Craft beer brewers gear up for battle on Capitol Hill

Having taken on Milwaukee and St. Louis, the nation’s craft beer brewers are setting their sights on Washington.

The Brewers Association, the 10-year-old lobby for the beer industry, has hired its first full-time “federal affairs manager” as it gears up for a battle on Capitol Hill to push legislation to cut taxes that the small brewers say are keeping them from competing fairly with the Budweisers and Miller Lites of the marketplace.

“I have always been very interested in craft beer. I know that makes me the same as pretty much everyone in the country,” said Katherine Marisic, the new top lobbyist for the trade group in Washington. Even before coming to Washington, she liked the work that the Brewers Association was doing and said her previous work as vice president of federal affairs for the National Association of Federal Credit Unions — the “little guys” of the financial world — was good preparation for taking up the cause of craft beer.

She can also see her new employer establishing deeper roots locally.

“I am a tiny bit involved with one of the local D.C. brewers, Atlas Brew Works,” she added. “It’s been great watching craft breweries make such an impact in the District.”

The Brewers Association’s No. 1 agenda item these day is new legislation to adjust excise taxes for small and independent breweries, thus readjusting the tax and regulatory codes to accommodate the rebirth of small, local breweries and brewpubs.

“The American beer landscape has changed dramatically in the last five to seven years,” said Bob Pease, CEO of the Brewers Association. He believes that the increased popularity of craft beer and tailored flavors over recent years have led to an increase of economic value for small brewing companies.

“It’s a very exciting time to be in the American craft beer community, and that’s because of everything that the beer drinker is demanding,” said Mr. Pease. “This is all being driven by the beer drinker.”

The industry got a backhanded compliment at this year’s Super Bowl, when brewing giant Budweiser spent $9 million on a one-minute ad mocking the craft beer craze and proudly proclaiming itself a “macro beer.” Bud is not beer “to be fussed over,” the spot said. The industry’s Big Two — Anheuser-Busch InBev and SABMiller — and the craft brewers have been fighting skirmishes in states around the country over issues such as market access and distribution and franchising regulation.

But Mr. Pease said the wider variety of options available to consumers will only continue to increase, and that the 10 percent approximate market share that small craft brewers have could eventually increase to as much as 30 percent.

“I think that is where we are headed,” Mr. Pease said. The American beer drinker “is not going to go back to just drinking an exclusively light lager.”

Tax battle

The organization is promoting the Small Brewer Reinvestment and Expanding Workforce Act (Small BREW Act) introduced by Sen. Benjamin L. Cardin, Maryland Democrat, and Sen. Susan M. Collins, Maine Republican, which aims to produce a tiered system of taxes for small brewing companies across the country. Versions of the bill have been introduced in both the House and the Senate.

“It would allow them to remain competitive against large multinational breweries, invest further in their breweries and create new employment opportunities in their communities,” said Mr. Pease. “This is the boost both our small brewers and overall economy need.”

At the same time, Reps. Steve Womack, Arkansas Republican, and Ron Kind, Wisconsin Democrat, have reintroduced a bill in the House that also seeks to change excise taxes for both beer brewers and importers; a Senate version of their bill is coming soon.

“This bill is important for reforming a hidden tax that most beer drinkers don’t even know they pay,” said Jim McGreevy, president and CEO of the Beer Institute.

Mr. McGreevy says that both the Brewers Association and the Beer Institute agree on the need for adjusted excise taxes for small beer brewers, but that they disagree on exactly how that should be done. He said the Cardin-Collins bill favors small brewers but unfairly fails to offer some larger brewers or beer importers the same benefits.

Under current law brewers making less than 2 million barrels annually must pay $7 per barrel for the first 60,000 barrels and $18 per barrel for anything more than that. The Cardin-Collins bill calls for brewers to pay only $3.50 on the first 60,000 barrels and $16 per barrel for production between 60,001 and 2 million barrels. For production over 2 million barrels, brewers would still pay the current $18 per barrel.

The House is similar but instead proposes no excise tax on the first 7,143 barrels and $3.50 per barrel for anything more than that — up to 60,000 barrels.

And the smaller producers are no longer small potatoes in the $80 billion-plus beer market.

Research by the Brewers Association claims that in 2013, the craft brewing industry volume rose 18 percent from the previous year and that its revenue had increased by 20 percent.

Mr. Pease argues that lowering taxes for smaller breweries would mean more growth and more jobs.

“Our bill is a jobs-creation bill, and we’re confident that our members will take that money, reinvest into their business, grow their production and hire more workers.”

Ms. Marisic said she sees a growing appreciation for the economic benefits of the beer industry, and of the need to foster a new generation of breweries to increase market competition.

“I think that the reception on Capitol Hill has been very positive,” she said. “People have been interested in creating jobs, interested in the impacts that craft brew has in their communities.”