For the first time in the modern era of American whiskey, Kentucky has 10 million barrels of Bourbon aging in distillery warehouses across the Commonwealth, the Kentucky Distillers’ Association said.
Kentucky’s distilling industry also set new production records for the number of Bourbon barrels filled in a single year – nearly 2.5 million – and for the total number of all aging barrels including other spirits such as brandy, at nearly 11 million. These numbers are for calendar year 2020.
“Kentucky’s signature Bourbon industry continues to invest in our Commonwealth at unprecedented levels, despite global pandemic disruptions, exorbitant taxes and ongoing trade wars,” said Eric Gregory, President of the Kentucky Distillers’ Association. “This is truly a historic and landmark record.”
But that milestone comes with a cost, Gregory said. Distillers will pay a record $33 million in aging barrel taxes in 2021. Kentucky remains the only place in the world that taxes aging barrels of spirits as part of the production process, a discriminatory tax that hampers growth and jeopardizes the state’s ability to attract new distillers.
Barrel taxes have catapulted 140% in the last 10 years alone, Gregory said.
“The Bourbon industry is investing more than $5 billion in this state to increase production, build innovative tourism centers and create thousands of new jobs,” he said. “But punitive barrel taxes are punishing this growth and harming our chances to land new distilleries.
“It’s time for the legislature to take action and make barrel taxes refundable or transferable, which will further incentivize distilling investment in the Commonwealth. Kentucky should not have a tax structure that penalizes growth and investment on any manufacturer.”
Even though the Kentucky legislature passed a corporate income tax credit in 2014 to offset barrel taxes, the escalating number of barrels – and therefore taxes – far outpaces the amount of credit that distillers can take, Gregory said. Some distillers now only realize 30% of the credit.
The new production numbers are based on inventories reported as of Jan. 1, 2021, submitted to the Kentucky Department of Revenue for tax purposes and includes all distilling companies in Kentucky, the vast majority of which are KDA member distilleries.