U.S. industry groups, confronted with the economic damage wrought by the pandemic, have started asking lawmakers for more targeted tax relief.
The requests, which come as Congress is starting work on the next coronavirus relief package, are likely to intensify in the coming months as businesses map out their plans for a post-pandemic world.
The alcoholic beverage industry, for example, hard hit by the closure of restaurants and bars, is looking for a number of breaks. The U.S. Alcohol and Tobacco Tax and Trade Bureau is already letting distillers, vintners, and breweries put off their federal excise tax payments for 90 days. But alcoholic beverage importers can only do so if their revenues have dropped more than 40%.
The alcohol industry associations are now pressing the Treasury Department to level the field for importers. They pointed out in an letter to Treasury Secretary Steven Mnuchin that the importers of beer, wine, and spirits pay the same excise taxes as do domestic producers.
Rob Maron, vice president of international trade for the Distilled Spirits Council of the United States, said importers are looking for parity. “In 2019, in terms of value, the U.S. imported about $9 billion of spirits,” he said, making the U.S. the second-largest spirits market in the world behind China.
A Broader Demand
Distillers, meanwhile, want Congress to suspend the federal excise taxes on domestic and imported distilled products while making permanent an excise tax break for craft beverages and others that expires at the end of 2020.
Craft liquor producers have had to shut down their tasting rooms and distillery tours, areas that drive much of smaller distillers’ business, said Jeff Wuslich, co-founder of Cardinal Spirits in Bloomington, Ind. That blow comes as key customers like bars and restaurants have been shuttered, further hammering sales. “Not only did that affect our tasting room, which we derive about a third of our revenues from, but also all our biggest accounts,” said Wuslich.
To make up the difference, many distillers pivoted to making hand sanitizer in the early days of the pandemic, as Purell and other brands flew off the shelves, and Congress cleared a temporary tax waiver in March so that spirit producers could easily switch to producing it. But that demand has now tapered, Wuslich said, and if hand sanitizer production dries up, “it will be unclear how we can carry on with our own sales and production.”
Distillers hope their current plight will prod Congress to enact tax changes they’ve pushed for years, encapsulated in the Craft Beverage Modernization and Tax Reform Act (H.R. 1175, S. 362). They are even calling on Congress to go a step further during the health crisis and provide an excise tax holiday for 2020.
They also want the Trump administration to de-escalate trade tensions with Europe, a major market for American whiskey. The European Union recently raised tariffs on whiskey in retaliation for levies on food products like wine and cheese imposed by President Donald Trump in a separate dispute over airplane manufacturing.
The National Waste and Recycling Association, the National Retail Federation and dozens of other national and state organizations and companies want Congress to suspend a 12% federal excise tax on new heavy-duty trucks and trailers.
According to the associations, the tax adds about $22,000 on average to the cost of a new truck or a trailer.
Jim Riley, a senior vice president for government affairs at the National Waste and Recycling Association, said temporarily suspending the excise tax would help service providers as well as manufacturers and suppliers.
“Now, especially with the pandemic going on, there are estimates that truck manufacturing and sales could be off as much as 50% this year,” Riley said.
A bipartisan group of senators has urged Treasury to extend a deadline for production tax credits and investments tax credits that is in use by some clean energy industries.
An extension of the “continuity safe harbor” from four to five years would benefit projects that began in 2016 or 2017 but cannot be completed on time because of delays caused by Covid-19, the senators, who include Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) said in a letter to Mnuchin.
The American Wind Energy Association is advocating for the change.
“Relief provisions ensuring renewable projects can secure financing and meet safe harbor continuity schedules are critical to preserving a strong domestic clean energy sector,” said Tom Kiernan, the CEO of the American Wind Energy Association.
“Making these adjustments would provide the industry the flexibility needed to accommodate Covid-19 delays, without costing the federal government any additional money,” he said.