Lodi vintners can raise a glass and toast the bipartisan support for a bill that will permanently reduce the excise tax for small wineries.
The effort to reduce the taxes for winemakers follows a bill introduced in 2015 through the Craft Beverage Modernization & Tax Reform Act.
The legislation received strong bipartisan support and a two-year version was later enacted into law as part of comprehensive tax overhaul that went into effect in 2018.
The Tax Reform Act reduced excise taxes for small-to-medium-sized wineries by 55 to 70 percent, according to the Wine Institute.
Wineries were able to claim credits ranging from $.535 and $1 per gallon for the first 750,000 gallons of wine produced, with a possible total value of $451,700 per year for wineries that produce the full 750,000 gallons.
However, when the legislation was written in 2015, it limited the excise tax reductions on a preliminary two-year basis giving the legislature the opportunity to amend the bill every two years.
A new effort has been made on behalf of U.S. Representatives Ron Kind, a Democrat from Wisconsin, and Mike Kelly, a Republican from Pennsylvania. The two introduced legislation in February which would make the tax credit permanent.
The new excise tax reductions would be $1 per gallon on the first 30,000 gallons of wine, 90 cents per gallon on the first 100,000 gallons and 53.5 cents per gallon on the first 620,000 gallons.
“The amendments to the bill would also raise the Alcohol by Volume (ABV) allowed for wines from 14 to 16 percent, which is especially beneficial for Lodi wineries,” said David Phillips, co-owner of Michael David Winery in Lodi. “Because of our climate, most of the wines produced here are over 14 percent ABV. This measure moves the threshold and puts more dollars in the hands of farmers and wineries.”
Phillips, who sits on the board of the Wine Institute, will attend a meeting in Washington D.C. this May to speak in front of elected officials to help move support in favor of the bill.
“We already have tremendous bipartisan support. We have high hopes that it will pass, and we hope it does because it has been a long process,” Phillips said.
State and federal legislation enacted in recent years has left farmers in a financial bind that has hindered local wineries as they try to compete on a global stage, according to wine grape commissioner Stuart Spencer.
“The tax cut will provide some relief but it does not make up for the increased labor costs and state regulations,” Spencer said.
Spencer believes there is an obvious disconnect felt by wine grape growers and the state legislature, but believes that this excise tax bill could be a step in the right direction for growers.