The Craft Beverage Modernization Act (CBMA) is an essential set of regulations governing the collection of federal excise taxes for any beverage alcohol brands selling in the United States.
Resource – Understanding the Craft Beverage Modernization Act
It was originally enacted in 2017, but some important changes are coming to the program in 2023. Effective January 1, 2023, oversight of the Craft Beverage Modernization and Tax Reform Act (CBMA) program will transition from Customs Border Protection (CBP) to the Alcohol and Tobacco Tax and Trade Bureau (TTB).
With this shift the beverage alcohol industry will see changes in the way the tax reduction program is applied as well as the steps that brands need to take to comply. The best way for producers to not skip a beat is to understand how new procedures apply to them and be aware of any upcoming deadlines issued by the TTB.
Notable Changes to Craft Beverage Modernization and Tax Reform Act
Here are the primary changes to the CBMA program in 2023.
- The TTB will now require payment of federal excise taxes at the standard rates used before CBMA at the time of entry on beer, wine, and spirits. This means that receiving the CBMA reduced tax rate at the time of importation will no longer be an option.
- Refunds for the difference between the standard rate and the CBMA rate will be issued upon submission of quarterly requests via a TTB importer portal. Importers will use the TTB Importer’s Portal scheduled to launch in Q1 2023 to submit CBMA refund claims based on the foreign producer’s assigned CBMA tax benefit.
- All foreign producers selling in the US must register with the TTB and receive a Foreign Producer ID and assign the CBMA tax benefits to importers either independently or via a third party. Park Street has an open registration program for all its producers.
- The new CBMA system will surround the creation of two management portals, the Producer Portal, which is now live, and the Importer’s Portal, which is scheduled to go live during the first quarter of 2023.
The New Craft Beverage Modernization and Tax Reform Act in 2023
These are the main considerations for CBMA 2023 eligibility.
Deadlines
Foreign producers can now register and assign allocations for products to be imported in the calendar year 2023.
Starting in 2023, foreign producers will be able to assign allocations starting on October 1 of the year prior and must have allocations assigned by December 31 of the calendar year for which the benefits would apply. Failure to do so will disqualify the importer from CBMA benefits. This is an important change from the current program which may allow up to 1.5 years to file for refunds retroactively via post-summary correction or protest.
Eligibility
The first step toward CBMA eligibility is for producers to be registered and to have assigned an allocation. As long as the registered foreign producer has designated an allotment, incoming imports will be flagged for CBMA benefits at the time of importation. With this flag, the importation will be paid at the standard tax rate, but will become qualified for quarterly refunds via the importers portal. It is strongly recommended that producers are registered and that allotments are assigned before the arrival of any shipments.
If the producer is not registered and an allotment has not been assigned, the producer may still register with the TTB within the time limits stated above. However, this may signify additional steps to the process that have the potential of translating into delays.
CBMA Refund Claims
TTB has not provided any guidance on expected refund processing times, however, some delays are expected until the program is in a steady state. The standard processing time for refunds should be under 60 days. Otherwise, the TTB will pay eligible claims including interest.
Quantitative Limit for Controlled Groups
A foreign producer that is under common ownership with other foreign and/or domestic producers of beer, wine, or distilled spirits is subject to “controlled group” limitations on the quantities of tax benefits that may be assigned when the common ownership creates a “controlled group” under U.S. law. The Internal Revenue Code provides that the quantity limitations for the CBMA tax benefits are applied to the entire controlled group and shall be apportioned among the controlled group members. In other words, their combined CBMA tax benefit assignments to U.S. importers cannot exceed the quantities allowed by law (26 U.S.C. 5051(a)(5)(B), 5001(c)(3)(C), and 5041(c)(3).)
Incorrect Information
As part of the new program, the TTB has announced that if a foreign producer provides erroneous information, the eligibility to assign tax benefits will be revoked for a period not to exceed three calendar years following the year of revocation. Additionally, if a foreign producer has previously had its eligibility revoked, subsequent revocation may instead be permanent.