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Breaking Down the Craft Beverage Modernization and Tax Reform Act

Back in 2017, the Alcohol and Tobacco Tax and Trade Bureau (TTB) changed the way it approached federal excise taxes on alcohol. The Tax Cuts and Jobs Act of 2017 included a Craft Beverage Modernization (CBMA) provision as part of an effort to update the alcohol specifications administered by TTB, offering new savings for brewers, distillers, and vintners in the U.S.

While the Tax Cuts and Jobs Act of 2017 was initially a two-year deal set to expire in 2019, the craft beverage modernization and tax reform provisions of the act were extended through Dec. 31, 2020. These new rules were a boon to producers of beer, distilled spirits , and wine across the country, but those changes are running out of time. As such, proponents of these CBMA’s changes are pushing Congress to pass the Craft Beverage Modernization and Tax Reform Act (CBMTRA).

A collection of beer cans made during the Craft Beverage Modernization and Tax Reform Act’s lower federal excise taxes.

What is the Craft Beverage Modernization and Tax Reform Act?

The short answer is that the CBMTRA would permanently modify the tax treatment of certain alcoholic beverages in accordance with the CBMA specifications found in the Tax Cuts and Jobs Act of 2017.

There are a variety of provisions included in the CBMTRA. These propositions include the move to permanently lower federal excise tax rates on alcohol to those listed in the Tax Cuts and Jobs Act of 2017. The bill also seeks to keep several other provisions that apply to beer, distilled spirits, wine, and more.

Beer

One of the main goals of the CBMTRA is the continuation reduced federal excise tax rates on any beer that is imported or removed from a brewery. The CBMTRA proposes to keep the following tax rates for breweries.

$3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually (previously $7 per barrel)
$16 per barrel on the first 6 million barrels for all other brewers and all beer importers (previously $18)
$18 per barrel rate for barrels not subject to the $16 rate (same rate as in the past)

These rate changes mark a notable savings for domestic brewers. Another potential savings is that the CBMTRA would allow bonded facilities to transfer beer without an additional tax payment.

Distilled spirits

As with beer, the CBMTRA seeks to maintain reduced tax rates for spirits that are distilled or processed and removed. In the past, the federal excise tax was set at $13.50 per proof gallon with adjustments depending on the percentage of alcohol of the product. The new rates not only lower these rates, but also break them into different groups depending on number of barrels removed or imported.

$2.70 per proof gallon on the first 100,000 proof gallons
$13.34 per proof gallon on the next 22.23 million proof gallons
$13.50 per proof gallon for anything past 22.23 million proof gallons

The CBMTRA also includes a note regarding the transfer in bond of distilled spirits between distilled spirits plants. The Act seeks to permanently allow such transfer whether or not the distilled spirits in question are transported in bulk or non-bulk containers.

Wine

Unlike beer and distilled spirits, the CBMTRA would not institute a new tax rate for wine produced domestically or imported into the country. However, the Act does allow for different tax credits depending on wine production and the tax class of the wine in question. These credits include:

$1 per wine gallon on the first 30,000 wine gallons of wine removed or imported
90 cents on the next 100,000 wine gallons removed or imported
53.5 cents on the next 620,000 wine gallons removed or imported

The CBMTRA also adjusted the existing tax classes and expanded the categories of producers covered by such credit. Previously, wines with 14 percent or less alcohol received the lowest tax rate ($1.07 per wine gallon). Under the CBMTRA, that rate now applies to still wines with 16 percent of fewer, along with any applicable tax credit.

In addition, both meads and low alcohol by volume wines are considered still wines by the CMTRA. These join artificially carbonated wines, sparkling wines, and hard cider as other tax classes included under the wine tax breakdown. To make things even trickier, hard cider is the only one of these products that does not utilize the aforementioned tax credits. Instead, they have a separate adjustment to producer credits. Check out the chart below for a detailed breakdown of all the federal excise taxes on various still wines (with applicable tax credits included).

A chart for the new wine tax rates listed in the Craft Beverage Modernization and Tax Reform Act.

What’s Next for Craft Beverage Modernization and Tax Reform Act?

