This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why the End of 'Craft' Beer Is Just a Tax Break Away

Updated with clarification from the Beer Institute regarding its stance on the competing legislation and Deschutes Brewing and Matt Brewing's role in the process

PORTLAND, Ore. (TheStreet) -- Garret Oliver has been brewmaster at The Brooklyn Brewery since 1994. He was the brewmaster at Manhattan Brewing before that and has served as editor-in-chief of The Oxford Companion to Beer, written two other books on beer and continues to make a series of brews that gets all the beer geeks excited.

At some point this year, a person who claims to love beer is going to say that Oliver isn't a craft brewer because of a stance his company took on excise taxes. If that happens in your presence, pull the beer out of that person's hand and pour it over his or her swollen head. They don't deserve it.

Earlier this week, Brooklyn Brewery joined Bend, Ore.-based Deschutes Brewing, Utica, N.Y.-based Saranac brewer Matt Brewing and Kalamazoo, Mich.-based Bell's Brewery in Washington, D.C., to ask Congress to support reducing the excise tax on the nation's brewers. While in town, those brewers offered varying levels of support for the Brewers Excise and Economic Relief Act of 2013 (BEER Act), would reduce the federal excise tax on beer for all brewers and beer importers. The act, introduced by U.S. Reps. Tom Latham (R-Iowa) and Ron Kind (D-Wis.) with 33 original co-sponsors, would help reduce the overhead on Brooklyn and the others and would, ideally, make it easier for new breweries to break into the business. That, in turn, might actually soften craft beer prices a bit for consumers.

The BEER Act is also supported by Anheuser-Busch InBev (BUD), MillerCoors (TAP), Heineken USA, Constellation Brands' (STZ) Corona distributor Crown Imports and Magic Hat and Pyramid brewer North American Breweries. Unfortunately, that makes it a bit of a sore point for craft beer lobbying group The Brewers Association, of which Brooklyn, Bell's, Matt and Deschutes are full members. That group has been working on its own legislation -- the Small Brewer Reinvestment and Expanding Workforce Act (Small BREW Act) with members of Congress including Sens. Ben Cardin (D-Md.) and Susan Collins (R-Maine).

Under the Small BREW Act, law that allows brewers making fewer than 2 million barrels of beer annually to pay $7 per barrel on the first 60,000 barrels they produce and $18 per barrel on every barrel thereafter would be amended. Instead, the smallest brewers and brewpubs would pay $3.50 on the first 60,000 barrels. Once brewers grow to between 60,001 and 2 million barrels, the rate would hit $16 per barrel. Any brewer that exceeds 2 million barrels (about 1% of the U.S. beer market) would begin paying the full $18 rate. Even the Washington-based lobbying group The Beer Institute, which is supporting the competing BEER Act, sees some common ground in the Small BREW Act.

"We believe that the beer industry is aligned in opposition to increased beer taxes," says Beer Institute spokesman Chris Thorne. "There are two different bills that attempt to achieve that through different means, but ultimately, we are united in our position against any increase in beer taxes."

Sounds great, right? The problem is that, under the Small BREW Act, breweries with an annual production of 6 million barrels or more don't get the reduced rate. That's why the big brewers' counteroffer, supported by Washington-based lobbying group The Beer Institute, is a bit more broad. Under their BEER Act, the smallest breweries making 15,000 barrels or less would pay no excise tax. That $3.50-per-barrel rate stays in place for brewers making 15,000 to 60,000 barrels. Brewers making more than that would pay $9 a barrel for every barrel from 60,000 to 2 million. The kicker is that big brewers and importers making more than 2 million barrels would see their tax trimmed from $18 a barrel to $9 for every barrel.

That latter legislation is making the Brewers Association surly for several reasons. For one, it gives every brewer a break, not just the ones the association recognizes as "craft." Secondly, it makes a mockery of that group's "craft vs. crafty" burn lists that keep out brewers such as D.G. Yuengling & Son that survived Prohibition and longtime craft brewers including Craft Brew Alliance (BREW) members Widmer Brothers and Redhook, who signed a distribution deal with InBev. Third, and this is the most prickly part of the whole equation, it implies that Samuel Adams maker Boston Beer (SAM) is definitely not craft beer, despite the Brewers Association changing its definition of a "craft brewer" just to accommodate it.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,092.63 -20.91 -0.12%
S&P 500 1,987.84 +4.31 0.22%
NASDAQ 4,473.92 +17.9040 0.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs