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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Craft Beverage Mod-
ernization and Tax Reform Act of 2019’’. 
SEC. 2. PERMANENT EXTENSION OF CERTAIN PROVISIONS. 
(a) PRODUCTION PERIOD FOR BEER, WINE, AND 
DISTILLED SPIRITS.— 
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(1) IN
GENERAL.—Paragraph (4) of section 
263A(f) of the Internal Revenue Code of 1986, as 
added by section 13801(a) of Public Law 115–97, is 
amended to read as follows: 
‘‘(4) EXEMPTION
FOR
AGING
PROCESS
OF 
BEER, WINE, AND
DISTILLED
SPIRITS.—For pur-
poses of this subsection, the production period shall 
not include the aging period for— 
‘‘(A) beer (as defined in section 5052(a)), 
‘‘(B) 
wine 
(as 
described 
in 
section 
5041(a)), or 
‘‘(C) distilled spirits (as defined in section 
5002(a)(8)), except such spirits that are unfit 
for use for beverage purposes.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to interest costs paid 
or accrued in calendar years beginning after Decem-
ber 31, 2017. 
(b) REDUCED RATE OF EXCISE TAX ON BEER.— 
(1) IN
GENERAL.—Paragraph (1) of section 
5051(a) of the Internal Revenue Code of 1986, as 
amended by section 13802(a) of Public Law 115–97, 
is amended to read as follows: 
‘‘(1) IN GENERAL.— 
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‘‘(A) IMPOSITION OF TAX.—A tax is here-
by imposed on all beer brewed or produced, and 
removed for consumption or sale, within the 
United States, or imported into the United 
States. Except as provided in paragraph (2), 
the rate of such tax shall be— 
‘‘(i) $16 on the first 6,000,000 barrels 
of beer— 
‘‘(I) brewed by the brewer and 
removed during the calendar year for 
consumption or sale, or 
‘‘(II) imported by the importer 
into the United States during the cal-
endar year, and 
‘‘(ii) $18 on any barrels of beer to 
which clause (i) does not apply. 
‘‘(B) BARREL.—For purposes of this sec-
tion, a barrel shall contain not more than 31 
gallons of beer, and any tax imposed under this 
section shall be applied at a like rate for any 
other quantity or for fractional parts of a bar-
rel.’’. 
(2) REDUCED RATE FOR CERTAIN DOMESTIC 
PRODUCTION.—Subparagraph 
(A) 
of 
section 
5051(a)(2) of the Internal Revenue Code of 1986, as 
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amended by section 13802(b) of Public Law 115–97, 
is amended— 
(A) in the heading, by inserting ‘‘$3.50 A 
BARREL’’ before ‘‘RATE’’; and 
(B) by striking ‘‘$7’’ and all that follows 
through ‘‘January 1, 2020)’’ and inserting 
‘‘$3.50’’. 
(3) APPLICATION OF REDUCED TAX RATE FOR 
FOREIGN MANUFACTURERS AND IMPORTERS.—Sub-
section (a) of section 5051 of the Internal Revenue 
Code of 1986, as amended by section 13802(c) of 
Public Law 115–97, is amended— 
(A) in subparagraph (A)(i)(II) of para-
graph (1), as amended by paragraph (1) of this 
subsection, by inserting ‘‘but only if the im-
porter is an electing importer under paragraph 
(4) and the barrels have been assigned to the 
importer pursuant to such paragraph’’ after 
‘‘during the calendar year’’; and 
(B) in paragraph (4)— 
(i) in subparagraph (A), by striking 
‘‘paragraph (1)(C)’’ and inserting ‘‘para-
graph (1)(A)’’; and 
(ii) in subparagraph (B), by striking 
‘‘The Secretary’’ and inserting ‘‘The Sec-
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retary of the Treasury, in consultation 
with the Secretary of Health and Human 
Services and the Secretary of the Depart-
ment of Homeland Security,’’. 
(4) CONTROLLED
GROUP
AND
SINGLE
TAX-
PAYER RULES.—Paragraph (5) of section 5051(a) of 
the Internal Revenue Code of 1986, as amended by 
section 13802(d) of Public Law 115–97, is amended 
by striking ‘‘paragraph (1)(C)(i)’’ each place it ap-
pears and inserting ‘‘paragraph (1)(A)(i)’’. 
(5) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to beer removed after 
December 31, 2017. 
(c) TRANSFER OF BEER BETWEEN BONDED FACILI-
TIES.— 
(1) IN GENERAL.—Section 5414 of the Internal 
Revenue Code of 1986, as amended by section 
13803(a) of Public Law 115–97, is amended to read 
as follows: 
‘‘SEC. 5414. TRANSFER OF BEER BETWEEN BONDED FACILI-
TIES. 