While the CBMA provisions are still in effect through the end of the year, those new tax rates will reset in 2021 without Congressional action. Several beverage alcohol trade associations have banded together to urge Congress to pass the CBMTRA in time to prevent the significant increase in federal excise tax rates, especially while the industry is still feeling the impacts caused by the COVID-19 pandemic. For those interested in joining the call to pass the CBMTRA, you can join the call here.

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Beer Can Shortage: Why It Happened and Potential Options for Breweries

Breweries across the country are feeling the effects of a tightening can supply. The can shortage is a product of several intertwining factors, and breweries nationwide are scrambling for new packaging solutions. Let’s break down why this shortage happened and potential options for breweries looking to maximize their limited supplies.

Why is There a Beer Can Shortage?

To start, aluminum cans are now the preferred form of packaging for brewers. In the first 11 weeks of 2020, cans contained 60 percent of all beer sold. Both consumers and producers show a strong preference to aluminum cans – and not just for beer. Soft drinks, seltzers, and other drinks have shifted to the same cylindrical metal containers, which thinned out the availability of certain cans.

Of course, that strain of can production was only intensified thanks to the COVID-19 pandemic. Once consumers were forced from bars and back into their homes, breweries needed to find new containers that were once meant for kegs. Can usage jumped to 67 percent from week 12 through 20 as a result. In addition, secondary can sources like Anheuser-Busch InBev subsidiary Metal Container Corporation stopped supplying smaller beer producers to focus on its parent company’s canning needs.

Unfortunately for breweries, there is no simple workaround to address the shortage. While major can manufacturers like Ball have added new production lines, the can shortage will likely persist throughout at least the rest of 2020.

16 oz. aluminum beer cans used by breweries as a different sizing option during the can shortage.

3 Potential Solutions to Maximize Supplies During the Can Shortage

Unless you have the means to switch to bottles in the short term, you’ll need to find a way to better utilize the aluminum cans you can access. Long story short, you may need to find some creative solutions for your situation. Fortunately, the following options may help you alleviate some stress create by the can shortage.

Be flexible to different aluminum can sizes

While 12 oz. and 32 oz. cans may be your ideal sizes for beer cans, you may need to be more flexible during a shortage. Don’t be afraid to temporarily try out 25.4 oz. or 16 oz. cans for crowlers or other to-go beers. It may not be your ideal can sizes, but it’s better to be flexible with what you can get so that you can ensure your beers are available for sale.

Of course, you’ll need to check out your local laws to see how much flexibility they allow. Some states limit can sizes for beverages higher than a certain ABV. For example, some local laws may limit crowler sizes to 25.4 oz. and below, whereas others may require a single standard size. Alcohol regulations have changed drastically during the pandemic, so it’s best to reach out to your local guild for the latest updates in your state’s local laws.

Utilize unused screen-printed cans

An empty screen-printed can is an opportunity when you’re in a tight spot. While you may have planned to use those cans for one type of beer, relabeling them can allow you to address canning needs for your other offerings as well. This route can give you some freedom to pick and choose how to use screen-printed cans until you’re able to obtain additional packaging.

When relabeling screen-printed cans, it’s important to make sure that you cover up the proper parts of the screen printing. A half wrap label may leave a bar code, an outdated ABV, or some other detail exposed. A full beer can label or shrink sleeve will help you hide the old screen printing and showcase your desired branding and information.

Do what you can to prevent can waste

When supplies are limited, it’s crucial to try to get the most out of what you have. Label application issues can put a dent in your available supply if you’re not careful, so it’s best to take steps to limit potential problems in the future.

For example, certain applicating environments can lead to label failure. If you’re trying to sell a new sour beer, the acidity from the fruit in that beer can cause oxidation between aluminum can and certain label materials. You’ll want to work with your label printing company to identify any potential problem areas that can lead to avoidable waste, especially when supplies and funds are at a premium. This will not only help prevent potential issues for your can, but also save unnecessary label waste.

Three can wraps used to cover screen printed cans.

Stay Flexible with Digital Label Printing

As we mentioned before, there is no simple workaround to address the shortage. What you can do is be creative with the supplies you have and minimize potential waste. Fortunately, the right label printing company can help you stay flexible and maximize your available supply.

At Blue Label, we have the technology, equipment, and experts to help you properly adapt to your exact situation. Thanks to digital printing technology, we can quickly provide beer labels for various size cans when you need them. Our experts can also work with you to identify potential application issues and provide feedback to limit potential waste.

