Green River Distilling Co. employee Coleman Savage looks over the 300,000th barrel of bourbon filled at the distillery inside the new-fill warehouse at the plant on April 20, 2021, in Owensboro, Kentucky. (Greg Eans/The Messenger-Inquirer via AP, File)

On Monday, the Kentucky House of Representatives passed House Bill No. 5, which seeks to phase out the tax on stored spirits, commonly referred to as the “bourbon barrel tax,” by 2039.

According to the Lexington Herald-Leader, the bill was heavily opposed by many legislators from bourbon-producing counties, who consider the tax to be something of a “lifeline” for their counties. Among the bill’s detractors was Nelson County Sheriff Ramon Pineiroa. Nelson County is home to Bardstown, which is often referred to as the “bourbon capital of the world.”

Nelson County was projected to lose about $6.3 million total per year in tax revenue per the first draft of the bill, according to the Herald-Leader.

Proponents of the bill included House A&R Chair Jason Petrie and House Speaker David Osborne. Osborne said the tax will disincentivize bourbon companies from leaving Kentucky and encourage more start-up businesses in Kentucky, since Kentucky is the only state with such a tax on stored spirits.

“It’s an anti-competitive tax with serious long-term ramifications. No question: Kentucky remains and continues to be the dominant player in bourbon production. It would be short sighted, however, to base policy decisions on that fact when there are clear and visible threats to our position,” Andrew McNeil, former deputy state budget director and policy fellow at the Bluegrass Institute for Public Policy Solutions, said, according to the Herald-Leader. “Other states are gunning for Kentucky.”

While certain counties may not be happy with the passage of this bill for financial reasons, it’s unquestionably a positive for the bourbon industry.

“The Kentucky Distillers’ Association thanks and applauds the Kentucky House of Representatives for passage of the common-sense compromise to House Bill 5, a long-term phase out of Kentucky’s discriminatory barrel tax on Bourbon that no distiller pays anywhere else in the world,” The Kentucky Distillers’ Association said in a statement Monday. “We appreciate the leadership of A&R Chairman Jason Petrie and House Speaker David Osborne who put forth this compromise which addresses funding issues with schools, local fire and emergency services, and barrels under industrial revenue bond contracts.

“Distillers will continue to pay the punitive tax over the next 17 years, giving local communities a significant influx of revenue and ample time to diversify their budgets and plan for the future without having to depend on the success of a single industry.”

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