CAA Provisions Related to Agriculture and Beer, Wine, and Spirits

The Consolidated Appropriations Act, 2021 (CAA), signed on December 27, 2020, contains a number of changes of interest to those working in agriculture and/or beer, wine, and distilled spirits. The following provides an overview of these provisions.

Permanent Modifications

Aging Period: The CAA makes permanent the special rule that excludes the aging period for beer, wine, and distilled spirits from the production period for purposes of the UNICAP interest capitalization rules. Taxpayers will continue to be able to deduct interest expenses attributable to shorter production periods.

Craft Beverage Modernization Act of 2017 Provisions: The Craft Beverage Modernization Act of 2017 provisions become permanent under the CAA. This includes the reduction of federal excise tax rates on beer and distilled spirits and certain tax credits for wine, lower tax rates for certain meads and low alcohol wines, and transfers of beer in bond between brewers who are not of the same ownership. The CAA also clarifies that reduced rates are not allowed for smuggled or illegally produced products.

New Changes and Code Sections Added

The CAA creates new provisions for putting restrictions on the transfer of bottled distilled spirits in bond, modifies the definition of processing for purposes of determining volume limitations or reduced rates, and modifies the single taxpayer rules for beer, wine, and distilled spirits. Additionally, provisions in the CAA reduce rates for imports starting in 2023 and create a new code section which sets out reporting requirements for foreign producers of beer, wine, and distilled spirits making certain elections.

Farming Loss 

Many of our clients operate farms/vineyards. The COVID-related Tax Relief Act of 2020 included in the CAA also modifies the CARES Act with respect to farming losses. It allows farmers who had in place a two-year net operating loss carryback before the CARES Act to elect to retain that two-year carryback rather than claim the five-year carryback provided in the CARES Act. It also permits farmers who before the CARES Act waived the carryback of a net operating loss to revoke the waiver. If taxpayers wish to revoke such elections, amended returns should be filed prior to the due date for their first tax return due after enactment of the CAA.

Further Insight

We know there is a good deal to process and consider as you learn of the many provisions within the CAA. If you would like to discuss these changes and what they mean for your organization, contact one of our wine, beer, and cider industry experts.

Disclaimer of Liability
Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.