National Issues

UPDATE: Small Brewer Graduated Excise Tax Rate Legislation.

Bipartisan legislation seeking a graduated beer excise tax rate of $3.50 and $16 for domestic small brewers continues to gain support in both chambers of Congress.  In the House, H.R. 4278 currently enjoys the support of 108 U.S. Representatives, while Senate Bill 3339 has the support of 24 U.S. Senators.

The legislation seeks to cut the small brewer rate on the first 60,000 barrels by 50 percent to $3.50/barrel and lowers the tax rate by two dollars to $16 per barrel on beer production above 60,000 barrels up to 2 million barrels.  Breweries with an annual production of 6 million barrels or less would be eligible for these reduced rates.

The Brewers Association has developed a resource page with the information and tools small brewers need to make the case to their federal elected officials for supporting these tax relief measures.

Brewers Association Files Comments on Federal Menu Labeling

In a joint comment submission with the Beer Institute, the Brewers Association (BA) has offered preliminary comments in response to a Food and Drug Administration (FDA) notice seeking public input on the requirement that chain restaurants (and similar retail food establishments with 20 or more outlets) disclose caloric values for regular menu items and that they make available more detailed nutrient information to consumers on request.  This requirement, part of the comprehensive federal health care legislation passed in March, applies to alcohol beverages.

At this early stage, BA has asked that FDA ensure consistency with all applicable Alcohol and Tobacco Tax and Trade Bureau (TTB) rules pertaining to alcohol beverage labeling and advertising, particularly the Statement of Average Analysis which has been in place for many years. It is anticipated that further comments will be submitted in the coming weeks.

Feds Look at Military Exception to Legal Drinking Age

H.R. 5958 directs the Secretary of Defense to allow members of the Armed Forces serving on active duty who are at least 18 years old and less than 21 years old to purchase and consume beer and wine at certain locations on military installations.

 

The Courts

Threat to Self-Distribution in Illinois a Big Step Closer to Reality

Relying heavily on the Supreme Court’s Granholm decision, a federal judge has ruled the Illinois law allowing self-distribution rights to in-state brewers unconstitutional. The ruling comes as part of the suit originally brought by Anheuser-Busch InBev (ABI) against the Illinois Liquor Control Commission (ILCC) disputing the ILCC’s ruling that the brewer could not buy Chicago distributor City Beverage because, under state law, it is barred from operating as a distributor. ABI disagreed, claiming the ILCC decision violates the commerce clause of the U.S. Constitution by restricting its interstate business.

In ruling on the Commerce Clause portion of the case, the court has in essence leveled the playing field down – rather than expanding the right to self-distribute to those outside of Illinois, the court has revoked that ability for in-state suppliers. The decision, however, will not become effective until March 31, 2011, so that the legislature has an opportunity to consider its own remedy to this constitutional issue during its regular session.

 

State Issues

TRADE PRACTICE & OTHER

California
With the Governor's signature, A.B. 2134, the California Small Brewers Association-sponsored Beer Maker Dinner bill has become law.  The legislation allows licensed brewers to conduct and participate in events featuring craft beers paired with food called "Beer Maker Dinners." Such consumer events may be held at restaurants that purchase a brewer's products. This measure creates a tied-house exception similar to one in existing law for winemakers.

Delaware
Signed into law by the Governor, House Bill 447 is meant to encourage tourism at Delaware-licensed microbreweries. Current Delaware law permits an individual to have an interest in up to two brewery-pubs and a microbrewery, but under a strict reading of the statute the individual could only sell for consumption off of the premises at two of the three licensed premises.  This bill makes clear that this limitation does not apply to microbreweries and brewery-pubs. Additionally, following the federal small brewer production threshold, the bill would allow microbreweries to brew up to 2 million barrels with the hope that this could attract larger microbreweries to Delaware.

Minnesota
The Minneapolis City Council has adopted an ordinance allowing licensed brewers to sell 64-ounce growlers out of their locations.

New York
Becoming law with the Governor's signature, S.B. 6970 relates to alternating proprietorships, allowing for premises (including space and equipment) to be rented by a licensed tenant brewer and for brewers to manufacture produce, blend, package, bottle, purchase, sell and deliver alcoholic beverage beverages.

Overview

SELF-DISTRIBUTION
The American consumer should have access to the widest range of domestically produced beers made available by licensed breweries. The success or failure of a beer should depend on consumer demand, rather than artificial barriers to distribution.   The absence of a willing and/or viable wholesaler should not prevent a small brewer's products from reaching a retailer who is willing to sell them.

We support state laws that respect and enhance consumer choice in the marketplace. We believe that to provide the greatest ongoing choice for consumers, small brewers need the right to act as their own wholesaler and be allowed to distribute to retailers. Such brewers should be subject to all laws and taxes applicable to both brewers and wholesalers.

FRANCHISE LAWS / ACCESS TO MARKET
We believe that small brewers and wholesalers should be free to establish enforceable contracts between the parties that both parties agree are fair and equitable. Franchise laws were enacted to protect wholesalers from the undue bargaining power of their largest suppliers. Applying those laws to relations between small brewers and wholesalers is unfair and against free market principles.

Where franchise laws exist, we believe that any brewer contributing less than 20% of a wholesaler's volume should be exempted from those laws and free to establish a mutually beneficial contract with that wholesaler. Without the leverage inherent in being a large part of a wholesaler's business, a small brewer and wholesaler can negotiate a fair contract at arm's length.

INDEPENDENT WHOLESALERS
We support the independence of wholesalers and believe independent wholesalers are wholesalers who are contractually and economically free to allocate their efforts among the brands they sell without the undue influence of their largest suppliers.   Each brand gets the attention it deserves on its own merits in the marketplace.

EXCISE TAXES
The Brewers Association opposes excise taxes on beer as a matter of public policy. The taxes are paid by small brewers whether or not they are profitable. They are also paid by consumers regardless of income level and are historically very regressive taxes. The total amount of excise taxes paid on beer exceeds the total amount of profit in the brewing industry. Newly proposed excise taxes earmarked to fund substance abuse programs do not recognize the positive and healthful benefits of beer consumption for the vast majority of beer drinkers. Furthermore, there have been billions of dollars of excise taxes already collected that could be used to fund such programs.

UNDERAGE DRINKING & DRIVING UNDER THE INFLUENCE
Responsible enjoyment of beer can be part of a healthy lifestyle. The Brewers Association strongly opposes illegal use of our products such as underage drinking and driving while under the influence. We, as brewers, are offended by those who misuse our products. We promote education on responsible enjoyment of craft beer through programs, such as the Savor the Flavor program.