legislature - BourbonSphere

Making the “World’s Most Admired” Whiskies

Louisville’s Michter’s Distillery took top honors in the 2023 Drinks International survey to find the “world’s most admired” whiskey brand. Andrea Wilson is the Master… Read More

Louisville’s Michter’s Distillery took top honors in the 2023 Drinks International survey to find the “world’s most admired” whiskey brand. Andrea Wilson is the Master of Maturation for Michter’s, as well as the company’s chief operating officer, and has the final say on any whisky that carries the Michter’s name. We’ll talk with Andrea about the pressure of living up to that reputation, as well as her Hall of Fame whisky-making career, on this week’s WhiskyCast In-Depth. In the news, Kentucky lawmakers have approved a bill to close loopholes in the state’s Vintage Distilled Spirits Law. We’ll have the details on that and the rest of the week’s whisky news, including a rare collaboration between Australia’s Starward Whisky and Lagavulin.

Episode 1050: March 31, 2024

A Commitment to Sustainable Whisky

Scotland’s Nc’Nean Distillery is one of a handful of whisky distilleries certified as “B Corp” for their sustainability efforts. At Nc’Nean, that goes all the… Read More

Scotland’s Nc’Nean Distillery is one of a handful of whisky distilleries certified as “B Corp” for their sustainability efforts. At Nc’Nean, that goes all the way to the use of renewable energy for the distillery and using recycled glass for its bottles. We’ll talk with founder Annabel Thomas about the challenges of making whisky sustainably and organically on this week’s WhiskyCast In-Depth. In the news, the founder of Bimber and Dunphail distilleries has stepped aside following his arrest on two-decade old charges in his native Poland, while Kentucky lawmakers are trying to close loopholes in the state’s Vintage Distilled Spirits law.

Episode 1045: February 25, 2024

Image courtesy Nc’Nean Distillery.

“Bourbon Capital of the World” Hits the Brakes on New Whiskey-Related Projects (Episode 1003: May 7, 2023)

Bourbon’s construction boom in Central Kentucky is raising concerns in Nelson County, home to Bardstown, the “Bourbon Capital of the World.” County officials have reached a compromise with whiskey makers for a 90-day moratorium on planning approval for new warehouses in agricultural zones. Nelson County Judge Executive Tim Hutchins wants a review of current ordinances allowing virtually unfettered development of warehouses without public input, while allowing projects in areas zoned for industrial use to move forward. We’ll talk with Judge Hutchins on this week’s WhiskyCast In-Depth about the moratorium and the impact of losing millions of dollars in barrel tax revenue in the coming years. In the news, Sazerac CEO Mark Brown is stepping aside in a long-planned succession, while Scotland’s Parliament has approved new rules to make it easier for whisky makers to borrow against their stockpiles of maturing whisky. We’ll also have details on a host of commemorative whiskies celebrating the coronation of King Charles III, along with the rest of the week’s whisky releases.

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Barrel Tax Bill Under Consideration in Kentucky Legislature

February 28, 2023 – Kentucky state lawmakers have just 11 legislative days left to consider a bill that would phase out the state’s “barrel tax” on barrels of aging Bourbon. House Bill 5 would start phasing out the tax in 2026 and end it completely in 2039, and is pending in the Kentucky House Appropriations and Revenue Committee. Kentucky is the only state that taxes inventories of maturing spirits, and the tax raised approximately $40 million for local governments in 2021. Distillers have the ability to take a credit for the barrel taxes they pay against their corporate state income Read More »

February 28, 2023 – Kentucky state lawmakers have just 11 legislative days left to consider a bill that would phase out the state’s “barrel tax” on barrels of aging Bourbon. House Bill 5 would start phasing out the tax in 2026 and end it completely in 2039, and is pending in the Kentucky House Appropriations and Revenue Committee.

Kentucky is the only state that taxes inventories of maturing spirits, and the tax raised approximately $40 million for local governments in 2021. Distillers have the ability to take a credit for the barrel taxes they pay against their corporate state income taxes, but income tax cuts in past years have made it so that they pay more in barrel taxes than they do in state income taxes.

The bill is the product of the General Assembly’s “barrel tax task force” that met last summer in Frankfort to hear testimony from stakeholders, including the Bourbon industry and local government officials. It would continue the current 100% credit through 2025, but distillers would only receive a 3% credit starting in 2026 with incremental increases each year until 2039, when the tax would be eliminated. That would significantly increase the amount of money the tax generates in the first 10 to 12 years of the phaseout, while gradually reducing it in subsequent years.

Eric Gregory of the Kentucky Distillers Association issued qualified support for the bill in a statement:

“Eliminating the job-killing inventory tax on aging barrels requires consideration of the distilleries that pay it and the local communities that benefit from it. Kentucky’s signature Bourbon industry believes the phase-out schedule in House Bill 5 ultimately benefits local communities across Kentucky by more than doubling the industry’s tax before any reduction occurs. In fact, most local communities will see no reduction from current revenues for at least the next 10 years.

While the bill will initially and significantly increase our tax liability, we appreciate the leadership of A&R Chairman Jason Petrie and Speaker David Osborne to put forth a proposal to slowly phase out the discriminatory tax.

The success or failure of House Bill 5 will determine whether Kentucky’s distilling industry continues to call the Commonwealth home, bringing jobs and tax revenue as it grows, or whether it is forced to look at other states for future growth or even potentially relocating existing facilities.

