I 

116TH CONGRESS 

1ST SESSION H. R. 1175 

To amend the Internal Revenue Code of 1986 to reform taxation of alcoholic 

beverages. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 13, 2019 

Mr. KIND (for himself, Mr. KELLY of Pennsylvania, Mr. BLUMENAUER, Mr. 

HIGGINS of New York, Mr. PANETTA, Mr. LAHOOD, Mr. DEFAZIO, Ms. 

PINGREE, Mr. TIPTON, Mr. MCHENRY, Mr. BRINDISI, Mr. WENSTRUP, 

Mr. REED, Mr. GOMEZ, and Mr. FERGUSON) introduced the following 

bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to reform 

taxation of alcoholic beverages. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Craft Beverage Mod5 ernization and Tax Reform Act of 2019’’. 

6 SEC. 2. PERMANENT EXTENSION OF CERTAIN PROVISIONS. 

7 (a) PRODUCTION PERIOD FOR BEER, WINE, AND

8 DISTILLED SPIRITS.— 


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1 (1) IN GENERAL.—Paragraph (4) of section 

2 263A(f) of the Internal Revenue Code of 1986, as 

3 added by section 13801(a) of Public Law 115–97, is 

4 amended to read as follows: 

5 ‘‘(4) EXEMPTION FOR AGING PROCESS OF

6 BEER, WINE, AND DISTILLED SPIRITS.—For pur7 poses of this subsection, the production period shall 

8 not include the aging period for— 

9 ‘‘(A) beer (as defined in section 5052(a)), 

10 ‘‘(B) wine (as described in section 

11 5041(a)), or 

12 ‘‘(C) distilled spirits (as defined in section 

13 5002(a)(8)), except such spirits that are unfit 

14 for use for beverage purposes.’’. 

15 (2) EFFECTIVE DATE.—The amendment made 

16 by this subsection shall apply to interest costs paid 

17 or accrued in calendar years beginning after Decem18 ber 31, 2017. 

19 (b) REDUCED RATE OF EXCISE TAX ON BEER.— 

20 (1) IN GENERAL.—Paragraph (1) of section 

21 5051(a) of the Internal Revenue Code of 1986, as 

22 amended by section 13802(a) of Public Law 115–97, 

23 is amended to read as follows: 

24 ‘‘(1) IN GENERAL.— 


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1 ‘‘(A) IMPOSITION OF TAX.—A tax is here2 by imposed on all beer brewed or produced, and 

3 removed for consumption or sale, within the 

4 United States, or imported into the United 

5 States. Except as provided in paragraph (2), 

6 the rate of such tax shall be— 

7 ‘‘(i) $16 on the first 6,000,000 barrels 

8 of beer— 

9 ‘‘(I) brewed by the brewer and 

10 removed during the calendar year for 

11 consumption or sale, or 

12 ‘‘(II) imported by the importer 

13 into the United States during the cal14 endar year, and 

15 ‘‘(ii) $18 on any barrels of beer to 

16 which clause (i) does not apply. 

17 ‘‘(B) BARREL.—For purposes of this sec18 tion, a barrel shall contain not more than 31 

19 gallons of beer, and any tax imposed under this 

20 section shall be applied at a like rate for any 

21 other quantity or for fractional parts of a bar22 rel.’’. 

23 (2) REDUCED RATE FOR CERTAIN DOMESTIC

24 PRODUCTION.—Subparagraph (A) of section 

25 5051(a)(2) of the Internal Revenue Code of 1986, as 


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1 amended by section 13802(b) of Public Law 115–97, 

2 is amended— 

3 (A) in the heading, by inserting ‘‘$3.50 A

4 BARREL’’ before ‘‘RATE’’; and 

5 (B) by striking ‘‘$7’’ and all that follows 

6 through ‘‘January 1, 2020)’’ and inserting 

7 ‘‘$3.50’’. 

