Wines & Vines

February 2018 WINES&VINES 17 WINE INDUSTRY NEWS W ashington, D.C.—When the U.S. House of Repre- sentatives passed the Tax Cuts and Jobs Act on Dec. 20, it included unexpected last-minute wording that will benefit the own- ers of vineyards and orchards. Section 13201 of this bill al- lows "plants bearing fruits and nuts" to be fully depreciated in the year they are planted. The 100% depreciation will apply to "a plant which is planted or grafted after Sept. 27, 2017, and before Jan. 1, 2023." That depreciation will then drop by 20% each year until Jan. 1, 2027, when the depreciation will be reduced to zero. U.S. Sen. Rob Portman of Ohio added those tax provisions this past fall from another bill, the Craft Beverage Modernization and Tax Reform Act, that had been introduced by U.S. Sen. Ron Wyden of Oregon in 2015. Originally designed to benefit the beer industry, the Craft Bever- age Modernization and Tax Re- form Act was rewritten to include benefits for wineries and distill- eries. According to Jim Trezise, president of WineAmerica, the Tax Cuts and Jobs Act will save all w i n e r i e s s i g n i f i c a n t m o n e y through an excise tax credit mech- anism that reduces the effective rate (see table). These excise tax provisions are scheduled to expire Dec. 31, 2019, unless Congress extends the timeframe or makes them permanent. Included in the Tax Cuts and Jobs Act is a change in the defini- tion of table wine: The alcohol level for table wine will be in- creased from 14% to 16%. An- other provision will increase the tolerance for still wine from 0.392 grams of carbon dioxide per 100 ml of wine to 0.64 grams for mead or wines produced pri- marily from grapes, which do not contain any other fruit and con- tain no more than 8.5% alcohol by volume. "The excise tax savings will allow wineries to invest money back into their businesses in countless ways," said Trent Preszler, Ph.D., the CEO of Bedell Cellars in Cutchogue, N.Y., and chairman of the WineAmerica Board of Directors. —Linda Jones McKee Tax Bill to Benefit Vineyard Owners, Change Excise Tax Rates CRAFT BEVERAGE MODERNIZATION ACT PROVISIONS FET Savings Examples Winery Size FET Payment (Current Law) FET Payment (New Law) Annual Savings 30,000 wine gallons* (12,600 cases) $5,100 $2,100 $3,000 59% 120,000 wine gallons* (50,000 cases) $38,400 $17,000 $21,000 55% 250,000 wine gallons* (105,000 cases) $267,500 $83,300 $184,200 69% 750,000 wine gallons* (315,000 cases) $802,500 $350,800 $451,700 56% 2 million wine gallons* (840,000 cases) $2,140,000 $1,688,300 $451,700 21% Source: Wine Institute; FET = Federal Excise Tax *Removed from bond annually. Assumes all wine is below 14% ABV, additional savings would apply for wines currently over 14% ABV.

• Cover