City July 25, 2012 1:07 PM

Cuomo Signs Legislation to Strengthen Craft Brewing Industry

Sarah Maurer 21

Governor Cuomo recently signed Senator Mark Grisanti's package legislation that aims to give a boost to many of New York's small business owners, specifically those in the brewing industry and the local farms that they collaborate with in production.

One objective is to encourage industry-related economic development by easing tax burdens on small breweries, allowing them to focus more spending on expansion and diversifying their business. The package of laws will keep a tax benefit for small breweries intact and exempt them from paying an annual State Liquor Authority fee. Breweries that produce 60 million or fewer gallons of beer in New York will be eligible for a refundable tax credit applied against State personal income and business taxes. In addition, breweries producing brands of 1,500 barrels or less annually will be exempt from paying the $150 annual brand label fee.

"In addition to producing some of the finest beer in the world, New York's craft breweries are creating jobs, supporting our state's farmers and hops growers, as well as bringing in tourism dollars in local communities across New York," Cuomo said. "The legislation demonstrates that the new New York is truly working for small business, as this law will allow breweries and wineries the opportunity to invest in new opportunities and expand their operations."

The legislation also includes the creation of the new "Farm Brewery License," which encourages small breweries to diversify their business in the same way that much of the wine industry has, by allowing them to add retail outlets, open restaurants, hold tasting sessions, and sell beer-related products. The stipulation is that until the end of 2018, the beer must be produced using at least 20 percent locally grown hops and 20 percent of the rest of the beer's ingredients must be grown or produced in New York State. These percentages are slated to increase in the future.

"The Empire State needs to become a more business friendly state and the economic stimulus in this package of laws moves us in the right direction. I applaud Governor Cuomo for demonstrating his support of both the agriculture industry and small businesses by helping to ease the tax burden on these essential job creating and growing areas," said Senator Grisanti. "Local beer breweries will especially find these targeted tax breaks provide the opportunity for more diversification to expand their businesses and market their products just like wineries."

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Comments

21 Comments Leave a comment

longgone

July 25, 2012 3:22 PM

The "Farm Brewery License' is a great idea but as usual NYS gets it wrong.

The stipulation that 20% of your hops and ingredients come locally is stupid. While these type of craft brewers always try and use local, to put a limitation on it is stupid. Even worse is these % are going to go up.

These provision stores / tasting rooms are awesome for the community. In almost everyone I have been in they are tastefully done, do not run late hours and add a great stop to a retail corridor. To say a business can not have one of these or even worse would have to close up shop because of the ingredients in their beer do not meet a set % by lawmakers is backwards.

What if one of these breweries hits a goldmine with a beer recipe that does not include local product? What if this beer allowed them to expand and hire more people? How is that a bad thing? Only in NY.

If you want to encourage local use..great. Provide incentives but do not limit one business in order to try and prop up another. So...sadly...backwards. So NYS.

[ Reply ]

Score: -1 ( 7 votes )

Jesse

July 25, 2012 4:14 PM

Agreed.

Good for removing the SLA fee. As a small-time web shop I never had to pay the State Liquor Authority, why should any other business?

But if they get a tax credit, I should too. And if I wanted to offer a beer for sale, why not? Beer + web design = better web design!

Great point on the local hops requirement. Nothing like legislatures trying to micromanage industries. It's not just NYS (we just might be the best of 'em!).

[ Reply ]

replied to longgone

Score: -3 ( 5 votes )

longgone

July 25, 2012 5:06 PM

Agree. Love the down votes by the way.

This line says it all...

NYS has so many problems and needs to stop trying to help everyone with opportunity. Work on getting these breweries up and running. Do not try and fix the farm economy at the same time. If it happens..great.

[ Reply ]

replied to Jesse

Score: -1 ( 1 votes )

elmdog

July 25, 2012 4:13 PM

Still waiting for the big signing of the historic tax credit increase ............. What is Cuomo waiting for ?

[ Reply ]

Score: 2 ( 2 votes )

300miles

July 25, 2012 4:51 PM

last time it was mentioned that it's still sitting with the Senate, even though they already approved it.

So basically our state processes suck.

[ Reply ]

replied to elmdog

Score: 1 ( 1 votes )

warehousedweller

July 25, 2012 5:20 PM

just bootleg and dont tell big brother ! use the barter system.that is what it will come to anyways!

[ Reply ]

Score: -2 ( 4 votes )

grad94

July 25, 2012 6:44 PM

ok, everybody, aim your mouse for the downvote button because i'm going to be the lone voice of disagreement.

if you don't want to use local hops, fine! then don't use the tax benefit. this legislation sounds like the same model as the preservation tax credit. if you don't want to comply with secretary of the interior standards on your old building, like installing vinyl siding, fine! then don't claim the tax credit.

i think that if government is going to hand out goodies, it is entirely appropriate and responsible for it to establish eligibility standards that promote a legitimate government interest.

[ Reply ]

Score: 8 ( 10 votes )

longgone

July 25, 2012 7:20 PM

Could not disagree more. I see your point on the preservation tax credit but that is not similar to this situation. It's like saying that a preservation tax credit to restore a home is tied to what furniture you use.

The provision stores / tasting rooms are a business in their own right. In most tasting rooms they feature the brewery beer in addition to other selections.

My point is a license to add retail outlets, open restaurants, hold tasting sessions, and sell beer-related products should not be tied to the ingredients in the beer. That is just nonsense.

If you want to offer an program to help the farm community..I'm all for it. But to try and prop up the farm community at the expense of sales tax, commercial real estate, jobs and the like...again that is just nonsense.

[ Reply ]

replied to grad94

Score: -2 ( 2 votes )

whatever

July 25, 2012 8:22 PM

grad - the BR article clearly says it isn't only about a tax break as you claimed.

grad94>"if you don't want to use local hops, fine! then don't use the tax benefit ... then don't claim the tax credit"

From the article -
"The legislation also includes the creation of the new "Farm Brewery License," which encourages small breweries to diversify their business in the same way that much of the wine industry has, by allowing them to add retail outlets, open restaurants, hold tasting sessions, and sell beer-related products. The stipulation is that until the end of 2018, the beer must be produced using at least 20 percent locally grown hops and 20 percent of the rest of the beer's ingredients must be grown or produced in New York State. These percentages are slated to increase in the future."

If that's correct, then tax break or no tax break, the NY state govt is making it illegal for these breweries to have retail outlets, open restaurants, hold tasting sessions, and sell beer-related products unless they buy a mandated percent of materials from where the state says to buy it.

It might cost more in lawyer fees than it's worth, but it would be interesting if the breweries would challenge that part of the NYS legislation in federal court for illegally restricting interstate commerce.

[ Reply ]

replied to grad94

Score: 0 ( 2 votes )

grad94

July 25, 2012 11:55 PM

licensing is different than granting tax credits -- fair enough. but not that different. if i want a driver's license, there are certain tings i need to do to qualify. if i find those things onerous, i get a bike or a bus pass instead.

can any actual brewers chime in? wouldn't be surprised if some of them are thinking, "man, i wish i could get hops grown in wyoming county rather than having to ship them in from germany!"

[ Reply ]

replied to whatever

Score: 0 ( 2 votes )

longgone

July 26, 2012 1:26 AM

You know very little about beer.

[ Reply ]

replied to grad94

Score: -4 ( 4 votes )

grad94

July 26, 2012 12:38 PM

maybe so, but in the 19th century, new york hop farmers dominated the hops industry in america:

http://tinyurl.com/d26ssvl
http://tinyurl.com/c2tpwaj

don't see why our crop should automatically be considered inferior.

[ Reply ]

replied to longgone

Score: 2 ( 2 votes )

longgone

July 26, 2012 1:59 PM

It's not inferior at all. In fact it's superb. The challenge is it provides for specific notes when combined with other ingredients. They are different. That is the key.

Let me give you an example of how this could turn ugly.

Say you have a brewery that creates a beer using the Chinook hop. Due to the acid content, it produces a strong ale with a high gravity.

Now say that for whatever reason, local farmers in NYS decide that growing Golding or Mount Hood hops makes better sense to them because these product notes that are more common to lagers...which is closer to the water beers that most in WNY drink.

Because of the farmers doing what is in their best interest, the cost of purchasing Chinook hops is artificially inflated by this rule. This makes it more expensive to produce a beer and the cost is passed on down the line.

To try and force the hand of brewers as to what hops/yeast they use, without consideration of control on the production, is just silly.

I honestly think this is due to people like Grisanti having no idea about the difference or being forced into this by his farm constituants..who vote a specific way if you know what I mean.

[ Reply ]

replied to grad94

Score: 1 ( 1 votes )

MikeO14209

July 26, 2012 9:58 AM

The hops flowers are actually processed into little pellets and then vacuum sealed. It doesn't really matter how far they have to travel, they stay fresh and potent for a very long time. Almost all small (home) to medium sized brewers use pellets. I don't know what the real big guys do. That said locally grown hops and grains should be cheaper since you should be about to pick them up yourself. The yeast and water will always be 100% local. I think given the choice everyone would buy local if it made sense economically. And it should. Notice how many times I've said "should."

[ Reply ]

replied to grad94

Score: 3 ( 3 votes )

longgone

July 26, 2012 10:34 AM

Another person who does not know much about beer. No wonder why bad legislation is passed..most of the constituents have no idea it's bad.

Hops are not created equal. There are varieties, as well as, notes created from the region they are grown in. If you think this does not matter...you're probably one of the folks who drinks blue or coors light. But to the craft brewing industry...these things matter.

Not even going to go into yeast......

