Kentucky bourbon producers, which make 95 percent of the world’s bourbon supply, would be able to deduct interest expense related to production in the year it is paid under a bill introduced by U.S. Rep. Andy Barr (R-KY) on Friday.
The legislation with bicameral support aims to correct the tax code loophole that makes it harder for bourbon producers in Kentucky to compete in global markets. The measures, the Aged Distilled Spirits Competitiveness Act in the House and the Advancing Growth in the Economy through Distilled (AGED) Spirits Act in the Senate, would level the playing field for U.S. bourbon producers.
Interest expense cannot be deducted until bourbon is bottled and sold under current law, which means that distillers could be left waiting anywhere from two to 23 years while bourbon ages.
“This bill is a commonsense fix which would end the discrimination of bourbon and other aged spirits for tax purposes, helping support jobs for Kentucky families and our local economy,” Barr said.
The Kentucky bourbon industry contributes $8.5 billion to the state economy each year and supports more than 17,500 jobs in Kentucky, according to a recent study.
U.S. Senate Majority Leader Mitch McConnell (R-KY) and U.S. Sen. Rand Paul (R-KY) introduced the Senate version of the AGED Spirits Act.
“The AGED Spirits Act is a pro-growth measure that will help level the playing field between Kentucky’s bourbon industry and its competitors abroad, while providing a boost to our home-state economy,” McConnell said. “This bill would benefit thousands of hard-working Kentuckians who have contributed to one of the commonwealth’s signature industries and helped make Kentucky the Bourbon Capital of the World. As recent studies have shown, the industry has grown and thrived, and I am sure it will continue to do so thanks to the many Kentuckians working in our distilleries and in other bourbon-related jobs.”
Eric Gregory, the president of the Kentucky Distillers’ Association, applauded Barr, McConnell and Paul for their leadership on the AGED Spirits Act.
“Unlike most spirits, it takes years for Kentucky bourbon to age before it can be appreciated,” Gregory said. “The AGED Spirits Act will free important capital on aging barrels, allowing distilleries to increase investments and create more jobs. This is a vital solution that will level the playing field for our signature industry as it competes in the global marketplace. We thank and appreciate the longtime support of Sen. McConnell, Sen. Paul and Congressman Barr and look forward to working with them to promote and protect our timeless craft.”
Mark Brown, the president and CEO of Sazerac, said his company is already investing more than $100 million in its three Kentucky distilleries and has more than $100 million in development projects on tap around the country.
“This will help lift the unfair burden that impacts manufacturers of Bourbon, Kentucky’s native spirit. Tearing down these discriminatory barriers will allow all Bourbon distillers to reinvest in their facilities and their employees,” Brown said.