Jason Parker

Notes from FET discussion on 7-28-15

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On Tuesday, July 28, 2015, Justin Stiefel (Heritage Distilling, WA), Ralph Erenzo (Tuthilltown Spirits Distillery, NY), and Nicole Austin (Kings County Distillery, NY) met at Hilliard’s Beer Taproom to speak to about 45 distillers and distillery industry folks about Federal Excise Tax reduction efforts currently under consideration in Washington DC. They each brought their extensive backgrounds in national legislation to bear on questions such as:

  • What are the differences between the various bills aiming to reduce the FET for distillers?
  • Do we need to pick just one bill to support, or can we support them all?
  • What chance do the bills have of passing as stand-alone bills?
  • What other avenue to enactment do the bills have, besides being signed into law as a stand-alone bill?
  • Who are our allies on these bills?
  • Who is against these bills?
  • What changes are likely to occur to the bills before they are in a position to become law?
  • What chance do they have of making it to law?
  • What can we do to help move these bills forward?
  • If we don't get a reduction to FET this year, when will our next chance be to try for it?

The conversations were thoughtful, informed, respectful, and action-oriented, with several general themes resonating, such as:

  • The main goal of FET reduction from $13.50 to $2.70 per proof gallon is what we should all stay focused on.
  • All of the bills (summarized in the attached spreadsheet) are worth backing except for H.R. 1172 (Rick Larson, WA) and should be supported at this time. (Rick Larson’s H.R. 1172 would cause distilleries who grow to even one proof gallon beyond 100,000/year to suddenly owe back taxes on the entire year's production, which would be about $1Million in back taxes. Yikes!)
  • The ACSA, who has experience working at the federal level, is focused primarily on moving the bills through congress, but not so much on communicating their plans and actions and garnering public support. Earlier this year, the ACSA partnered with DISCUS after recognizing that the lobbying power DISCUS will greatly improve the chance of success.
  • The ACSA and DISCUS have heard from the senators they’ve met with that a unified voice from the distilling industry is necessary before they will support our bills. This means that the big distilleries (represented by DISCUS), the small distilleries (represented by the non-profit trade group ACSA), and even the broader distilling industry--(i.e., suppliers, wholesalers, retailers, customers, and enthusiasts, all represented best by ADI) need to work together and bring their strengths to the effort. For only with everyone focused on the same message and outcome will congressmen feel there is consensus within the industry to enact FET reduction, and that it is politically “save” to support the bills.
  • The ADI has a good track record of raising general public awareness about the distilling industry, but they have so far not been significantly involved in the FET lobbying effort. This may make the ADI best poised to champion the cause through marketing and communications channels, while the ACSA focuses on lobbying efforts.
  • On the other hand, if multiple lobbyist were hired by the two different groups (ASCA and ADI), this would likely be considered a sign of a politicized community; And congressmen would rather not take on a trade's political battle when fighting for an industry-wide bill.
  • If the bill DISCUS is supporting (H.R. 2520) were to lose some or all of the benefits for spirits produced over 100,000 PG per year (whether through markups in committee or through amendments), they would probably either continue to support the bill (because all distilleries would receive an advantage for the first 100,000 PG) or at least remain neutral (because they will need our help on their bills in the future.)
  • Despite the $1 Billion windfall large distilleries would make if they were to receive FET reduction from $13.50 to $9.00 per PG for all production over 100,000 PG, it is not enough money between all of them to allow a significant shift in their marketing strategies that they couldn't otherwise afford. In other words, they won't suddenly be able to squash small producers by flooding the market with cheap alcohol, or spend so much money on advertising that they take back the market share small distillers have gained.
  • These bills will certainly all be modified, should they gain enough support to be marked-up in committee. Eventually the best ideas from them would be reconciled into a single bill, which would then be ready to be added to a vehicle such as the Federal Highway Tax bill for passage. If it doesn't get passed this October, before presidential election efforts overshadow work in congress, then it will probably be 2-3 years before it gets a chance as good as it has now.
  • Next steps include:
    • engage with your congressman and share your personal stories of how money saved from excise taxes will be used to create more direct jobs (i.e., distillers, bottlers, tasting room staff, bookkeepers, sales people) and indirect jobs (i.e., label printers, distributors, equipment manufactures, legal council, marketing, advertising, and financial services), and buy more locally produced agricultural products.
    • Encourage the two groups, ACSA and ADI, to play to their strengths and work together to create a unified voice throughout the entire distilling community.

The following resources will give you more information about the issue, as well as action items we recommend you take to help improve our chances of success:

  • To watch the 2.5 hour video of the entire panel discussion, click here.
  • To learn more about the ADI FET reduction efforts, click here.
  • To learn more about the ACSA FET reduction efforts, click here.
  • Finally, please contact both the ADI and the ACSA and encourage them to work together for all of us to get federal excise tax reduction passed this fall!

Thanks!

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