[ Reply ]

replied to MikeO14209

Score: 0 ( 4 votes )

longgone

July 25, 2012 8:36 PM

Whatever - I do not think that is the case.

I think the law allows breweries to have tasting rooms without having a traditional license to sell beer and wine. Those are pretty expensive for a 'tasting room'..

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Score: 0 ( 2 votes )

whatever

July 25, 2012 10:51 PM

long, I'm confused now - which aspect do you mean isn't the case?

Doesn't Sarah's article above say the 20% stipulation applies to all that stuff beyond the tax issue - "...by allowing them to add retail outlets, open restaurants, hold tasting sessions, and sell beer-related products..." ?

I thought your reply to grad (right above mine) also said that stuff was part of what will be legally allowed only if these breweries obey the state's 20% rule.

[ Reply ]

replied to longgone

Score: 0 ( 0 votes )

biniszkiewicz

July 26, 2012 12:13 AM

I interpreted the 20% locally grown requirement to relate, as Grad94 surmised, only to qualification for the tax credit. While that was nothing more than my own conjecture, I'd be surprised if all those other business opportunities were restricted only to those brewers who abide by locally purchasing their ingredients . . . and yet . . .

I don't know that I'd necessarily be against this legislation even if it did restrict all those benefits to those brewers who purchased a set percentage of NYS produce for their suds production. NY wants to grow an industry. It's not about a few small mom and pops. It's about planting the seeds for a culture of brewing, much as there is a culture about wine making in many states, including, to a small degree but perhaps a slowly growing one, ours.

Nurturing this brewing supply chain seems to me to be a reasonable tactic in the execution of a strategy to further develop this nascent culture and industry. And since I personally very much like high quality beer, I like furthering a culture of brewing.

The state is appropriately priming this pump by requiring local produce. My bet is that most brewers would like to buy ingredients locally, but there aren't high quality ingredients available. And farmers would love to produce hops, etc., if they had a real, solid market for them. But there's no organized local market.

The individual farmer isn't going to go knocking on doors to try to sell his produce. He's going to plant something safe instead. This legislation helps create a marketplace which eventually will not need those protections. See also: 'how America rose to industrial power through protectionist taxes' (but the free marketers don't want that history lesson taught).

[ Reply ]

Score: 2 ( 2 votes )

whatever

July 26, 2012 2:50 AM

bini - It's possible that I'm misinterpreting Sarah's paragraph and you're interpreting correctly. It still looks to me like it says what I thought before it says, but maybe I'm just not getting something about its wording.

However for sake of discussion on the merits even if hypothetical - there's many reasons I think it would be dumb (and possibly illegal federally - if it isn't, it should be) for NY state to require these breweries to buy 20% of hops from in-state sources as a condition for being allowed to do retail selling, etc.

For one thing - not even the main point - but how do we know that would be a step toward improving long term strength of the hops producers here? Instead of having to compete in the marketplace on quality, value, etc they'd be getting sales through a quota.

And to enforce the rule fairly for all, how many more NYS govt employees are needed to do who-knows-what to verify compliance of the 20%, handle appeals of rejections, etc.?

Beyond all that, suppose in some other state(s), hops producers complain to their legislatures who then retaliate against NYS by requiring 30% of hops purchased by their state's similar breweries must be in-state there or else no retail allowed, etc. Now that would cause NYS hops producers to be less able to sell in other states - what they gained by favoritism mandated by Albany can be lost by the revenge mandates of Harrisburg, Richmond, Columbus, etc in little trade war among states.

Maybe Ohio hears about it, loves the concept, and extends the idea to make a law that cider makers there must buy 70% of apples from in-state sellers or else they can't sell retail, etc - and thus Niagara County apple growers back here lose long time customers in Ohio.

Next, suppose NYS govt has a goal to improve some other industry here of which commercial real estate brokers are customers - and suddenly to renew your license you need to prove to Albany that you're buying 40% of product X or service Y from NYS-owned businesses.

[ Reply ]

replied to biniszkiewicz

Score: 0 ( 0 votes )

TheRealBuffaloBill

July 26, 2012 4:23 AM

That part will not have a great effect breweries large then the Nanos. There is very little hop/barley production for brewing in NYS and anyone of size will have to buy from the larger suppliers. I understand the idea was to get farms to produce it and get local people to buy it but it will end up being only for the smallest producers. I will have to look at the law but that’s a very small part of what came out of it. What also seems to be missing is farming isn’t just picking a plant and tossing it in the ground. Many varieties of Hops only grow in spoil of certain types, climates etc. It’s not like I can go out and plant East Kent Goldings and them being the same as the ones from Kent.

Second it will be interesting to see how the stipulated ingredients since I get my water from NYS and most of the beer is made from water there for I can say the beer is in fact mostly NYS. Therefore I should get tax breaks?

[ Reply ]

Score: 2 ( 2 votes )