The Craft Beverage Modernization Act

The Craft Beverage Modernization Act began life as a temporary tax cut, became permanent six years later, and in the process rearranged the economics of nearly every brewery, winery, and distillery operating in the United States. It is, in a sense, a piece of legislation that exists primarily to do arithmetic — multiplying barrels by dollars and small producers by relief — and yet the arithmetic itself reshaped what kinds of beverage businesses could plausibly exist. The acronym most commonly used is CBMA, occasionally CBMTRA when the original title (Craft Beverage Modernization and Tax Reform Act) is being honored in full.

The thing itself, formally

CBMA arrived inside the Tax Cuts and Jobs Act of December 2017, took effect on January 1, 2018, was extended once by the appropriations bill of December 2019, and was made permanent by the Consolidated Appropriations Act of December 2020. The relevant statutory home is 26 USC § 5051, which governs the federal excise tax on beer. Parallel sections handle wine (§ 5041) and distilled spirits (§ 5001). The Alcohol and Tobacco Tax and Trade Bureau, TTB, is the agency that actually collects the money and writes the rulings that interpret the statute, and its regulatory tree for beer sits at 27 CFR Part 25.

The pre-CBMA federal excise structure on beer, set out in 26 USC § 5051, taxed brewers at $7 per barrel on the first 60,000 barrels (for domestic brewers producing under 2 million barrels annually) and $18 per barrel thereafter. CBMA cut the small-producer rate to $3.50 per barrel on the first 60,000 barrels, and reduced the rate to $16 per barrel on the next tranche up to 6 million barrels. Brewers above 6 million barrels — a club with comparatively few members — continued to pay $18.

It is worth pausing on what this means in practice. A brewery producing exactly 60,000 barrels a year saw its federal excise burden on that production fall from $420,000 to $210,000. The legislation did not change anything about the beer in the tank. It changed the column in the ledger.

Wine and spirits, briefly

CBMA also rewrote the wine and spirits portions of the tax code, and the page is honest enough to say that beer is not the whole story. For distilled spirits, governed at the labeling level by 27 CFR Part 5, CBMA introduced a tiered structure with a reduced rate of $2.70 per proof gallon on the first 100,000 proof gallons — a dramatic cut from the standard $13.50 rate. For wine, regulated for labeling purposes under 27 CFR Part 4, CBMA expanded existing small-producer credits, raised the alcohol-by-volume threshold separating the $1.07 and $1.57 per gallon tax brackets from 14% to 16%, and extended credits to sparkling wine producers who had previously been excluded.

The Distilled Spirits Council, DISCUS, has tracked the spirits-side effects, and WineAmerica and the Wine Institute publish material on the wine-side consequences. The American Cider Association is also relevant, because cider sits in an awkward statutory niche between wine and beer, and CBMA tinkered with its definitions as well.

What the bill did not do

A common misconception, encountered often enough that the Beer Institute and the Brewers Association both address it in their policy material, is that CBMA changed the definition of beer, the definition of a brewery, or the rules of the three-tier distribution system. It did not. The Federal Alcohol Administration Act definitions at 27 USC § 211 are untouched. Health warning requirements at 27 CFR Part 16 are untouched. Labeling rules at 27 CFR Part 7 for malt beverages are untouched. The three-tier system, regulated largely at the state level and described in the policy materials of the National Beer Wholesalers Association, was not addressed.

CBMA is, strictly, a tax statute. It moved numbers. It also did one other thing, which was to allow the transfer of beer in bond between brewers who are not of the same ownership — a small change that nevertheless reduced friction in contract and collaboration brewing, since previously such transfers triggered tax events at unhelpful moments.

The Brewers Association definition, and why it matters here

The Brewers Association maintains a separate definition of "craft brewer" that is not a federal definition and has no statutory force. The current criteria, published at brewersassociation.org, require a craft brewer to be small (annual production of 6 million barrels or less), independent (less than 25% owned or controlled by an alcohol industry member that is not itself a craft brewer), and a brewer (holds a TTB Brewer's Notice and makes beer). The Independent Craft Brewer Seal program, which licenses a recognizable bottle-tipping logo to qualifying members, is the trade-association expression of that definition.

CBMA's 6-million-barrel threshold for the $16 rate happens to align with the Brewers Association's production ceiling for craft status. This is not a coincidence — the trade association lobbied for the figure — but it is also not a legal equivalence. A brewer who exceeds 6 million barrels does not lose any federally defined status. The brewer simply pays $18 per barrel on every barrel and stops being called craft by the trade press.

