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McConnell and Paul Introduce Tax Bill For Bourbon Producers

Aging bourbon at a distillery in Kentucky.
Flickr
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Aging bourbon at a distillery in Kentucky.

Republican U.S. Sens. Mitch McConnell and Rand Paul of Kentucky introduced legislation Monday aimed at helping bourbon producers.

The AGED Spirits Act allows bourbon producers to write off whiskey as it ages. At the moment, the tax code is written such that distilleries can only deduct bourbon once it is bottled and sold.

Eric Gregory, President of the Kentucky Distillers’ Association, said this has been a problem for the industry for decades.

“It really puts us at a competitive disadvantage in the global market place when we are the only place in the world that discriminates--from a tax standpoint--against aged spirits,” he said. “So, this will really be a tremendous help to the industry.”

Most of the world's bourbon is produced in Kentucky. Now more than ever, Gregory said it’s important to let the industry use that money to invest in itself. He noted this is the “golden age of Kentucky bourbon” and there has been $1.3 billion of investment in the industry in the past few years.

“So, if we were able to make more bourbon and age more bourbon we wouldn’t have to worry about that accumulating tax,” Gregory explained. “We could actually be using that to reinvest in the distilleries, create more whiskey to send overseas where most of our growth lies.”

Even though distillers have wanted to tackle this tax issue for decades, now is a prime moment for Kentucky distillers.

“We are very fortunate that Sen. McConnell is in the position he is in right now as well as Sen.Paul,” he said. “This would be a game changer for our industry. If you think we are growing now, just wait until this passes.”

Senate Majority Leader McConnell said in a statement that “making this change in law is a matter of common sense.”

“The situation under current law, where American bourbon and whiskey producers are not allowed to deduct the expenses related to storing and aging their product until it is bottled and sold, is akin to a homeowner not being able to deduct the interest on a home mortgage until the sale of the house,” he said in a press release.