When situations change, our team is flexible enough to help you determine the best, most cost-effective labeling solution for your exact needs. Contact us today to talk about your next label order.

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TTB Final Rule Breakdown: The New TTB Label Requirements for Alcohol Labels

Over time, alcohol regulations are bound to change. That’s why it’s critical to keep up to date with new changes to alcohol labeling laws, such as the latest final rule from the Alcohol and Tobacco Tax and Trade Bureau (TTB).

After more than a year of deliberation, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published its changes to alcohol labeling requirements and advertising regulations in April of 2020. The TTB weighed several ideas from the 2018 Proposal, accepting several recommendations after reviewing comments from industry members and the public.

TTB Final Rule: What Changed?

In general, the new TTB label requirements and alcohol regulations aim to modernize labeling and advertising regulations. These changes are designed to streamline processes and provide extra flexibility for alcoholic products. The resulting final rule documents several regulatory changes and even discusses proposals that weren’t adopted.

In short, it’s a long read. The changes range from notable updates to minor tweaks that may not affect the majority of alcohol labels. To help, we broke down some of the changes for alcohol label requirements that can have a direct impact on the way you label alcoholic products.

A six-pack of beer with holographic labels.

Mandatory label information placement for distilled spirits

Before the final rule went into effect, distilled spirits were required to list mandatory information on a “brand label,” also known as the principal display panel. This term applied to the label that is “most likely to be displayed, presented, shown, or examined under normal retail display conditions” per TTB guidelines. This mandatory information includes:

Brand name
Class and type of distilled spirit
Alcohol content
Net contents (for containers that do not meet a standard of fill)

In the new final rule, the TTB gave distillers more freedom in terms of mandatory information placement. You can now include mandatory information anywhere on a distilled spirit container. The only catch is that all the mandatory information must be placed in the same field of vision, which can differ depending on bottle shape:

A single side of a container for containers with flat sides
40 percent of the circumference for cylindrical containers

Standard of identity for vodka

Congratulations, vodka makers. The TTB no longer requires vodka to be “without distinctive character, aroma, taste, or color.” As such, you may now feel comfortable classifying your products as vodka even if your product features some different base ingredients, flavors, or flavor profiles that previously landed you in trouble with the TTB.

Recognition of mezcal and addition of agave spirits class

In the past, the TTB only provided a standard for tequila. The final rule institutes a brand-new class called “agave spirits.” This new class contains two different types of spirits: the aforementioned “Tequila” and the addition of “mezcal.” By definition, the fermented mash for agave spirits should meet the following criteria:

At least 51 percent of the mash is derived from plant species in the genus Agave.
Up to 49 percent of the mash is derived from sugar.
The spirit is distilled at less than 95 percent alcohol by volume and bottled at or above 40 percent alcohol by volume.

The exciting part of this rule is that the TTB now lists mezcal as an official type of alcohol. Accordingly, agave spirits are an official class that includes mezcal and tequila. These changes now allow distilleries to label their products appropriately. The TTB also notes that labels previously approved as “spirits distilled from agave” can designate their products as “agave spirits” if they choose.

Country of origin labeling

The TTB took steps to defer to the U.S. Customs and Border Protection (CBP) for rules on country of origin labeling. In the past, the TTB required a country of origin statement on distilled spirits labels, but not for imported wine or malt beverages. The final rule followed CBP regulations that all imported alcoholic beverages should display their country of origin. As such, make sure to add those statements for any imported wines or malt beverages in the future.

A closeup of a spirits label complying with changes from the latest TTB final rule.

New definition and approval process for personalized labels

With the final rule, there is now an approval process for any importers or bottlers who wish to customize existing labels in order to personalize them. The final rule defines personalized labels as “an alcohol beverage label that meets the minimum mandatory label requirements and is customized for customers.” Essentially, that’s any alcoholic product that’s specific to a consumer purchasing that product.

This new allowance provides breweries, wineries, and distilleries with an official process to produce personalized products for weddings, birthdays, or other commemorative events. Interested parties can submit a personalized label template during COLA approval. This template should note any elements eligible for customization. This can include:

Personalized messages
Pictures or artwork
Salutations
Names
Congratulatory dates
Event dates

As long as the application meets other TTB regulations, the organization will issue you a COLA and a special qualification for personalization. This qualification allows you to add or change items for personalized versions of that label without applying for a new COLA. You can also opt to obtain a COLA for each individual personalization if you prefer – just make sure to avoid common COLA issues.

