GLENWOOD, Iowa (AP) — Iowa brewers are toasting the recently approved federal tax changes, saying a tax break targeting their industry could spur expansion and more profits.
Keg Creek Brewing is a large craft beer producer in southwest Iowa. Keg Creek is also one of the about 80 local breweries eligible for a tax break from President Donald Trump’s tax plan that went into effect this month.
The new “Craft Beverage Modernization and Tax Reform Act” approves a $3.50 barrel tax on the first 60,000 barrels made every year by breweries that produce fewer than 2 million barrels annually. Brewers saw a $7 barrel tax previously.
The Brewers Association found that Iowa produced about 61,000 barrels of craft beer in 2016, which means every ounce of state-brewed beer would benefit from the tax break.
The Beer Institute said the cut should encourage $320 million in economic growth for the industry each year.
Keg Creek would have potentially saved around $5,200 with the tax break last year. This year, the brewers said they hope to increase production by 50 percent.
“(These) breweries . if they’re not growing, they’re dying. It is a small-margin industry,” said John Bueltel, a co-founder of Keg Creek Brewing. “This tax has given us more money to continue that growth.”
J. Wilson, head of the Iowa Brewers Guild, said the tax break won’t turn a $5 pint into a $4 pint, but is a step toward permanent reform.
The tax is planned to sunset in 2019, which will restore the $7 barrel tax. Wilson said the tax break would see a real impact if it were extended beyond 2019. Wilson plans to lobby for a permanent cut.
“This is one of those things where you’re excited but you’ve also got to be realistic and manage expectations,” said Wilson.