Castle & Key Distillery - Warehouse B

The number of distilled spirits barrels aging in the state of Kentucky has reached its highest level in nearly half a century. The total number including bourbon, brandy and other spirits reached 8.1 million barrels, the most since 1971. The tax assessed value of those barrels also hit a record high of $3 billion, as did the amount of barrel taxes paid by distillers at $23 million.

Zeroing in on the bourbon side of the barrels, the state’s bourbon inventory has reached 7.5 million barrels, the most since 1972. According to Eric Gregory, President of the Kentucky Distillers’ Association, “With 4.4 million people living in Kentucky…the iconic industry is close to having two barrels of spirits for every man, woman and child in the state.”

Maker's Mark Distillery - Maker's Mark Cellar, Holds up to 2,000 Barrels
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The barrel count includes all distilleries in Kentucky as compiled from state Department of Revenue data as of Jan. 1, 2018. Other key facts form the annual barrel report include the following statistics.

  • Production in 2017 was 1,715,541 barrels. That’s only the second time since 1968 that distillers filled at least 1.7 million barrels, and it’s an increase of 129,000 barrels produced in 2016.
  • The tax-assessed value of $3 billion is the first time ever that barrels have reached that mark, and it’s an increase of $456 million over the previous year.
  • Barrel taxes had never reached the $20 million mark before, let alone $23 million. Revenue from this tax funds education, public safety and other needs in local communities where barrels are stored.

Kentucky’s Bourbon industry remains the highest-taxed of all 536 manufacturing industries in the state with seven different taxes accounting for 60 percent of every bottle. Kentucky also is the only place in the world that taxes aging barrels of spirits.

In 2014 the Kentucky’s legislature passed House Bill 445, known as The Bourbon Barrel Reinvestment Credit. That bill took effect beginning in 2015 and allowed distilleries to gain an income tax credit for the state and local property taxes paid on aging barrels of bourbon.

The distilled spirits income tax credit is being phased in at a rate of 20 percent annually over five years. The entire credit will be available beginning in 2019. In 2013, the barrel tax generated approximately $14 million in state and local property taxes.

Gregory said the credit is working as intended with distilleries reinvesting the tax credit in capital improvements, including construction, renovation, tourism related facilities, equipment and milestone barrel inventories. As a result Kentucky’s distilled spirits industry is in the middle of a $1.2 billion building boom, from innovative new tourism centers to expanded production facilities, all to meet the growing global thirst for Kentucky Bourbon.

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