Clarification on alcoholic beverages not subject to the FAA Act

The TTB made efforts to list certain alcoholic beverages that are not subject to TTB labeling regulation. These efforts include clarifying certain beverages that don’t qualify as wine or malt beverages under the Federal Alcohol Administration (FAA) Act. These beverages include:

Wine that is under 7 percent alcohol by volume
- Wine under this category now subject the FDA labeling regulations
Beer made without any malted barley
- Beer under this category now subject to either FDA or IRC regulations depending on alcohol content

The TTB also stressed that there are no distilled spirits that are subject to FDA labeling regulations instead of TTB rules. However, the TTB amended the definition of “distilled spirits” in a separate portion of the final rule. This change continues longstanding TTB policy that any products with less than 0.5 percent alcohol by volume aren’t regulated as “distilled spirits” under the FAA Act.

A collection of wine bottles with labels that meet TTB requirements.

Added tolerance for distilled spirits alcohol statements

The TTB gave distilleries a bit more wiggle room in terms of alcohol content statements. The final rule increased to tolerance up to plus or minus 0.3 percentage points for alcohol contents on distilled spirits labels.

Removal of age statement prohibition for distilled spirits

While the TTB initially proposed that only time spent in the initial oak barrel should count toward the “age” of a distilled spirit, the organization changed course after receiving industry feedback. The TTB now agrees that all the time spent in all oak containers should count towards a label’s age statement.

In addition, the final rule expanded the classes and types of distilled spirits that can make age statements of labels. The TTB acknowledged that other alcoholic products may benefit from such a statement. All distilled spirits may include prohibition of age statements, except for neutral spirits that aren’t deemed grain spirits.

Removal of prohibition of strength terms for malt beverages

In the past, the TTB prohibited malt beverages from making claims of drink strength. That meant any of the following terms were off-limits for labeling purposes unless expressly allowed by state law:

Strong
Full strength
Extra strength
High test
High proof
Pre-war strength
Full oldtime alcoholic strength
Usage of numerals, letters, characters, or figures that can be construed as alcohol statements

The final rule effectively ends the prohibition of these terms. Language like “strong” and “full strength” are now allowable as indications of alcohol strength on malt beverage labels. However, the TTB can still block labels that make any false or misleading claims in the future.

Removal of citrus wine class

While the TTB initially created the citrus wine class to streamline regulations, the opposite was true. The standards of identity for both citrus wine the overall fruit wine class are largely the same. The TTB accordingly found the separation of the classes unnecessary and removed the citrus wine class in the final rule. This change means that if you were using citrus wine as a statement of identity, it’s time to switch to fruit wine for your labels.

Allowance for vintage dates on wine imported in bulk

In the past, The TTB only allowed imported wine to bear a vintage date if it’s imported in containers of five liters or less. The final rule offers added labeling flexibility for these situations. As long as the bottler provides appropriate documentation to substantiate a vintage date, it does not matter if the bulk container used to import the wine does not bear a date.

New Rules, Same Dedication to Stunning Alcohol Labels

As alcohol label laws inevitably change, so too must the labels themselves. Bottle labels and can labels play a critical part in attracting new and repeat customers. As such, it’s essential to find the right label printing company to ensure that your beer, wine, and spirits labels are perfect for your products.

At Blue Label, we have the digital printing technology and expertise one hand to help you get the most out of your alcohol labels. We work with you to enhance your design and address potential issues ahead of time to maximize your investment. In the end, we can deliver stunning, eye-catching labels that are perfect for your products and your budget. Contact us today to have Blue Label provide the right labels for your products.

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House Bill 37: The Ohio ABV, a Good Change for You and Me

On May 31, 2016, Governor John Kasich passed House Bill 37. The bill removes Ohio’s alcohol by volume (ABV) of 12 percent. The last change was in 2002 when the cap rose from 6 percent to 12 percent. For beer aficionados and the brave, these changes are long-awaited. But, what do alcohol laws in Ohio like HB 37 actually do and what does it mean for Ohio craft brewers?

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