Thank you to the legislature for addressing this crisis. It is imperative that the Kentucky General Assembly end the tax on a $9 billion homegrown industry that employs 22,500 Kentuckians and attracts millions of tourist visits to Kentucky each year.”

Local leaders blasted the bill during a news conference Monday in Bardstown, claiming the elimination of the tax will lead to cuts in local services and public schools.

Links: House Bill 5 | Kentucky Distillers Association

Private Barrel Kentucky Bourbons in Legal Jeopardy

January 29, 2022 – Sales of “private selection” barrels by distillers in Kentucky have become popular choices for retailers, bars, restaurants, and even whiskey clubs. However, it turns out that those sales actually violate state liquor regulations in Kentucky, and perhaps even at the federal level. It’s not because sales by the barrel are specifically banned, but because the process of selecting those barrels violates a number of state regulations. Kentucky’s Alcoholic Beverage Control Board enforces the state’s regulations, and has issued an advisory opinion to that effect, according to Kentucky Distillers Association president Eric Gregory. “Right now, the ABC Read More »

January 29, 2022 – Sales of “private selection” barrels by distillers in Kentucky have become popular choices for retailers, bars, restaurants, and even whiskey clubs. However, it turns out that those sales actually violate state liquor regulations in Kentucky, and perhaps even at the federal level. It’s not because sales by the barrel are specifically banned, but because the process of selecting those barrels violates a number of state regulations.

Kentucky’s Alcoholic Beverage Control Board enforces the state’s regulations, and has issued an advisory opinion to that effect, according to Kentucky Distillers Association president Eric Gregory. “Right now, the ABC has given us a grace period, if you will, to work with us while the Legislature is in session to get that fixed,” he said in a telephone interview. “That’s not a want…that’s a need, and we’ve gotta get that done,” he said, citing support from the groups representing liquor wholesalers and retailers for reforms.

The process of selecting a barrel usually involves tasting samples from multiple barrels during a customer’s visit to a distillery, and that is where the legal issues begin to build up. State regulations do not make any difference between “trade” visitors to a distillery and consumer visitors to that distillery’s visitors center, and the regulations limit the amount of samples to 1.75 ounces per visitor per day. In addition, regulations also limit the amount of whiskey an individual customer can buy at a distillery to one nine-liter case per day. Once again, that doesn’t allow for the sale of an entire barrel of whiskey to a single customer, since that barrel could yield 200 bottles or more in what would be counted as a single purchase.

Private barrel selections can be critical for retailers trying to set themselves apart from their competitors. Westport Whiskey & Wine in Louisville has been among the most active participants in private barrel programs with more than 60 barrel picks, and owner Chris Zaborowski says the loss of that opportunity would have a critical impact on his business. “Just to use a conservative number, if that’s around $8,000 a barrel, that’s a fairly impactful number, almost half a million dollars in sales.”

While the Kentucky ABC’s opinion applies only within the Commonwealth, it could have nationwide implications. Not only do Kentucky distillers sell private barrels to customers in other states, but similar restrictions on sampling and sales exist in most of the states with craft distillers. As of now, regulators in other states have not moved to block private barrel selections, but the Kentucky decision could set a precedent.

There is also a potential issue at the federal level as well. Kentucky’s opinion also cited the potential violation of the state’s “tied house” regulations banning distillers from offering anything of value to retailers, based on the exclusive nature of a private selection barrel not available to other retail competitors. In addition, when consumers purchase an entire barrel of whiskey from a distillery, the bottles are shipped through a wholesale distributor to the retailer of the consumer’s choice, and Gregory says that compliance with the “three-tier system” also is seen as a violation of tied house restrictions. Similar bans exist in federal regulations enacted after the end of Prohibition to keep distillers from having undue influence over the retail sector. Gregory indicated that the KDA is working with federal regulators to address the issue.

“It’s not quite a problem in search of a solution, or a solution in search of a problem, it’s just a case of getting the language cleaned up so no one can create a problem,” Zaborowski said. “It’s a point of distinction for us, and to turn that switch off would be devastating for our business,” he said in a telephone interview.

State lawmakers are currently in session at the state Capitol in Frankfort, with the current legislative session scheduled to run through mid-April. “We’re urgently seeking a resolution in the Legislature, and it’s going to have to have an emergency so as soon as it’s signed by the Governor — if we’re fortunate enough to get it passed — it would take effect immediately and we wouldn’t miss a beat on private barrel sales,” Gregory said.

Gregory doesn’t want to think about the alternative.

“It would be a big impact on the distillers, but more importantly, it would be a big impact on retailers and consumers,” he said.

While the needed changes appear to have strong support and would be relatively simple to enact, Zaborowski is reminded of the constant threat that hangs over any piece of proposed legislation: the so-called “Christmas Tree” effect.

“It’s what gets tacked on to an easy bill that could make the bill more difficult,” he said with a laugh. “That’s the only real fear that I have, because Kentucky still has a large percentage of dry counties and a lot of these legislators don’t like dealing with alcohol bills because, you know…it’s sinful.”

Kentucky ABC executive director Allyson Taylor could not be reached for comment. This story will be updated with more information as necessary.

Links: Kentucky Distillers Association | Kentucky Alcoholic Beverage Control Board | Westport Whiskey & Wine