U.S. Rep. Andy Barr, R-Lexington, on Tuesday will introduce tax legislation in Washington to help Kentucky bourbon distillers, a move he said could spur new growth in the industry.
The Aged Distilled Spirits Competitiveness Act of 2013 would change the IRS's tax code to allow bourbon producers immediately to write off costs of interest and other expenses incurred in making bourbon, rather than only after it is sold, according to a news release from Barr's office.
Because bourbon may be aged two to 20 years or more, eligible expenses currently can't be deducted for decades — when the bourbon is finally bottled and sold.
Barr said this puts bourbon makers at a competitive disadvantage against makers of unaged white spirits.
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"I am confident that with the right trade, tax and regulatory polices, Kentucky's bourbon distilling, bottling and tourism industry is poised to enter a new era of growth and job creation for the people of this commonwealth," Barr said in a statement.
Some 95 percent of bourbon is made in Kentucky.
The bourbon industry brings billions of dollars in economic activity to the state and supports almost 9,000 jobs, according to a 2012 University of Louisville economic impact study. Kentucky distilleries ship more than $2.5 billion in products annually, much of it aged in Kentucky warehouses for years.
Distillers welcomed the bill, which reintroduces legislation filed in 2011 by then-U.S. Rep. Geoff Davis, R- Hebron.
"It will allow all of us to distill more bourbon, which unfortunately is in short supply due to measures like this, the aging required and growing demand," said Mark Brown, president and CEO of Buffalo Trace Distillery in Frankfort.
Eric Gregory, president of the Kentucky Distillers' Association, said the issue is a top one for the state's distillers. Members of his group, which collectively produce 90 percent of the world's bourbon, applaud the move, he said.
"Bourbon is a growing worldwide symbol of Kentucky's craftsmanship and tradition, and it is one of the commonwealth's most valuable and recognizable exports," Gregory said. "This tax provision, however, limits our legendary distillers' ability to competitively manufacture and promote their products on an international scale, which restricts job growth and further investment in the Bluegrass."
The legislation has the support of Kentucky's federal delegation. U.S. Reps. John Yarmuth, D-Louisville; Ed Whitfield, R-Hopkinsville; Brett Guthrie, R-Bowling Green; and Hal Rogers, R-Somerset, already have signed on as co-sponsors.