‘‘(a) IN GENERAL.—Beer may be removed from one 
brewery to another brewery, without payment of tax, and 
may be mingled with beer at the receiving brewery, subject 
to such conditions, including payment of the tax, and in 
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such containers, as the Secretary by regulations shall pre-
scribe, which shall include— 
‘‘(1) any removal from one brewery to another 
brewery belonging to the same brewer, 
‘‘(2) any removal from a brewery owned by one 
corporation to a brewery owned by another corpora-
tion when— 
‘‘(A) one such corporation owns the con-
trolling interest in the other such corporation, 
or 
‘‘(B) the controlling interest in each such 
corporation is owned by the same person or per-
sons, and 
‘‘(3) any removal from one brewery to another 
brewery when— 
‘‘(A) the proprietors of transferring and 
receiving premises are independent of each 
other and neither has a proprietary interest, di-
rectly or indirectly, in the business of the other, 
and 
‘‘(B) the transferor has divested itself of 
all interest in the beer so transferred and the 
transferee has accepted responsibility for pay-
ment of the tax. 
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‘‘(b) TRANSFER OF LIABILITY FOR TAX.—For pur-
poses of subsection (a)(3), such relief from liability shall 
be effective from the time of removal from the transferor’s 
bonded premises, or from the time of divestment of inter-
est, whichever is later.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to any calendar quar-
ters beginning after December 31, 2017. 
(d) REDUCED RATE OF EXCISE TAX ON CERTAIN 
WINE.— 
(1) IN GENERAL.—Section 5041(c) of the Inter-
nal Revenue Code of 1986, as amended by section 
13804 of Public Law 115–97, is amended— 
(A) in the heading, by striking ‘‘FOR 
SMALL DOMESTIC PRODUCERS’’; 
(B) by amending paragraph (1) to read as 
follows: 
‘‘(1) ALLOWANCE OF CREDIT.— 
‘‘(A) IN GENERAL.—There shall be allowed 
as a credit against any tax imposed by this title 
(other than chapters 2, 21, and 22) an amount 
equal to the sum of— 
‘‘(i) $1 per wine gallon on the first 
30,000 wine gallons of wine, plus 
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‘‘(ii) 90 cents per wine gallon on the 
first 100,000 wine gallons of wine to which 
clause (i) does not apply, plus 
‘‘(iii) 53.5 cents per wine gallon on 
the first 620,000 wine gallons of wine to 
which clauses (i) and (ii) do not apply, 
which are produced by the producer and re-
moved during the calendar year for consump-
tion or sale, or which are imported by the im-
porter into the United States during the cal-
endar year. 
‘‘(B) ADJUSTMENT OF CREDIT FOR HARD 
CIDER.—In the case of wine described in sub-
section (b)(6), subparagraph (A) of this para-
graph shall be applied— 
‘‘(i) in clause (i) of such subpara-
graph, by substituting ‘6.2 cents’ for ‘$1’, 
‘‘(ii) in clause (ii) of such subpara-
graph, by substituting ‘5.6 cents’ for ‘90 
cents’, and 
‘‘(iii) in clause (iii) of such subpara-
graph, by substituting ‘3.3 cents’ for ‘53.5 
cents’.’’; 
(C) by striking paragraphs (2) and (8); 
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(D) by redesignating paragraphs (3) 
through (6) as paragraphs (2) through (5), re-
spectively; 
(E) by redesignating paragraph (9) as 
paragraph (6); and 
(F) by amending paragraph (7) to read as 
follows: 
‘‘(7) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary to carry 
out the purposes of this subsection, including regula-
tions to ensure proper calculation of the credit pro-
vided in this subsection.’’. 
(2) ALLOWANCE OF CREDIT FOR FOREIGN MAN-
UFACTURERS
AND
IMPORTERS.—Subsection (c) of 
section 5041 of the Internal Revenue Code of 1986, 
as amended by paragraph (1), is amended— 
(A) in subparagraph (A) of paragraph (1), 
by inserting ‘‘but only if the importer is an 
electing importer under paragraph (6) and the 
wine gallons of wine have been assigned to the 
importer pursuant to such paragraph’’ after 
‘‘into the United States during the calendar 
year’’; and 
(B) in paragraph (6)— 
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(i) in subparagraph (A), by striking 
‘‘paragraph (8)’’ and inserting ‘‘paragraph 
(1)’’; 
(ii) in subparagraph (B), by striking 
‘‘The Secretary’’ and inserting ‘‘The Sec-
retary of the Treasury, in consultation 
with the Secretary of Health and Human 
Services and the Secretary of the Depart-
ment of Homeland Security,’’; and 
(iii) in subparagraph (C), by striking 
‘‘paragraph (4)’’ and inserting ‘‘paragraph 
(3)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to wine removed after 
December 31, 2017. 
