As whiskey and bourbon business booms, beloved distillers face rollback in taxes and emissions

MULBERRY, Tenn. (AP) — For decades, Tennessee and Kentucky whiskey and bourbon makers have been beloved in their communities. The distilleries where the liquor is made and the barrels where it is aged have complemented the rural character of their neighborhoods, while providing jobs and the pride of a thriving local industry.

Today, the growing popularity of the industry around the world is fueling conflict at home.

In Kentucky, where 95% of the world’s bourbon is made, counties are revolting after the legislature voted to phase out a barrel tax they depended on to fund schools, roads and public services. Local officials who donated land and spent millions on infrastructure to help bourbon makers now say those investments may never be recouped.

Neighbors in both states fought against the expansion of the industry, even going so far as to sue the distillers. Complaints include a destructive black “whisky mushroom,” the loss of prime farmland, and alcohol-themed tourism developments that are more Disneyland than visiting a distillery.

The love story, it seems, is over.

“We were their biggest defenders and they threw us under the bus,” said Jerry Summers, a former Jim Beam executive and Bullitt County Executive Judge, essentially the county’s mayor.

Bullitt County has long relied on an annual barrel tax on aging whiskey, which brought in $3.8 million in 2021, Summers said. The majority goes to schools, but the money is also used for services that support the county’s Jim Beam and Four Roses factories, including a full-time fire department.

Many of the new barrels are built with industrial tax bonds exempting them from property taxes for years or decades. Counties supported property tax relief because they expected to continue collecting the barrel tax. When the state legislature voted to phase it out earlier this year, after intense lobbying by the Kentucky Distillers’ Association, county officials felt betrayed.

“Our industry has always been a handshake deal,” Summers said. Now those agreements are broken.

Once the barrel tax expires in 2043, distillers will no longer pay any tax to Bullitt on certain warehouses. The county will still have to provide services to them, protect them and the surrounding community from them if something goes wrong, Summers said.

“When you have an alcohol-based plant that produces a hazardous material, you need emergency management, an EMS, a sheriff’s department,” he said.

Democratic Gov. Andy Beshear, who signed the bill after it passed the Republican-controlled Kentucky Legislature, said several industry trade-offs were key to its support, while the bill will encourage investment. .

“I know it was tough. You had an industry that supports so many jobs and calls Kentucky home. At the same time, you have communities that helped build that industry. I know there are, right now, probably difficult feelings,” Beshear said at a press conference.

Kentucky Distillers’ Association President Eric Gregory noted that the compromise bill creates a new excise tax to help fund school districts. Another tax helps fire and emergency management services, although it does not apply in all counties.

“Even with this relief, distilling remains the highest-taxed industry in Kentucky, paying $286 million in taxes each year,” Gregory said in an email.

As tax changes take place, whiskey is booming.

As a former Beam executive, Summers recalls a time when whiskey was a cheap, “low-end” drink. With small product batches, the liquor cools slowly. Revenue from American whiskey since 2003 has almost quadrupled, reaching $5.1 billion last year, according to the Distilled Spirits Council of the United States. During the same period, the super premium segment grew more than 20 times to reach $1.3 billion.

Today, many of the most recognized brands are part of international beverage conglomerates. Jim Beam belongs to the Japanese company Beam Suntory. Britain’s Diageo owns Bulleit. The Italian group Campari owns Wild Turkey.

In pushing for an end to the tax, the group of distillers suggested the industry could leave Kentucky. Officials like Summers call it a bluff. He said Bullitt County doesn’t want new barrels unless things change, and he’s not alone.

Nelson County, home to Heaven Hill, Log Still and other Kentucky communities involved in the industry, recently approved a moratorium on the construction of a new bourbon warehouse while the county updates safety rules. zoning and authorization. Soon, any new projects will have to seek citizen input and zoning board approval, said Executive Judge Timothy Hutchins.

“It caught their attention, let’s put it this way,” Hutchins said. “Now we are trying to kiss and reconcile.”

The county receives about $8.6 million a year from the barrel tax, he said.

In Lincoln County, Tennessee, Jack Daniel’s recently received a stop work order after neighbors filed a lawsuit over a huge unauthorized expansion. Since 2018, the company has built six 86,000-square-foot (7,989-square-meter) warehouses holding 66,000 barrels each on a 120-acre (48-hectare) property, according to the lawsuit.

Jack Daniel’s has since retroactively received the proper approvals, but neighbors say their biggest complaint hasn’t been addressed: a black fungus that feeds on the ethanol emitted as the whiskey ages.

The “whisky fungus” has been a nuisance around liquor facilities for centuries, but the size and scope of new barrel complexes means that much more ethanol is released in a concentrated area. The fungus coats nearby homes and cars in a black film of soot, smothering trees and shrubs.

When Pam Butler moved to Lincoln County 30 years ago, there were only two barrels nearby and she had “no problem”.

“I had a white car and it stayed white. I had a white horse trailer and it stayed white. Then, about five years ago, everything started looking dirty,” Butler said.

Butler owns a small farm where she keeps horses next to Jack Daniel’s estate. She said her pastures were not thriving as they should, many of her trees were dying and she had developed asthma. She doesn’t know if her illness is related to the fungus, but said she only started having symptoms in recent years.

Butler and several other neighbors want Jack Daniel’s to capture its ethanol emissions instead of releasing them into the neighborhood. The company wouldn’t comment on the mushroom, but spokesperson Svend Jansen provided a statement saying it “will continue to work hard to be a good partner for everyone in our community.”

“We recognize that there have been, at times, a small number of people who dislike or dislike the growth of Tennessee Whiskey production in the regions where we operate,” the statement read.

Back in Kentucky, famed author and farmer Wendell Berry has another concern: local food security and the destruction of prime farmland.

“I worked for 30 years to develop a regional food economy for Louisville,” Berry said.

“Cities like Louisville and Nashville are surrounded by fertile, well-watered land,” but they import much of their food from California’s Central Valley, he said. “I’ve spent my life arguing that this land is going to be needed for people who want something to eat.”

Berry recently lost a fight with distiller Angel’s Envy in Louisville over the development of a 1,200-acre (485-hectare) property adjacent to the farm where he grew up. Henry County approved company plans for a bourbon resort there, complete with cabins, an amphitheater and a helipad.

Angel’s Envy declined to comment.

Fred Minnick, who has written books on bourbon and judges world whiskey competitions, said it’s an interesting time for the industry because bourbon has never been more popular.

“Bourbon was the right guy. Bourbon was loved by the state,” he said of Kentucky. “It will be fascinating to see if the bourbon remains a hero.”

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