8 (3) APPLICATION OF REDUCED TAX RATE FOR

9 FOREIGN MANUFACTURERS AND IMPORTERS.—Sub10 section (a) of section 5051 of the Internal Revenue 

11 Code of 1986, as amended by section 13802(c) of 

12 Public Law 115–97, is amended— 

13 (A) in subparagraph (A)(i)(II) of para14 graph (1), as amended by paragraph (1) of this 

15 subsection, by inserting ‘‘but only if the im16 porter is an electing importer under paragraph 

17 (4) and the barrels have been assigned to the 

18 importer pursuant to such paragraph’’ after 

19 ‘‘during the calendar year’’; and 

20 (B) in paragraph (4)— 

21 (i) in subparagraph (A), by striking 

22 ‘‘paragraph (1)(C)’’ and inserting ‘‘para23 graph (1)(A)’’; and 

24 (ii) in subparagraph (B), by striking 

25 ‘‘The Secretary’’ and inserting ‘‘The SecVerDate Sep 11 2014 21:10 Feb 27, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1175.IH H1175

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1 retary of the Treasury, in consultation 

2 with the Secretary of Health and Human 

3 Services and the Secretary of the Depart4 ment of Homeland Security,’’. 

5 (4) CONTROLLED GROUP AND SINGLE TAX6 PAYER RULES.—Paragraph (5) of section 5051(a) of 

7 the Internal Revenue Code of 1986, as amended by 

8 section 13802(d) of Public Law 115–97, is amended 

9 by striking ‘‘paragraph (1)(C)(i)’’ each place it ap10 pears and inserting ‘‘paragraph (1)(A)(i)’’. 

11 (5) EFFECTIVE DATE.—The amendments made 

12 by this subsection shall apply to beer removed after 

13 December 31, 2017. 

14 (c) TRANSFER OF BEER BETWEEN BONDED FACILI15 TIES.— 

16 (1) IN GENERAL.—Section 5414 of the Internal 

17 Revenue Code of 1986, as amended by section 

18 13803(a) of Public Law 115–97, is amended to read 

19 as follows: 

20 ‘‘SEC. 5414. TRANSFER OF BEER BETWEEN BONDED FACILI21 TIES. 

22 ‘‘(a) IN GENERAL.—Beer may be removed from one 

23 brewery to another brewery, without payment of tax, and 

24 may be mingled with beer at the receiving brewery, subject 

25 to such conditions, including payment of the tax, and in 


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1 such containers, as the Secretary by regulations shall pre2 scribe, which shall include— 

3 ‘‘(1) any removal from one brewery to another 

4 brewery belonging to the same brewer, 

5 ‘‘(2) any removal from a brewery owned by one 

6 corporation to a brewery owned by another corpora7 tion when— 

8 ‘‘(A) one such corporation owns the con9 trolling interest in the other such corporation, 

10 or 

11 ‘‘(B) the controlling interest in each such 

12 corporation is owned by the same person or per13 sons, and 

14 ‘‘(3) any removal from one brewery to another 

15 brewery when— 

16 ‘‘(A) the proprietors of transferring and 

17 receiving premises are independent of each 

18 other and neither has a proprietary interest, di19 rectly or indirectly, in the business of the other, 

20 and 

21 ‘‘(B) the transferor has divested itself of 

22 all interest in the beer so transferred and the 

23 transferee has accepted responsibility for pay24 ment of the tax. 


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1 ‘‘(b) TRANSFER OF LIABILITY FOR TAX.—For pur2 poses of subsection (a)(3), such relief from liability shall 

3 be effective from the time of removal from the transferor’s 

4 bonded premises, or from the time of divestment of inter5 est, whichever is later.’’. 

6 (2) EFFECTIVE DATE.—The amendment made 

7 by this subsection shall apply to any calendar quar8 ters beginning after December 31, 2017. 

9 (d) REDUCED RATE OF EXCISE TAX ON CERTAIN

10 WINE.— 

11 (1) IN GENERAL.—Section 5041(c) of the Inter12 nal Revenue Code of 1986, as amended by section 

13 13804 of Public Law 115–97, is amended— 

14 (A) in the heading, by striking ‘‘FOR

15 SMALL DOMESTIC PRODUCERS’’; 

16 (B) by amending paragraph (1) to read as 

17 follows: 

18 ‘‘(1) ALLOWANCE OF CREDIT.— 

19 ‘‘(A) IN GENERAL.—There shall be allowed 

20 as a credit against any tax imposed by this title 

21 (other than chapters 2, 21, and 22) an amount 

22 equal to the sum of— 

23 ‘‘(i) $1 per wine gallon on the first 

24 30,000 wine gallons of wine, plus 


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1 ‘‘(ii) 90 cents per wine gallon on the 

2 first 100,000 wine gallons of wine to which 

3 clause (i) does not apply, plus 

4 ‘‘(iii) 53.5 cents per wine gallon on 

5 the first 620,000 wine gallons of wine to 

6 which clauses (i) and (ii) do not apply, 

7 which are produced by the producer and re8 moved during the calendar year for consump9 tion or sale, or which are imported by the im10 porter into the United States during the cal11 endar year. 

