Booze Break Among Top Issues That Could Hop on Must-Pass Bills

A push to make permanent an excise tax break on beer, wine and distilled spirits has been languishing in Congress despite bipartisan support. But there’s renewed hope for the booze break and numerous other dangling issues as lawmakers bargain over what to stuff into must-pass spending legislation before they leave town for the holidays.

The appropriations package that would fund the government for the remainder of fiscal 2020 is being eyed as the vehicle for a range of non-spending items, including extensions of the Export-Import Bank’s charter and the flood insurance program. Both of those programs are set to lapse when the current stopgap spending bill expires Dec. 20.

Proposals to bail out a failing miners’ pension fund and changing contribution and withdrawal rules for individual retirement accounts are also on the table, as lawmakers use these issues as chips to secure support for the broader must-pass bills.

The popularity of alcohol industry tax break, which expires at the end of this year, could help drive passage of a package of tax extenders, along with dozens of expired and expiring tax breaks that Congress has yet to act on, including tax perks that are valuable to biofuel producers and railroads.

“It takes up to the end of any given year to determine what to do with the extenders,’’ said Jim McGreevy, president and chief executive officer of the Beer Institute, which is lobbying to extend the tax break. “We are confident it will get done’’ because of its widespread support on Capitol Hill.

(Photo by Scott Olson/Getty Images)
Craft beer festival in Chicago.

The companion measures (S. 362,H.R. 1175) were introduced in February and have 327 House sponsors and 74 in the Senate. While gathering more co-sponsors, they’ve awaited action by tax writing committees, which typically prefer to assemble a package of tax extenders rather than extending breaks individually.

The tax break has made starting a craft brewery “even more attractive to do” in an already growing and competitive industry, said Bob Centa, chief financial officer of Great Lakes Brewing Co., a mid-sized craft brewer in Cleveland.

Almost 2,100 breweries obtained federal permits to make beer in the two years after Congress enacted the 2017 excise-tax break, according to Treasury Department figures. In 2017, there were 6,266 craft breweries that sold $26 billion worth of beer, accounting for 23% of the U.S. beer market, according to Brewers Association figures cited in a Sept.7, 2018 Congressional Research Service report.

The 2017 legislation reduced the excise tax on breweries that produce less than 2 million barrels annually to $3.50 from $7 per each of the first 60,000 barrels. The legislation would also make permanent a $2 per barrel tax break on the first 6 million barrels produced by all other brewers. Centa’s company produces 140,000 barrels annually.

The additional $2 levy on each of the last 80,000 barrels Great Lakes produces means “we could not reinvest in new equipment, add new jobs, add benefits,” Centa said.

House Majority Leader Steny Hoyer (D-Md.) voiced optimism about a package of tax extenders, though negotiators said the two sides were still far apart. Lawmakers say the list of proposed tax-break extensions keeps changing from day to day.

Extending Ex-Im

The Ex-Im Bank’s charter, along with its authority to approve export credits and the flood-insurance program were set to expire Sept. 30. But Congress has twice extended those authorities in stopgap spending measures, the second of which is set to lapse Dec. 20.

Hoyer told reporters Tuesday that House and Senate negotiators are “pretty close to an agreement” to extend Ex-Im’s authority to approve export credits, for which a three-member board quorum is required to authorize transactions of more than $25 million.

President Donald Trump favors a 10-year extension to give businesses the ability to plan export sales by ending periodic suspensions of the Ex-IM’s lending authority.

Both Ex-Im and the flood insurance program enjoy bipartisan support, but also face opposition in some quarters, which is particularly problematic in the Senate where one or two senators can hold up legislation.

Pension Bailout

A wildcard in the talks is legislation (S. 2788) to bail out the failing United Mine Workers of America pension fund. Sen. Joe Manchin(D-W.Va.) threatened to block the must-pass spending bill unless that relief is included.

“Time is running out for our coal miners,’’ Manchin said Wednesday in a floor speech. “We need to fix this now, not in 2020,” he said, threatening to keep the Senate in session “through New Year’s” unless lawmakers put “coal miners first.” He said later in an in interview that he was “hopeful” that the pension measure be included in the spending package.

The bailout’s chances for inclusion in a year-end spending package improved after Senate Majority Leader Mitch McConnell(R-Ky.) co-sponsored the pension bill. But western state Republicans, notably Wyoming’s two GOP senators, object to financing the bailout from a fund for cleaning up abandoned coal mines.

Other bills that might ride to passage on the spending measure include:

  • Legislation to permanently extend a provision from an expiring law that requires good-faith negotiations between television broadcasters and pay-TV providers over retransmission rights. The House passed legislation (H.R. 5035) by voice vote that would make the requirement permanent and mandate that pay TV providers tell consumers what they would pay each month before signing a subscription contract. Under an agreement between lawmakers reached this month, another expiring provision, allowing satellite television providers to import distant signals to certain rural markets, would be extended through May 31 and then allowed to expire, except for recreational vehicles and “short markets” that don’t have access to one of the four most widely viewed television networks.
  • Bipartisan legislation to change contribution and withdrawal rules for individual retirement accounts. The House passed, 417-3, legislation (H.R. 1994) to allow penalty-free withdrawals for up to $5,000 following childbirth or adoption. Another provision would postpone to 72 from 70½ the age individuals must start withdrawing their IRA. The bill also includes the “Gold Star fix,” which would correct an unintended effect of the 2017 tax law that placed higher tax rates on some survivor benefits for military families. An amendment proposed by Sen. Pat Toomey(R-Pa.) to make technical fixes to business-expending provisions in Trump’s 2017 tax law and another by Sen. Ted Cruz (R-Texas) to allow educational tax credits for parents who home-school their children have snarled action in the Senate.
  • Measures to repeal or further delay taxes levied by the Affordable Care Act, such as the “Cadillac tax,” the 40% levy on expensive health insurance plans now set to take effect in 2022.

To contact the reporter on this story: James Rowley in Washington at jrowley@bgov.com

To contact the editors responsible for this story: Bennett Roth at broth@bgov.com; Kyle Trygstad at ktrygstad@bgov.com; Patrick Ambrosio at pambrosio@bloombergtax.com

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