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Kentucky Peerless Distilling Co. whiskey barrels

December 13, 2023by David Klemt David Klemt No Comments

Will Whiskey Bring Us Together?

Will Whiskey Bring Us Together?

by David Klemt

A letter penned by Senator Catherine Cortez Masto and signed by a bipartisan group of senators shows that we’re capable of coming together.

There’s seemingly no escape from messages that America is divided like never before. And, when inundated with that message, it’s easy to believe. Sadder, when we believe that message it’s too easy to plunge into despair.

However, 17 senators, Democrats and Republicans, are coming together in support of American whiskey.

These senators are seeking the permanent removal of tariffs on American spirits and wine by the European Union. That 25 percent tariff, first imposed in June of 2018, is in retaliation over a dispute over aluminum and steel. This was a response to the US imposing a 25 percent tariff on steel imports, and ten percent on aluminum.

Unfortunately, after a suspension in 2021, the tariffs on American whiskey will jump to 50 percent on January 1, 2024. So, Sen. Cortez Masto and a bipartisan group of senators are urging the Biden administration to work with the EU to permanently suspend or otherwise eliminate tariffs on American whiskey.

If Ambassador Katherine Tai and the White House are unable to broker a deal with the EU, the tariffs would be catastrophic for many American whiskey distillers. In turn, their whiskeys would become more costly for restaurant, bar, nightlife, and hotel operators. And, of course, for consumers.

Here’s to hope. Hope that a deal can be reached, and hope that somehow, some way, our elected officials will engage in more bipartisan efforts moving forward.

Bipartisan Support in the Senate

Below, the text of the letter that Sen. Cortez Masto (D-NV) sent to Ambassador Tai and the White House.

The following senators signed this letter in a show of bipartisan support:

Marsha Blackburn (R-TN)
Katie Boyd Britt (R-AL)
Mike Braun (R-IN)
Maria Cantwell (D-WA)
John Cornyn (R-TX)
Mike Crapo (R-ID)
Bill Hagerty (R-TN)
Tim Kaine (D-VA)
Mitch McConnell (R-KY)
Joe Manchin (D-WV)
Roger Marshall (R-KS)
Rand Paul (R-KY)
Gary Peters (D-MI)
Jacky Rosen (D-NV)
Mark Warner (D-VA)
Todd Young (R-IN)

If only restaurants and bars, venues where American whiskey is bought and sold, had received this type of support when seeking RRF replenishment.

The Letter

“Dear Ambassador Tai,

“We write today to request an expedited agreement with the European Union (EU) to secure the permanent removal of retaliatory tariffs on spirits and wines. While we applaud the Administration’s efforts to suspend retaliatory tariffs for five-years on spirits and wines in the WTO Large Civil Aircraft Dispute and the two-year pause on American Whiskeys in the steel and aluminum dispute, we are deeply concerned that a lack of a permanent fix risks the re-imposition of tariffs. As of now, a 50 percent tariff is set to hit American Whiskeys on January 1, 2024.

“Spirits have had a significant cultural impact in our country, and currently have a profound impact on the U.S. economy. In 2022 alone, U.S. distilled spirit exports reached $2.06 billion. But the impact of the retaliatory tariffs was devastating. For the American Whiskey industry, exports decreased from $702 million to $440 million, a loss of 20 percent between 2018 and 2021. In 2022, American spirits exports rebounded over 2017 pre-tariff levels – the last full year before retaliatory tariffs – due in large part to the suspension of retaliatory tariffs. For many in the hospitality industry and others such as retailers, grocers, importers and distributors, many of which are small, locally-owned businesses, the impact was severe, compounded by the onset of the Covid-19 pandemic.

“While we understand that you continue to negotiate towards a deal to settle the dispute related to steel, we believe that the targeting of spirits is extraneous. Likewise, a permanent fix is needed as the two-year pause on American Whiskey tariffs is set to snapback soon.

“Understanding that tariffs are a ‘tool in the toolbox’ in negotiating a deal, the imposition of additional tariffs on this industry would be detrimental. There are mutual benefits in finding a path forward, and our belief is that spirits and wines are a point where there can be consensus to limit the damage for all parties.

“We look forward to your support in finding a permanent fix for retaliatory tariffs on spirits and wines.”

Image: Daniel Norris on Unsplash

March 29, 2023by David Klemt David Klemt No Comments

What’s Up with the Restaurant Tax Credit?

What’s up with the Restaurant Revitalization Tax Credit?

by David Klemt

If you’re wondering what’s going on with the Restaurant Revitalization Tax Credit bills in the House and Senate, you’re probably not alone.

And if you find yourself wondering about them, that’s likely because there isn’t much news about the bills. Unfortunately, it appears that no meaningful progress has been made on HR 9574 or S.5219.

A quick check shows that both bills share the same status: Introduced. As for the House bill, HR 9574, that was introduced on December 15, 2022 by Representative Earl Blumenauer (D-OR). The Senate bill, S.5219, was introduced by Senator Benjamin Cardin (D-MD) on December 8, 2022.

