[Congressional Record Volume 161, Number 66 (Monday, May 4, 2015)]
[Senate]
[Pages S2600-S2601]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself and Mr. Paul):
  S. 1179. A bill to exempt the aging process of distilled spirits from 
the production period for purposes of capitalization of interest costs; 
to the Committee on Finance.
  Mr. McCONNELL. Mr. President, this past Saturday, May 2, saw the 
running of the 141st Kentucky Derby, the most exciting 2 minutes in 
sports. Derby day is a cause for celebration across the State and derby 
celebrations often feature Kentucky's native spirit of bourbon. Bourbon 
is a key ingredient in the legendary Mint Julep, the official drink of 
the derby. Fittingly, today marks the 51st anniversary of the original 
congressional bourbon resolution that designated bourbon as a 
distinctive product of America.
  Kentucky is the birthplace of bourbon. The drink is named for Bourbon 
County, KY, where the product first emerged, and today Kentucky 
produces 95 percent of the world's supply. The bourbon industry 
generates 15,400 jobs with an annual payroll of $707 million statewide. 
It is a $3 billion industry in Kentucky and a vital part of the State's 
tourism and economy. Simply put, the bourbon industry is a signature 
industry for the Commonwealth of Kentucky.
  That is why the legislation I introduce today is so important. I rise 
to introduce the Advancing Growth in the Economy through Distilled 
Spirits Act, or the AGED Spirits Act. Cosponsored by my friend Senator 
Rand Paul, it will correct a provision in the tax code to ensure that 
Kentucky's bourbon producers are no longer at a disadvantage with their 
global competitors.
  Under current law, unlike most other spirits, bourbon, and whiskey 
producers in America must capitalize the interest expense incurred to 
finance inventories, and it is not deductible until the product is 
sold, which could be as long as 23 years after a lengthy aging process.
  In the United Kingdom, however, all spirit producers are permitted to 
deduct interest expense the year it is capitalized. This discrepancy is 
harmful to American makers of distilled spirits as it contributes to 
increased costs that directly create a competitive disadvantage for 
American products in the global marketplace.
  My bill would fix this discrepancy by permitting American bourbon and 
whiskey producers to deduct interest

[[Page S2601]]

expense associated with production in the year it is paid by exempting 
the natural aging process in the determination of the production period 
for distilled spirits. This legislation will not only put Kentucky's 
bourbon industry on a level playing field with its global competitors, 
it is also a pro-growth measure that will help provide a boost to our 
economy and help create jobs in Kentucky.
  Making this change in law is a matter of common sense. The situation 
under current law, where American bourbon and whiskey producers are not 
allowed to deduct the expenses related to storing and aging their 
product until it is bottled and sold, is akin to a homeowner not being 
able to deduct the interest on a home mortgage until the sale of the 
house.
  Over the last several years, high-end premium American bourbons and 
whiskeys have enjoyed significant growth in volume both here in the 
U.S. and in international markets. Bourbon production has increased 
more than 150 percent since 1999. Given equitable tax treatment, 
American bourbon and whiskey products, as well as related jobs, could 
grow even more. Finally, this problem reveals just one of the many 
flaws in our Nation's broken tax code, which ultimately needs to be 
comprehensively reformed to promote even greater job creation and 
economic growth in our country.
  So I hope my colleagues will join me in advancing growth in 
Kentucky's and America's economy by leveling the tax playing field for 
America's distilled spirits. Fifty-one years after its official 
recognition, bourbon is responsibly enjoyed by adults all over the 
world, and not just on Derby Day. The industry has grown and thrived, 
and I am sure it will continue to do so. I want to thank and 
congratulate all the hard-working Kentuckians who have contributed to 
building our State's vibrant bourbon industry.
  I urge my colleagues to support the AGED Spirits Act, and I look 
forward to its swift passage.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1179

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Advancing Growth in the 
     Economy through Distilled Spirits Act'' or the ``AGED Spirits 
     Act''.

     SEC. 2. PRODUCTION PERIOD OF DISTILLED SPIRITS.

       (a) In General.--Section 263A(f) of the Internal Revenue 
     Code of 1986 is amended--
       (1) by redesignating paragraph (4) as paragraph (5), and
       (2) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Exemption for aging process of distilled spirits.--
     For purposes of this subsection, the production period shall 
     not include the aging period for distilled spirits (as 
     described in section 5002(a)(8)).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to the production of distilled spirits that 
     begins on or after the date of the enactment of this Act.
                                 ______