 1 year after the date of the enactment of this Act, the 14 Secretary of the Treasury or the Secretary of the Treas- 15 ury’s delegate shall amend subpart F of part 25 of sub- 16 chapter A of chapter I of title 27, Code of Federal Regula- 17 tions, to ensure that, for pu [Text truncated for display. Full text available on Congress.gov.]