House Finance Committee hears bill to let Pennsylvania breweries sell malt-beverage tax credits

The House Finance Committee held a public hearing in Allentown on HB2340, a bill to allow Pennsylvania breweries to carry forward and sell their malt-beverage tax credits to other Pennsylvania brewers so small operators can convert awarded credits into usable cash.

Representative Ana Tiburcio, the bill's prime sponsor, told the committee the current program often leaves small breweries unable to realize the full value of credits awarded for capital investments. "This bill will help us preserve those craft breweries, ensuring that people have more options than the largest national beer brands," Rep. Tiburcio said, explaining the proposal would lengthen carryforward time for credits and permit transfers within the brewing industry.

Hannah Ison, executive director of the Brewers of Pennsylvania, said the credit program 'created in 2016'helped spur growth but needs updating. She told lawmakers the industry employs more than 15,000 people and generates about $5 billion in annual economic activity. Ison emphasized that HB2340 would not change the program's existing $5 million annual allocation but would allow greater realization of awarded credits by permitting sales and limiting purchasers from eliminating more than 50% of their liability.

Patrick McDonald, a CPA who advises breweries, described how the structure of the credit and program administration reduce its usefulness for smaller producers. McDonald said many small breweries 'often lacking substantial malt-beverage excise liability'can realize only a small fraction of a $200,000 award and that, on average, his clients realize about 15% of their credit. "Making these credits sellable between the breweries would be a game changer for the industry," he said, also criticizing the application process as cumbersome because it requires submitting files on a thumb drive rather than through an online portal.

Local brewery owners described how the present rules affect operations. Jim Yergi, owner of Yurgi Brewing in Emmaus, said his expansion cost roughly $1.2 million and generated more than $110,000 in qualifying equipment credits, but under current rules he can recover only about 2% of those credits before they expire. "By passing HB2340, allowing us to sell those credits to other malt-beverage excise tax liability holders, we would be able to recoup a far greater percentage of these credits and reinvest them back into our business," Yergi said.

Larry Winans, owner of Jackass Brewing Company, said he invested roughly $384,000 in equipment and that, under existing limits, it would take his company almost 300 years to realize the full benefit of the credits. "Selling the credits to a willing partner within the industry in Pennsylvania'would be life saving for us in this time period," Winans said, adding the proceeds would help him clear roughly $150,000 in invoices and preserve payroll for more than 75 employees.

Committee members asked how many breweries currently use the program; witnesses said roughly 34'41 breweries have taken credits in recent years out of about 450 craft breweries statewide, and that the malt-beverage excise tax on a 1,000-barrel brewery is about $2,480 annually (about $2.48 per barrel), which helps explain the gap between awards and usable liability.

Lawmakers said they hope the committee can consider HB2340 at its next meeting at the end of the month and try to negotiate the change during upcoming budget deliberations. The committee adjourned the hearing with no vote taken.

NEXT STEPS: The House Finance Committee could consider HB2340 at its meeting later this month; committee members said they aim to pursue discussions during budget negotiations.