Yesterday the California Board of Equalization made a troubling ruling that has the potential to threaten the production of all barrel-aged beer in the state. The changes were urged by neo-prohibitionists in their misguided attempt to have Alcopops taxed at the higher distilled spirits rate instead of as beer (or more technically malt-based beverages). But the language, perhaps unintentionally, makes it possible to be applied to any beer that’s been aged in a used wooden barrel. Here’s the relevant language from the ruling:
any alcoholic beverage, except wine, which contains 0.5 percent or more alcohol by volume from flavors or ingredients containing alcohol obtained from the distillation of fermented agricultural products will be classified as a distilled spirit for tax purposes.
Brewers will be “required” to “prove” their beer doesn’t meet that criteria, meaning they’ll have to submit a form for every current and new beer they produce, a ridiculous requirement at best. Effectively they’ll have to “prove” each beer they make is really a beer, and not something else. Guilty until they prove themselves innocent. And who better to monitor that than a tax organization, with little or no brewing knowledge? Since distilled spirits are taxed at a much higher rate, they’ll have no incentive whatsoever to act fairly. To me, this has disaster written all over it. In California, we’re facing a huge budget deficit and beer makes a convenient bogeyman to help pay for other people’s mistakes.
Also, under the ruling the Board of Equalization will give itself the authority to define and implement regulations applying to alcohol, a power previously reserved for the legislature (and enforced by the ABC). That, too, I find disturbing. Tax authorities regulating alcohol do not exactly have a good track record.
But let’s get back to calling a beer a distilled spirit just because it touched wood that used to have one in it. I can’t even fathom why, apart from economic greed, that makes any kind of sense. It’s just wrong on so many levels.
I may spend time abroad in a foreign land and be forever changed for the experience. Perhaps if I go for any length of time to … let’s say Canada, I might start paying closer attention to hockey, or even curling. Maybe I’ll start calling a case of beer a “two-four,” spelling colour with a “u,” hanging prints by one of the Gang of Seven in my home, or quoting Louis Riel, eh? But I’ll still be an American. The same is true for beer. A stout may spend years in a bourbon barrel, taking on rich vanilla character and other flavors from its time in the wood. But it will still be a 5% abv stout. To suggest it will turn into Maker’s Mark, even just for “tax purposes,” is an insult to common sense.
Aging beer in wooden barrels has, of course, become quite common and I’d say many, if not most, California craft brewers are making a beer of this type at least from time to time. And there are several that have made names for themselves with their barrel aged beers, such as Russian River and the Lost Abbey, to name two prominent ones. Their entire business will be under threat if the ABC decides to apply this ruling to these beers. The higher taxes will make them too expensive to produce.
The EU did something similar a year or so ago, when they tried to implement a requirement that all breweries meet a standard of cleanliness, inadvertently threatening all lambic breweries, whose wild yeast microcosms would have been destroyed under the proposed regulations. I’m pretty sure an exception was worked out, but the general public has a bit better appreciation for beer in Europe than on our shores.
Paranoid? Maybe, but I love these beers far too much to leave it to chance. Something needs to be done, but at this early stage I don’t even know what or who this can be appealed to. I’ll keep you posted. But I’m sure your local state representative will be involved. Find out who yours is now, and be ready to send him a letter or e-mail. Hopefully, I’ll have details soon on what we all can do.