The import wrinkle, which became its own subplot

One section of CBMA that consumed an unreasonable amount of administrative oxygen concerns imported alcohol. The reduced rates and credits were extended to imported beer, wine, and spirits, but the mechanism by which a foreign producer could assign the credit to a US importer turned out to be procedurally complicated. From 2018 through 2022, the credit was administered through US Customs and Border Protection. Beginning January 1, 2023, the program shifted to TTB, which now handles the foreign producer registration, the credit assignment, and the importer refund claim through its myTTB online portal.

Foreign producers who wish to assign CBMA credits to their US importers must register with TTB and formally allocate their credit quantities for each calendar year. The TTB beer regulatory page at ttb.gov details the current process, and it is the kind of multi-step procedure that exists because someone, somewhere, was paying close attention to whether a brewer in Belgium counted as small.

Comparative footnote: how other countries handle small-producer relief

The United States is not unique in giving small brewers a tax break, and the page would be poorer without acknowledging this. The European Union allows member states to reduce excise duty by up to 50% for independent breweries producing under 200,000 hectoliters annually, a framework discussed in materials from The Brewers of Europe and the Deutscher Brauer-Bund. The United Kingdom operates a Small Producer Relief scheme, replacing the older Small Brewers Relief; the British Beer and Pub Association tracks its evolution. Japan's National Tax Agency administers a tiered beer tax that does not specifically privilege small producers in the American sense, though Japan's separate sake and shochu categories, documented by the Japan Sake and Shochu Makers Association, have their own structures.

The American approach is unusual chiefly in scale. A 60,000-barrel ceiling on the lowest rate is generous compared to most European thresholds, and the 6-million-barrel ceiling on the second rate is generous compared to nearly anything outside the United States.

Compliance, paperwork, and the things that did not get easier

Brewers still file the TTB Form 5130.9 (Brewer's Report of Operations) and pay excise tax through TTB's Pay.gov system on the schedule prescribed in 27 CFR Part 25. CBMA reduced the dollar amounts on those filings; it did not reduce the filings themselves. The recordkeeping requirements at 27 CFR Part 25 Subpart U remain in force, the Brewer's Notice application process remains in force, and the labeling requirements administered through Certificate of Label Approval (COLA) submissions remain in force. The Cornell Legal Information Institute mirror of 27 CFR Part 25 is a serviceable reading copy for anyone who finds the eCFR interface more austere than helpful.

A small brewer producing, say, 3,000 barrels per year benefits from CBMA to the tune of approximately $10,500 annually compared to the pre-2018 rate. Whether that sum is meaningful depends entirely on the brewery. For some it is the difference between hiring a packaging assistant and not. For others it is a rounding error against the cost of canning-line maintenance. The Brewers Association's economic impact data and the Beer Institute's economic impact figures together describe a national industry of considerable size; CBMA is one input among many.

Education and certification, sideways relevance

The Craft Beverage Modernization Act does not appear directly on the syllabus of any major beverage certification program, which is appropriate — it is tax law, not sensory science. Candidates studying for the Certified Cicerone® exam, BJCP-accredited beer judges, and Master Brewers Association of the Americas members may encounter the statute when discussing US brewing industry economics, but it is not a tested topic in the way that hop chemistry or yeast genetics are. For sensory and stylistic reference material, the Brewers Association's Draught Beer Quality Manual and Brewers Publications catalog remain the standard works, and the Cicerone Certification Program®, BJCP, and MBAA continue to handle education, judging, and brewing-science credentialing respectively. See cicerone.org for current details on Cicerone® program structure.

Further reading

• TTB, Beer (regulatory home): https://www.ttb.gov/regulated-commodities/beverage-alcohol/beer
• Cornell Legal Information Institute, 26 USC § 5051 — Imposition and rate of tax on beer: https://www.law.cornell.edu/uscode/text/27/211
• Brewers Association, Craft Brewer Definition: https://www.brewersassociation.org/statistics-and-data/craft-brewer-definition/
• Beer Institute, Policy briefs: https://www.beerinstitute.org/policy/
• Distilled Spirits Council of the United States: https://www.distilledspirits.org/
• eCFR, 27 CFR Part 25 — Beer: https://www.ecfr.gov/current/title-27/chapter-I/subchapter-B/part-25