Trump’s Tax Plan WILL Affect You – But How?
On December 22, 2017, in one of the fastest-moving pieces of legislation to come across a President’s desk, President Trump signed into law a bill generally known as the “Tax Cuts and Jobs Act.” The Act will undoubtedly affect most individuals and businesses beginning with the 2018 tax year. Verrill Dana’s Tax Practice has prepared a comprehensive client advisory highlighting many of the major tax reform changes, including the numerous changes to how beer, wine and distilled spirits are taxed. These particular changes related to the beverage industry are only effective for the 2018 and 2019 tax years.
The first significant change to how beer, wine and distilled spirits are taxed is the modification of the Uniform Capitalization (“UNICAP”) rules under section 263A, which require certain direct and indirect costs allocable to real or tangible personal property produced (or acquired for resale) to be included in inventory or capitalized into the basis of the related property. Changes to the UNICAP rules will affect property that is customarily aged, excluding the aging periods for beer, wine and distilled spirits from the product period for purposes of the UNICAP interest capitalization rules. Consequently, producers of beer, wine, and distilled spirits are able to deduct interest expense (subject to any other applicable limitation) attributable to a shorter production period.
The Act also makes changes to the federal excise tax imposed on brewers and importers of beer; foreign and domestic producers of wine and sparkling wine; and producers of distilled spirits. Special credit rates are also provided through the Act to producers of hard cider.