Kentucky's Bourbon Distillers Rooting for State Tax Reform

Dec 12, 2012

Barrels aging in a warehouse at Woodford Reserve in Versailles
Credit Kevin Willis

One of the big issues Kentucky lawmakers are expected to take up in the next legislative session is an overhaul of the state tax code. It's something that the commonwealth's bourbon distillers will have their collective eyes on, because a provision under consideration would create a new tax credit for manufacturers designed to offset a longstanding barrel tax.

"We pay a tax on every barrel that is aging in the commonwealth, as long as it sits in one of our warehouses. So if you're drinking a bottle of 18-year- old bourbon, it's been taxed 18 times," says Eric Gregory, president of the Kentucky Distillers Association. "That makes Kentucky non-competitive in the global marketplace. We are the only alcohol manufacturer in the world that pays such a tax."

Tax legislation designed to help Kentucky's bourbon distillers has previously passed in the Senate, but has never made it out of the House. Gregory says distillers are sensing a renewed seriousness on the part of many lawmakers to get a tax code overhaul passed next year, either in the regular session that begins January 8, or during a special session.

Gregory says a tax credit would be a tremendous benefit for distillers, given the fact there are currently 4.9 million barrels aging in warehouses in Kentucky.

"We are literally at our highest level of barrel-aging in Kentucky since 1977. So that's a strong predictor that our industry is putting back more product because we think that the bourbon revolution, as we call it, is only going to continue to grow," says Gregory.