Governor signs bill phasing out bourbon barrel tax

UPDATED: House Bill 5, sponsored by House Appropriations and Revenue Committee Chair Jason Petrie, would gradually phase out the tax distilleries pay on aging bourbon barrels.

The bourbon barrel tax is levied on every barrel for every year it ages. No other manufacturer in Kentucky pays a state and local tax on its good during production.

In 2022, distilleries were taxed more than $33 million on their barrels.

During a meeting of the Senate Appropriations and Revenue Committee on Thursday morning, changes were made to the bill in a committee substitute. The changes help make school districts and local governments whole in the transition by shifting the liability from the state to the bourbon industry, gives distillers a choice on how to move forward with the transition, and more.

The bourbon barrel tax would be phased out between 2026-2043.

The legislation was also amended in the committee with some language to make slight changes to House Bill 360, the revenue bill passed earlier this session that made some changes to the tax code including language to clarify intent of the pass through entity tax changes from the legislation.

The amended version of House Bill 5 passed through committee before passing in the Senate 23-14. It then received a concurrence vote on the House floor of 60-39.

The governor signed the bill into law Friday morning.