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US Tax Break Bill For Bourbon Producers

by Mike Godfrey, Tax-News.com, Washington

11 May 2015


Senate Republican Leader Mitch McConnell and Rand Paul (R - Kentucky) have introduced legislation to amend a provision in the US tax code to ensure that Kentucky's Bourbon producers are no longer at a disadvantage compared with their global competitors.

They introduced the Advancing Growth in the Economy through Distilled Spirits Act (AGED) on May 4, the 51st anniversary of US Congress designating Bourbon as a distinctive product of America. The Act would allow for the immediate deduction of interest expense relating to Bourbon inventories, thereby improving the producers' competitive position.

"Kentucky produces 95 percent of the world's Bourbon supply," McConnell said. "Over 15,000 jobs in Kentucky are attributed to the Bourbon industry and it brings in billions of dollars to our state's economy. The AGED Spirits Act will put Kentucky's Bourbon industry on a level playing field with its competitors."

Under current law, Bourbon and whiskey producers in America must capitalize the interest expense incurred to finance inventories, and it is not deductible until the product is sold, which could be as long as 23 years after a lengthy aging process. It was noted that in the United Kingdom all spirit producers are permitted to deduct interest expense the year it is capitalized.

"Our bill would fix this discrepancy by permitting American Bourbon and whiskey producers to deduct interest expense associated with production in the year it is paid by exempting the natural aging process in the determination of the production period for distilled spirits," McConnell said. "Making this change in law is a matter of common sense."

Eric Gregory, the President of Kentucky Distillers' Association, added that "Kentucky Bourbon can't be made overnight like most spirits. It takes years of age to produce, but that's actually a deterrent when it comes to the present discriminatory tax policies that are restricting growth and investment."

TAGS: compliance | tax | business | tax compliance | law | manufacturing | legislation | United States

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