Craft Beverage Modernization and Tax Reform Act (CBMA)
The Craft Beverage Modernization and Tax Reform Act is federal legislation that reduced excise tax rates for small alcohol producers, simplified compliance requirements, and modernized regulatory provisions to support the craft beverage industry.
In Plain English
CBMA is the most significant recent piece of legislation for the alcohol industry. Originally passed as part of the 2017 tax reform bill and made permanent in 2020, it dramatically reduced federal excise taxes for small producers across all three categories — spirits, wine, and beer. For small distillers, the tax on the first 100,000 proof gallons dropped from $13.50 to $2.70 per proof gallon — an 80% reduction. Small brewers got a reduction from $7.00 to $3.50 per barrel on the first 60,000 barrels. Small wineries received tax credits of up to $1.00 per gallon. CBMA also simplified certain compliance requirements, including allowing some small producers to operate without posting bonds. These changes were transformative for the craft beverage industry, reducing costs and lowering barriers to entry.
Technical Detail
CBMA was originally enacted as Subtitle F of Title XIII of the Tax Cuts and Jobs Act of 2017 (P.L. 115-97), initially as a temporary provision. It was made permanent by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (P.L. 116-260). Key provisions: Distilled spirits: $2.70/proof gallon on first 100,000 PG (was $13.50), $13.34/PG on next 22,130,000 PG, $13.50/PG beyond that. Beer: $3.50/barrel on first 60,000 barrels for qualifying small brewers (previously $7.00), $16.00/barrel for all others on first 6,000,000 barrels (previously $18.00). Wine: tax credits up to $1.00/gallon for small producers, with credits for different wine types. Additional provisions include: bond exemption for certain small producers with expected tax liability below $50,000, transfer-in-bond between bonded facilities without tax payment, and import simplification. The provisions apply to both domestic producers and importers (through an assignment mechanism for foreign producers).
Why It Matters
CBMA has been one of the primary drivers of craft beverage industry growth. The tax reductions directly improved margins for small producers, enabling more investment in production, marketing, and distribution. For BevAlc Intelligence, the increase in new market entrants driven partly by CBMA translates to more NEW_COMPANY signals. For service providers, the expanding universe of small producers creates a larger addressable market for their services.
Related Terms
Frequently Asked Questions
Is CBMA permanent?
Yes. CBMA was made permanent in December 2020 after initially being passed as a temporary provision in 2017. The reduced tax rates and other provisions are now part of the permanent tax code.
Do large producers benefit from CBMA?
Large producers receive some benefit (the slightly reduced rate on the first 6 million barrels of beer, for example), but the largest benefits are concentrated on small producers. The reduced rates apply to the first tranche of production, so the percentage benefit decreases as production volume increases.
Did CBMA affect the number of new producers entering the market?
While it is difficult to isolate CBMA's effect from other factors, the number of new DSPs, brewers notices, and bonded wineries has continued to grow since CBMA's enactment. The reduced tax burden and simplified compliance requirements lower barriers to entry for new producers.