It’s important to note that Sens. Cardin, Patty Murray (D-A), and Sherrod Brown (D-OH) reintroduced S.5219 in January of this year. However, that apparently didn’t mean much as the Congress.gov trackers show no progress.

Last year, some opined that neither bill would receive a vote until January 2023 at the earliest. That “prediction” has proven true, of course—it’s now the end of March.

Restaurant Revitalization Tax Credit Act Summary

Let’s take a quick look at HR 9574 and S.5219.

Both bills propose a $25,000 payroll offset for restaurants. Eligibility requirements are also identical: applicants must have applied for but not awarded a Restaurant Revitalization Fund grant.

Additional, eligible applicants are:

restaurants with operating losses of at least 30 percent in 2020 and 2021 in comparison to 2019; or
restaurants with losses of at least 50 percent in either 2020 or 2021 in comparison to 2019.

So, those are elements that both the Senate and House bills share. What about the differences between the two bills?

Mainly, differences come down to the number of employees. For S.5219, restaurants with ten employees or fewer could be eligible for the maximum payroll tax credit. That credit, as a reminder, is up to $25,000 for 2023. For every employee over ten, the refund cap drops by $2,500.

Now, HR 9574. Restaurants with ten or fewer employees would receive the full $25,000 payroll tax offset. For restaurants with between 11 and 20 employees, the offset would be “partially refundable.”

Now What?

If you believe that you’re eligible for this tax credit, it’s time to let your representatives know you want them to act.

To make things simple for everyone, I’m including the links you need to find and contact senators and representatives.

For senators, click here. And for representatives, click here.

Let them know that it’s time for action on S.5219 and HR 9574. And let them know exactly what action you expect them to take.

Image: Karolina Grabowska on Pexels

March 21, 2023by David Klemt David Klemt No Comments

IRS Proposes New Tip Reporting Program

IRS Proposes New Tip Reporting Program

by David Klemt

The Internal Revenue Service is proposing a voluntary tip reporting program which they’re calling the Service Industry Tip Compliance Agreement (SITCA).

Making the announcement via Notice 2023-13 back in February, the IRS is giving people the chance to comment on the SITCA proposal.

Per the IRS, their intention is to “take advantage of advancements” in POS, scheduling, and e-payment technology. How do they intend to leverage all this tech? In short, the IRS is proposing that POS systems will have to process payments and tips in the same way.

To clarify further, if someone pays by credit card, they’ll have to tip via credit card. If a guest pays in cash, they’ll have to tip in cash. So, should SITCA become the industry standard, the days of paying with a credit card but leaving a cash tip will be over.

However, in my eyes, this isn’t a simple “modernization” of IRS processes.

If the IRS is proposing a new for businesses to process tips, they’re looking to catch non-compliant businesses and tipped workers. A likely culprit or contributing factor to this IRS scrutiny? The retail venues now asking for or suggesting tips when customers check out.

So, it would be wise to reiterate to your team the need to report tips accurately. And remember, business owners need to ensure they’re complying with tip reporting as well. Getting flagged for inaccurate reporting is a great way to catch an audit, penalties, and a huge bill.

Nuts and Bolts

According to the IRS, SITCA will reduce taxpayer burdens. And, of course, the service claims the program will also reduce their own administrative costs.

Additional “features,” per the IRS website, are as follows:

The monitoring of employer compliance based on actual annual tip revenue and charge tip data from their point-of-sale system. There will be allowance for adjustments in tipping practices from year to year.
Participating employers demonstrate compliance with the program requirements by submitting an annual report after the close of the calendar year. This reduces the need for compliance reviews by the IRS.
Employers participating in SITCA will receive protection from liability under the rules that define tips as part of an employee’s pay for calendar years in which they remain compliant with program requirements.
Participating employers have flexibility to implement employee tip reporting policies best suited for their employees and business model. Policies must be in accordance with the section of the tax law that requires employees to report tips to their employers.

Requests for Comment

Interestingly, Notice 2023-13 contains a request for comments in four specific areas:

By what means a technology-based time and attendance system may be used by tipped employees to report tips. This includes tips in cash and other forms of tipping made through electronic payments methods (other than a credit card), regardless of whether the tips are received directly from customers or through tip sharing arrangements.
How tip sharing practices vary across service industries and how the SITCA program can support employer participation while accommodating potential differences in Federal, state, and local labor and employment law requirements.
By what methods employers of large food or beverage establishments participating in the SITCA program may meet their filing and reporting obligations under section 6053(c) and also satisfy the SITCA program requirements for compliance, while minimizing the administrative burdens on taxpayers and the IRS.

Those interested in providing such feedback have until May 7, 2023 to do so. The IRS has set up two ways to provide comments on Notice 2023-13:

Mail: CC:PA:LPD:PR (Notice 2023-13), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044; or
Electronic: Visit the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and Notice 2023-13) and follow the instructions for comment submission.

Personally, I have more questions than comments. Bear in mind, the IRS will stop accepting comments, feedback, and questions on May 7, 2023.

Image: Jon Tyson on Unsplash