Home Distilling Ban Raises Court Suspicion for Weak Link to Tax

The fate of 157-year-old restrictions on home distilling appeared to turn on their connection to tax revenue as a federal appeals court panel focused primarily on that issue.

The government’s position “ticks me off,” Judge Edith Jones said during oral arguments before the US Court of Appeals for the Fifth Circuit Monday, taking issue with the justification that the home distilling ban is “necessary and proper” and thus within the province of the federal government.

“The ‘necessary and proper’ power is not a fundamental source of authority, you have to go back to collection of revenue,” Jones told Caroline W. Tan, the Justice Department attorney representing the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau.

“You’re trying to not collect revenue by saying you can’t do alcohol distilling in your house, but you could do it 100 yards away,” she said. “I bet a whole lot of moonshiners could exist under the qualification that you now attach this to.”

A blanket ban might not be justified as falling within the “necessary and proper” powers of the government to ensure tax collection, the judge said.

“Congress’ taxing power is limited to paying money into the treasury, no more, and if the tax is properly paid, the government has no power to punish individuals,” she said. “I take this sentence, and I don’t think it’s out of context, that the taxing power is used to tax, it’s not used to regulate primary conduct.”

The appeals court is considering the constitutionality of Sections 5601(a)(6) and 5178 of the Tax Code, which prohibit distilleries in homes, sheds, yards, and enclosures connected to houses, as well as boats, premises where beer and wine are produced, where liquors are retailed, and where most other businesses are carried on.

ATTTB is charged with enforcing the ban, which the government says is meant to protect federal tax revenue.

The Hobby Distillers Association and several individuals argued the ban lacks an adequate connection to taxation to justify the measure, an argument that previously had failed until a federal district court in Texas last year deemed the law unconstitutional.

‘Narrowly Tailored’

Tan said during oral arguments on appeal that the provisions are “narrowly tailored” to preventing tax evasion, refuting the idea that the statutory language broadly bans home distilling. It merely restricts where distilling can take place, she said.

Moreover, the plaintiffs lack standing to sue, she said.

Out of the original plaintiffs, only Scott McNutt was found to have standing because he received an ATTTB permit to distill fuel alcohol in a shed located 260 feet away from his residence but also received a notice that distilling alcoholic spirits in the same location wasn’t allowed.

Tan characterized the correspondence as a “notice of obligations under the law” that shouldn’t be deemed a threat of prosecution. But Jones said the notice proactively warns people away from an action.

“There’s plenty in there that says, ‘you do anything like this and we’re going to sue the pants off you or send you to jail,’” Jones said. “You’re saying that letter is meaningless, but my point is it’s not meaningless.”

Arguing for the plaintiffs, Andrew Michael Grossman of Baker & Hostetler LLP said the provision “invades the police power reserved to the states.” Moreover, its language isn’t supported bythe government’s taxing power because it singles out residential structures, which is both irrational and “backwards,” he said.

“There is simply no explanation in the government’s briefing why a home would somehow imperil tax revenue in a way another structure would not,” he said.

But the law does make sense as far as limiting the ability to conceal distilled spirits from authorities, said Judge Fernando Rodriguez Jr., a US District Court for the Southern District of Texas judge sitting by designation on the panel.

That’s not to say it necessarily makes sense, as there’s existing case law on whether a “blanket provision is a step too far,” he said.

Judge James E. Graves Jr. also sat on the panel.

The Competitive Enterprise Institute and Griffith Barbee PLLC represent also represent the plaintiffs.

The case is McNutt v. Dep’t of Justice, 5th Cir., No. 24-10760, oral arguments held 8/4/25.