12 ‘‘(B) ADJUSTMENT OF CREDIT FOR HARD

13 CIDER.—In the case of wine described in sub14 section (b)(6), subparagraph (A) of this para15 graph shall be applied— 

16 ‘‘(i) in clause (i) of such subpara17 graph, by substituting ‘6.2 cents’ for ‘$1’, 

18 ‘‘(ii) in clause (ii) of such subpara19 graph, by substituting ‘5.6 cents’ for ‘90 

20 cents’, and 

21 ‘‘(iii) in clause (iii) of such subpara22 graph, by substituting ‘3.3 cents’ for ‘53.5 

23 cents’.’’; 

24 (C) by striking paragraphs (2) and (8); 


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1 (D) by redesignating paragraphs (3) 

2 through (6) as paragraphs (2) through (5), re3 spectively; 

4 (E) by redesignating paragraph (9) as 

5 paragraph (6); and 

6 (F) by amending paragraph (7) to read as 

7 follows: 

8 ‘‘(7) REGULATIONS.—The Secretary may pre9 scribe such regulations as may be necessary to carry 

10 out the purposes of this subsection, including regula11 tions to ensure proper calculation of the credit pro12 vided in this subsection.’’. 

13 (2) ALLOWANCE OF CREDIT FOR FOREIGN MAN14 UFACTURERS AND IMPORTERS.—Subsection (c) of 

15 section 5041 of the Internal Revenue Code of 1986, 

16 as amended by paragraph (1), is amended— 

17 (A) in subparagraph (A) of paragraph (1), 

18 by inserting ‘‘but only if the importer is an 

19 electing importer under paragraph (6) and the 

20 wine gallons of wine have been assigned to the 

21 importer pursuant to such paragraph’’ after 

22 ‘‘into the United States during the calendar 

23 year’’; and 

24 (B) in paragraph (6)— 


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1 (i) in subparagraph (A), by striking 

2 ‘‘paragraph (8)’’ and inserting ‘‘paragraph 

3 (1)’’; 

4 (ii) in subparagraph (B), by striking 

5 ‘‘The Secretary’’ and inserting ‘‘The Sec6 retary of the Treasury, in consultation 

7 with the Secretary of Health and Human 

8 Services and the Secretary of the Depart9 ment of Homeland Security,’’; and 

10 (iii) in subparagraph (C), by striking 

11 ‘‘paragraph (4)’’ and inserting ‘‘paragraph 

12 (3)’’. 

13 (3) EFFECTIVE DATE.—The amendments made 

14 by this subsection shall apply to wine removed after 

15 December 31, 2017. 

16 (e) ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR

17 APPLICATION OF EXCISE TAX RATES.— 

18 (1) IN GENERAL.—Paragraphs (1) and (2) of 

19 section 5041(b) of the Internal Revenue Code of 

20 1986, as amended by section 13805 of Public Law 

21 115–97, are each amended by striking ‘‘14 percent’’ 

22 and all that follows through ‘‘January 1, 2020’’ and 

23 inserting ‘‘16 percent’’. 


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1 (2) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to wine removed after 

3 December 31, 2017. 

4 (f) DEFINITION OF MEAD AND LOW ALCOHOL BY

5 VOLUME WINE.— 

6 (1) IN GENERAL.—Subsection (h) of section 

7 5041 of the Internal Revenue Code of 1986, as 

8 added by section 13806 of Public Law 115–97, is 

9 amended— 

10 (A) in paragraph (2), by striking ‘‘the Sec11 retary shall’’ each place it appears and insert12 ing ‘‘the Secretary may’’; and 

13 (B) by striking paragraph (3). 

14 (2) EFFECTIVE DATE.—The amendments made 

15 by this subsection shall apply to wine removed after 

16 December 31, 2017. 

17 (g) REDUCED RATE OF EXCISE TAX ON CERTAIN

18 DISTILLED SPIRITS.— 

19 (1) IN GENERAL.—Subsection (c) of section 

20 5001 of the Internal Revenue Code of 1986, as 

21 added by subsection (a) of section 13807 of Public 

22 Law 115–97 and amended by subsection (c) of such 

23 section, is amended— 

24 (A) in the heading, by striking ‘‘FOR 2018 

25 AND 2019’’; 


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1 (B) in paragraph (3)(B), by striking ‘‘The 

2 Secretary’’ and inserting ‘‘The Secretary of the 

3 Treasury, in consultation with the Secretary of 

4 Health and Human Services and the Secretary 

5 of the Department of Homeland Security,’’; and 

6 (C) by striking paragraph (4). 

