Big Tax Reductions, Lower Tax Rate for Wineries, Breweries, Cideries

Big Tax Reductions, Lower Tax Rate for Wineries, Breweries, Cideries

Nestled among the mountain of provisions in the federal tax bill passed by Congress is one of specific interest to Loudoun County wineries, breweries and cideries.

On Jan. 1, such businesses entered a new era of lower federal excise taxes. For wineries, the cut can be substantial depending on production. Previously, tax credits were limited to small wineries.

The federal excise tax on wine — which was raised in 1991 from 17 cents to $1.07 per gallon produced — is now as low as 7 cents for the first 30,000 gallons, thanks to a $1 credit. That credit decreases slightly to 90 cents for the next 100,000 gallons and then to 53.5 cents for between 130,000 and 750,000 gallons.

“The excise tax savings will allow wineries to invest money back into their businesses in countless ways, whether that’s hiring new employees, buying oak barrels, or planting vineyards,” Jim Trezise, president of national trade group WineAmerica, said in a statement. “Ultimately, such investments will help American wineries be more competitive in the global marketplace.”

Loudoun features 40 wineries open to the public — more than any other county in Virginia. There are also 25 breweries and three cideries or distilleries. Visitors to the county’s wineries, breweries and distilleries represent a good share of its tourism business, which posted $1.7 billion in domestic expenditures in 2016.

The tax on beer declined to $3.50 per barrel from $7 on the first 60,000 barrels for smaller brewers that make less than 2 million barrels annually. For all others, the tax decreased to $16 a barrel from $18 on the first 6 million barrels.

The legislation also redefined table wine as having up to 16 percent alcohol from 14 percent, setting a lower tax rate of $1.07 per gallon, down from $1.57. The provisions are slated to expire in late 2019, and Trezise said his organization will work to extend the lower rates.

Besides the tax reductions for wineries, the law, which takes effect for the 2018 tax year, reduces the corporate tax rate from a maximum of 35 percent to a flat rate of 21 percent.  It also about doubles the standard deduction for individuals, while capping deductions for local taxes at $10,000.

The Loudoun County Chamber of Commerce lobbied for reforming the federal tax code, which hadn’t been substantially changed in more than three decades. The lower tax bills will help local wineries and many other businesses have more funds to grow their companies, said Eric Johnson, the chamber’s government relations manager.

“There are a number of changes that will be beneficial,” he said. “We’re not saying it will help every business, but generally we believe it will be positive.”

U.S. Rep. Barbara Comstock (R-McLean), who represents Loudoun, was among those who supported the tax bill. She said the tax cuts for families and businesses will “help revitalize and create a healthy economy where American workers can compete.”

U.S. Sen. Mark Warner (D-Va.), who opposed the bill, cited a report from the Congressional Budget Office that concluded that many lower and middle-income families will start paying more in taxes in 2019. By 2027, every family making less than $75,000 will spend more in taxes, while those in the higher brackets will continue to pay less, according to the report.

On a separate state matter, the Loudoun chamber opposes a bill filed in January by Del. Timothy Hugo (R-Fairfax) in the General Assembly. The legislation would remove the exemption for farm buildings and other structures that operate as a winery or brewery from uniform state building code standards. Johnson said that change would impact many of Loudoun’s wineries and breweries.

“Those businesses that have been operating safely for years would be suddenly forced to either put in expensive upgrades to these historic structures or stop using their property altogether,” he said.

The bill has apparently died for now, as a state subcommittee recommended delaying its consideration until 2019, according to the General Assembly website.