Kentucky Bourbon stocks reach 46-year high

28th September, 2018 by Nicola Carruthers

More than 7.5 million barrels of Bourbon are maturing in Kentucky – equivalent to almost two barrels for every person living in the state, according to the Kentucky Distillers’ Association (KDA).

Bourbon

Bourbon industry “remains the highest-taxed of all 536 manufacturing industries” in Kentucky

The total number of all barrels, which include those filled with Bourbon, brandy and other spirits, reached 8.1m – the highest amount since 1971.

The tax assessed value hit a record high of US$3 billion, with the amount of barrel taxes paid by distillers reaching US$23m.

The new ‘Bourbon without Borders’ law, which allows Kentucky distillery visitors to ship bottles they buy home, could see the figures increase further.

“Kentucky’s economy will benefit as more states pass similar reciprocal laws, allowing us to send our signature spirit around the country,” KDA president Eric Gregory said.

However, the new figures were reported before several countries enacted retaliatory tariffs on Bourbon. Gregory said the association is “still working to understand the actual impacts of those tariffs, and remain hopeful that it’s a short-term issue that will be resolved soon”.

Tax burden

Visitors to the KDA’s Kentucky Bourbon Trail and Kentucky Bourbon Trail Craft Tour distilleries have grown by 314% in the last 10 years.

However, the KDA said the Bourbon industry in Kentucky “remains the highest-taxed of all 536 manufacturing industries in the state”.

Seven different taxes account for 60% of every bottle. The state is the only place in the world that taxes ageing barrels of spirits.

The Bourbon Barrel Reinvestment Credit, passed by the legislature in 2014, sought to offset the discriminatory barrel tax.

The credit originally worked as intended, with distilleries reinvesting the tax credits into their sites, driving “tremendous growth and milestone barrel inventories”.

However, barrel taxes have risen with the growth, and the non-refundable tax is “far outpacing the amount of corporate income tax credit that’s allowed, particularly since the general assembly lowered the corporate rate last session”, Gregory explained.

“Distillers can’t realise the full benefit of the barrel credit, which means less money they can reinvest for future growth,” he said.

“The legislature took a good first step in reforming the tax code earlier this year, but more needs to be done to incentivise our state’s signature industries.

“We are grateful that policymakers recognise the vital role this homegrown industry plays in jobs, revenue and tourism, but we should not have a tax structure that penalises increased production and capital investment. That’s why the barrel tax credit needs to be refundable or transferrable.

“Today’s barrel inventory numbers prove the importance of Bourbon to the fabric and future of our state. We look forward to working with state leaders to continue this momentum and strengthen Kentucky’s rightful place as the one, true and authentic home for Bourbon and distilled spirits.”

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