With small distillers facing economic pressure, lawmakers introduce a targeted tax credit to support both local producers and rural agriculture.
Bipartisan lawmakers have introduced the Supporting Producers Through Incentives from Rural Ingredients and Tax Relief Act (SPIRIT Act) to provide targeted tax relief to small, independent U.S. distillers.
Led by Congressional Craft Spirits Caucus Co-Chair Representative Jeff Hurd (R-CO) and co-sponsored by Representative Jill Tokuda (D-HI), the legislation establishes a Federal Excise Tax (FET) credit for distillers that use domestic agricultural ingredients.
Key Terms of the SPIRIT Act
Under the proposed bill, eligible distillers can receive a tax reduction of $2.35 per proof gallon. To qualify, producers must meet two requirements:
- Produce no more than 100,000 proof gallons annually.
- Source at least 90 percent of their agricultural inputs from domestic farmers.
Industry Context and Economic Impact
The bill's introduction follows data from the latest Craft Spirits Data Project, which reported the first-ever decline in the total number of U.S. craft distilleries, alongside falling sales volumes and decreased sector investment.
According to trade advocates, the tax credit aims to offset rising operational costs. "Independent distillers are being squeezed by higher costs across nearly every part of our business—from grain and glass to barrels and transportation," said Lee Wood, President of the Colorado Distillers Guild. Wood noted that the bill would encourage stronger partnerships between distillers and local farmers.
Emily Pennington, Chief Executive Officer of the American Craft Spirits Association (ACSA), highlighted the industry's connection to the agricultural sector, saying, "Craft spirits producers are among the most agriculture-dependent businesses in beverage alcohol. Every bottle represents a significant investment in American grain, specialty crops, manufacturing, tourism, and local jobs. The SPIRIT Act recognizes that connection and provides meaningful relief to small distillers during a period of economic uncertainty and rising production costs."
Representative Hurd stated that the legislation is designed to ensure small producers can continue investing in local agriculture, creating jobs, and strengthening domestic supply chains.
Artwork property of TSR.
