CBMA: Key Changes to Earlier Provisions

Posted 01/13/2021 by the Office of Communications

On December 27, 2020, the President signed the Taxpayer Certainty and Disaster Tax Act of 2020, which made most Craft Beverage Modernization Act (CBMA) provisions of the Tax Cuts and Jobs Act of 2017 permanent.

The legislation included several notable changes to earlier CBMA provisions, some of which were effective January 1, 2021, and others that will take effect in 2022 or 2023.

Permanent CBMA Provisions

The temporary CBMA provisions that are now permanent include:

• Reduced tax rates on beer and distilled spirits, and certain tax credits for wine
• Adjusted alcohol content for certain still wine tax classes from 14% to 16% alcohol by volume
• Lower tax rates for certain meads and low alcohol wines
• Transfers of beer in bond between brewers who are not of the same ownership

Key Changes to Earlier CBMA Provisions

Changes to previous CBMA provisions include:

Transfers of non-bulk beverage distilled spirits are limited

Beginning January 1, 2021, the law prohibits the transfer of bottled spirits in bond except:

• between bonded premises belonging to the same person or members of the same controlled group, or
• if the distilled spirits are transferred in bond from the DSP who distilled or processed the spirits to another DSP for bottling or storage and returned to the transferor for removal, but only if the transferor retained title during the entire period between such distillation, or processing, and removal.

Single taxpayer provision for distilled spirits includes processing

Beginning January 1, 2021, entities who process distilled spirits are included in the Single Taxpayer provision for distilled spirits. Pursuant to rules issued by the Secretary, two or more entities (whether or not under common control) that produce or process distilled spirits under a license, franchise, or other arrangement shall be treated as a single taxpayer.

Bottling distilled spirits will not be processing for reduced rate purposes

Effective January 1, 2022, only distilled spirits plants who perform a processing activity other than bottling are entitled to take a CBMA reduced rate on distilled spirits that they process and remove.

Imports and foreign producer election

• Import administration—Beginning in 2023, the reduced tax rates and tax credits on beer, wine, and distilled spirits produced outside the United States and imported will be administered by the Treasury Department under a refund system of providing the benefit of assigned reduced rates to importers.  Since CBMA became effective, U.S. Customs and Border Protection (CBP) has administered imports subject to CBMA and will continue to do so for 2021-2022. See CBP guidance, for example CSMS #45315560 of December 31, 2020.
• Information requirements for foreign producers—A new provision (26 U.S.C. 6038E) requires a foreign producer that elects to make a reduced rate or credit assignment to provide information (including controlled group information) in accordance with requirements prescribed by the Secretary.

To learn more about the CBMA, please visit our main CBMA page.

Updates to Guidance

We will issue updated CBMA guidance in the near future. For now, if you have questions about CBMA, please contact us.

For more information on imported products, please contact CBP.