McConnell, Paul Introduce 'AGED Spirits' Act

U.S. Senate Republicans Mitch McConnell and Rand Paul introduced legislation Wednesday to make permanent a provision in the tax code to ensure Kentucky's bourbon producers can continue investing in their facilities and employees and remain on a level playing field with their global competitors.

"The Advancing Growth in the Economy through Distilled (AGED) Spirits Act" would maintain fairness for bourbon producers by allowing the deduction of interest expenses related to bourbon inventories in the year it is paid. The legislation protects the competitive position of  one of Kentucky's signature industries by exempting the natural aging process from the production period for distilled spirits.

Before this provision was signed into law as part of the 2017 Tax Cuts and Jobs Act, interest expenses were not deducted until the bourbon was bottled and sold, which could be anywhere from 2 to over 20 years after aging. This situation has been likened to a homeowner not being able to deduct the interest on a home mortgage until the sale of the house. 

As Senate Majority Leader, Senator McConnell ensured the "AGED Spirits Act" was included in the "Craft Beverage Modernization and Tax Reform Act," which President Trump signed into law in 2017 as part of the "Tax Cuts and Jobs Act." However, this important bourbon provision is scheduled to expire on December 31, 2019. The legislation would make this tax provision permanent to help Kentucky's bourbon industry continue to grow in communities throughout the Commonwealth.

"Kentucky Bourbon can't be made overnight like most spirits. 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 Eric Gregory, President, Kentucky Distillers' Association. "The AGED Spirits Act will permanently relieve that burden, create new jobs and level the playing field for our signature industry as it competes in the global marketplace. We thank and applaud Senator McConnell's leadership in this critical effort and look forward to working with him, Senator Paul, and our Kentucky Congressional delegation to protect our iconic spirit."

Kentucky produces 95 percent of the world's bourbon supply and has become an international tourist destination. According to a recent economic study, 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.