WASHINGTON
Senate Majority Leader Mitch McConnell and Sen. Rand Paul are proposing legislation to benefit Kentucky’s burgeoning bourbon industry.
The Kentucky Republicans’ legislation, offered Wednesday, would make permanent an about-to-expire provision in the tax code that allows for the deduction of interest expenses related to bourbon inventory in the year the expenses are paid.
McConnell’s office says the bill — the Advancing Growth in the Economy through Distilled Spirits Act — or AGED Spirits Act, would provide Kentucky bourbon producers with a “level playing field” against their global competitors.
“This bill would benefit thousands of hard-working Kentuckians who have contributed to one of the Commonwealth’s signature industries and who have helped make Kentucky the ‘Bourbon Capital of the World,’ “ McConnell said.
The legislation exempts the natural aging process from the production period for distilled spirits. Before the provision was signed into law as part of the 2017 Republican tax cut at McConnell’s behest, interest expenses were not deducted until the bourbon was bottled and sold. That could be from two to more than 20 years, depending on the aging process.
McConnell’s office said the situation has been compared to a homeowner not being able to deduct the interest on a home mortgage until the house is sold.
The provision is scheduled to expire on Dec. 31. The bill would make it permanent. The senator’s office did not immediately have a cost estimate or a proposed method of paying for it.
The Kentucky Distillers’ Association hailed the provision, noting that bourbon, unlike most spirits, can’t be made overnight.
“It takes years of age and tender craftsmanship to produce the world’s finest bourbon, but that actually could be a deterrent when it comes to discriminatory tax policies restricting growth and investment,” said association president Eric Gregory.
According to a recent economic study conducted by the association, Kentucky bourbon contributes $8.6 billion to Kentucky’s economy each year and supports over 20,100 jobs in the Commonwealth. Since 2009, the number of distilleries in Kentucky has more than tripled to 68, and the number of counties with a distillery has quadrupled to 32 out of 120.
Tourism at Kentucky distilleries also has been booming, with visits to KDA Kentucky Bourbon Trail and Craft Tour distilleries almost quadrupling to 1.4 million.
In this Jan. 11, 2017, file photo, Senate Majority Leader Mitch McConnell of Ky., left, and Sen. Rand Paul, R-Ky., arrived on Capitol Hill in Washington. ZACH GIBSON AP