7 (2) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to distilled spirits re9 moved after December 31, 2017. 

10 (h) BULK DISTILLED SPIRITS.— 

11 (1) IN GENERAL.—Section 5212 of the Internal 

12 Revenue Code of 1986, as amended by section 

13 13808 of Public Law 115–97, is amended— 

14 (A) by striking the last two sentences; 

15 (B) by striking ‘‘Bulk distilled spirits on 

16 which’’ and inserting ‘‘Distilled spirits on 

17 which’’; and 

18 (C) by striking ‘‘bulk distilled spirits for’’ 

19 and inserting ‘‘distilled spirits for’’. 

20 (2) EFFECTIVE DATE.—The amendments made 

21 by this subsection shall apply to distilled spirits 

22 transferred in bond after December 31, 2017. 

23 (i) SIMPLIFICATION OF RULES REGARDING

24 RECORDS, STATEMENTS, AND RETURNS.— 


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1 (1) IN GENERAL.—Subsection (a) of section 

2 5555 of the Internal Revenue Code of 1986 is 

3 amended by striking ‘‘For calendar quarters begin4 ning after the date of the enactment of this sen5 tence, and before January 1, 2020, the Secretary’’ 

6 and inserting ‘‘The Secretary’’. 

7 (2) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to any calendar quar9 ters beginning after February 9, 2018. 

10 SEC. 3. USE OF WHOLESOME PRODUCTS SUITABLE FOR 

11 HUMAN FOOD CONSUMPTION IN THE PRO12 DUCTION OF FERMENTED BEVERAGES. 

13 (a) IN GENERAL.—Not later than the date that is 

14 1 year after the date of the enactment of this Act, the 

15 Secretary of the Treasury or the Secretary of the Treas16 ury’s delegate shall amend subpart F of part 25 of sub17 chapter A of chapter I of title 27, Code of Federal Regula18 tions, to ensure that, for purposes of such part, wholesome 

19 fruits, vegetables, and spices suitable for human food con20 sumption that are generally recognized as safe for use in 

21 an alcoholic beverage and that do not contain alcohol are 

22 generally recognized as a traditional ingredient in the pro23 duction of fermented beverages. 


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1 (b) DEFINITION.—For purposes of this section, the 

2 term ‘‘fruit’’ means whole fruit, fruit juices, fruit puree, 

3 fruit extract, or fruit concentrate. 

4 (c) RULE OF CONSTRUCTION.—Nothing in this sec5 tion shall be construed to revoke, prescribe, or limit any 

6 other exemptions from the formula requirements under 

7 subpart F of part 25 of subchapter A of chapter I of title 

8 27, Code of Federal Regulations, for any ingredient that 

9 has been recognized before, on, or after the date of the 

10 enactment of this Act as a traditional ingredient in the 

11 production of fermented beverages. 

12 SEC. 4. INCREASED FUNDING FOR THE ALCOHOL AND TO13 BACCO TAX AND TRADE BUREAU. 

14 (a) IN GENERAL.—In addition to any other amounts 

15 authorized to be appropriated to the Alcohol and Tobacco 

16 Tax and Trade Bureau, there is authorized to be appro17 priated— 

18 (1) for fiscal year 2019, $15,000,000, to re19 main available until September 30, 2020; and 

20 (2) for fiscal year 2020, $15,000,000, to re21 main available until September 30, 2021. 

22 (b) AVAILABILITY OF FUNDS.—Of the amounts au23 thorized to be appropriated under subsection (a), for each 

24 of fiscal years 2019 and 2020— 


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1 (1) $5,000,000 shall be for the costs of accel2 erating the processing of formula and label applica3 tions; 

4 (2) $5,000,000 shall be for the costs of pro5 grams to enforce trade practice violations of the 

6 Federal Alcohol Administration Act (27 U.S.C. 201 

7 et seq.); and 

8 (3) $5,000,000 shall be for the purpose of car9 rying out the provisions of this Act and the amend10 ments made by this Act, including accelerating the 

11 processing of permit applications for non-industrial 

12 alcohol production and distribution. 

Æ 


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