(e) ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR 
APPLICATION OF EXCISE TAX RATES.— 
(1) IN GENERAL.—Paragraphs (1) and (2) of 
section 5041(b) of the Internal Revenue Code of 
1986, as amended by section 13805 of Public Law 
115–97, are each amended by striking ‘‘14 percent’’ 
and all that follows through ‘‘January 1, 2020’’ and 
inserting ‘‘16 percent’’. 
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(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to wine removed after 
December 31, 2017. 
(f) DEFINITION OF MEAD AND LOW ALCOHOL BY 
VOLUME WINE.— 
(1) IN
GENERAL.—Subsection (h) of section 
5041 of the Internal Revenue Code of 1986, as 
added by section 13806 of Public Law 115–97, is 
amended— 
(A) in paragraph (2), by striking ‘‘the Sec-
retary shall’’ each place it appears and insert-
ing ‘‘the Secretary may’’; and 
(B) by striking paragraph (3). 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to wine removed after 
December 31, 2017. 
(g) REDUCED RATE OF EXCISE TAX ON CERTAIN 
DISTILLED SPIRITS.— 
(1) IN
GENERAL.—Subsection (c) of section 
5001 of the Internal Revenue Code of 1986, as 
added by subsection (a) of section 13807 of Public 
Law 115–97 and amended by subsection (c) of such 
section, is amended— 
(A) in the heading, by striking ‘‘FOR 2018 
AND 2019’’; 
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(1) IN
GENERAL.—Subsection (a) of section 
5555 of the Internal Revenue Code of 1986 is 
amended by striking ‘‘For calendar quarters begin-
ning after the date of the enactment of this sen-
tence, and before January 1, 2020, the Secretary’’ 
and inserting ‘‘The Secretary’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to any calendar quar-
ters beginning after February 9, 2018. 
SEC. 3. USE OF WHOLESOME PRODUCTS SUITABLE FOR 
HUMAN FOOD CONSUMPTION IN THE PRO-
DUCTION OF FERMENTED BEVERAGES. 
(a) IN GENERAL.—Not later than the date that is 
1 year after the date of the enactment of this Act, the 
Secretary of the Treasury or the Secretary of the Treas-
ury’s delegate shall amend subpart F of part 25 of sub-
chapter A of chapter I of title 27, Code of Federal Regula-
tions, to ensure that, for purposes of such part, wholesome 
fruits, vegetables, and spices suitable for human food con-
sumption that are generally recognized as safe for use in 
an alcoholic beverage and that do not contain alcohol are 
generally recognized as a traditional ingredient in the pro-
duction of fermented beverages. 
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(b) DEFINITION.—For purposes of this section, the 
term ‘‘fruit’’ means whole fruit, fruit juices, fruit puree, 
fruit extract, or fruit concentrate. 
(c) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed to revoke, prescribe, or limit any 
other exemptions from the formula requirements under 
subpart F of part 25 of subchapter A of chapter I of title 
27, Code of Federal Regulations, for any ingredient that 
has been recognized before, on, or after the date of the 
enactment of this Act as a traditional ingredient in the 
production of fermented beverages. 
SEC. 4. INCREASED FUNDING FOR THE ALCOHOL AND TO-
BACCO TAX AND TRADE BUREAU. 
(a) IN GENERAL.—In addition to any other amounts 
authorized to be appropriated to the Alcohol and Tobacco 
Tax and Trade Bureau, there is authorized to be appro-
priated— 
(1) for fiscal year 2019, $15,000,000, to re-
main available until September 30, 2020; and 
(2) for fiscal year 2020, $15,000,000, to re-
main available until September 30, 2021. 
(b) AVAILABILITY OF FUNDS.—Of the amounts au-
thorized to be appropriated under subsection (a), for each 
of fiscal years 2019 and 2020— 
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(1) $5,000,000 shall be for the costs of accel-
erating the processing of formula and label applica-
tions; 
(2) $5,000,000 shall be for the costs of pro-
grams to enforce trade practice violations of the 
Federal Alcohol Administration Act (27 U.S.C. 201 
et seq.); and 
(3) $5,000,000 shall be for the purpose of car-
rying out the provisions of this Act and the amend-
ments made by this Act, including accelerating the 
processing of permit applications for non-industrial 
alcohol production and distribution. 
Æ 
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