The drinks industry is both celebrating and bemoaning H.R.1, the sweeping set of measures signed into law by President Donald Trump on July 4, after passage in the Republican-led Congress. Officially dubbed the One Big Beautiful Bill Act (OBBB), the package extends and expands credits from the Tax Cuts and Jobs Act of 2017, passed during Trump’s first term; cuts Medicaid, food benefits, and student loans; increases funds for immigration enforcement; rescinds many of former President Joe Biden’s green tax initiatives; addresses some needs from the stalled Farm Bill; and much more. It’s estimated to cost the United States $3.4 trillion over the next 10 years.
The OBBB is so sprawling that, for beverage professionals, it is a mixed bag. Economic gains in the form of tax breaks are offset by environmental setbacks and much-increased funding for the Trump administration’s crackdown on immigration, which impacts the agriculture and hospitality communities.
SevenFifty Daily spoke with industry advocates and consultants about the bill’s relevant sections and their projected impact on distributors, producers, and workers.
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The Pass-Through Business Tax Deduction
The biggest win in the bill, say some industry insiders, is the extension of Section 199A, the 20 percent discount for pass-through entities—businesses that, rather than filing corporate income tax, handle profits, losses, deductions, and credits on the owners’ personal returns. Encompassing LLCs, S corporations, sole proprietorships, and partnerships, pass-throughs make up 95 percent of U.S. businesses, including the bulk of the drinks industry.
“In the original tax reform in 2017, they reduced tax rates for corporations, so they had to do the same for pass-through businesses,” explains Guy W. Carl, a certified public accountant at Brotemarkle, Davis, and Company, a Napa-based accounting firm that works with many wineries. “It’s an extra deduction to get your tax rate down to something comparable to what a corporation would be paying.”
The section was set to expire in 2025, so advocates like Michael Bilello, the executive vice president of strategic communications and marketing for the Wine and Spirits Wholesalers of America (WSWA), urgently lobbied for its inclusion in H.R.1. “Our members range from small, community-based distributors to large, multistate operations, but the common thread is that most are closely held companies that have been passed down for generations. These are Main Street businesses that have deep roots in their communities, often employing local workers and supporting regional economies,” says Bilello. “This deduction helps ensure they’re taxed at a rate that allows them to reinvest in their operations, expand distribution networks, support jobs in their communities, and remain competitive.”
The OBBB made Section 199A permanent, allowing pass-through owners to deduct 20 percent of their business income on their personal returns going forward. It also expands the eligibility threshold so that higher-earning owners can take advantage of it and establishes a minimum deduction, so that start-up wineries and breweries with few profits can take at least $400 off their returns.
Estate Taxes, R&D Expenditures, and Tips
Some drinks advocates also applaud the extension and expansion of the estate tax exemption, which had been scheduled to sunset in January 2026. Again, the exemption threshold was increased by $1 million to $15 million, and made permanent. “So if you own a winery or vineyard under that threshold, you will avoid that tax, so that’s a net positive,” explains Michael Kaiser, the executive vice president and director of government affairs for WineAmerica, a Washington, D.C.-based lobby group with 400 member wineries, growers, and suppliers. The change, says Bilello, “helps protect our legacy businesses from being unfairly burdened or broken up due to tax liability when ownership is transferred. That means families can focus on building their businesses.” And, for accountants like Carl, “it added some stability” to estate tax law, with specific language that “lets everyone know what the rules are, so they don’t have to guess and hope.”
But Carl was even more interested in research and development costs, or what the bill calls research and experimentation (R&E) expenditures. As part of last-minute negotiations in 2017 to balance the budget for the eight years that many of the measures in the Tax Cuts and Jobs Act would be in effect, Congress mandated that businesses must spread R&E deductions across five years of returns. “Because it’s an undue burden on manufacturing, they made a delayed effective date to 2022 and gave themselves five years to fix it,” explains Carl. “But Congress was too dysfunctional and couldn’t agree, so businesses had to do it for 2022 and 2023.” Since they couldn’t deduct all of their R&E expenses for that particular year, one winery Carl works with ended up paying $1.5 million in taxes on $10 million in revenue in 2022. “It was an extreme hit to a lot of wineries.”
Retroactive to 2024, the OBBB allows businesses to depreciate all their R&E expenditures within a single fiscal year. It also allows businesses under $31 million in gross receipts per year to amend their 2022 and 2023 tax returns to do the same. Marc Sorini, the vice president of government affairs for the Brewers Association, sees this as a win for the craft beer producers the organization represents. “Craft brewers are innovators, and the ability to immediately depreciate R&E expenses will encourage innovation and investment,” he says
Sorini also touts the inclusion of the ‘No Tax on Tips’ clause in the OBBB. “Although we did not actively lobby for it, we see the provision providing tax relief for many brewery employees working on the retail side of the business,” he says. The clause allows workers earning less than $150,000 to deduct up to $25,000 of cash tips from their annual federal income tax returns until 2028. It sunsets after that, and it is unclear, at this point, whether credit card and app-based tips are also included. Congress left this detail, as well as the list of qualified professions, up to the Internal Revenue Service and the Treasury Secretary. It’s almost certain that hospitality workers are covered, however.
The bigger problem with the clause, say critics, is its cap on deductions in a context where Medicaid, SNAP, and other benefits are being slashed, something which New York Congresswoman Alexandria Ocasio-Cortez, who famously worked as a server and bartender before running, has spoken out about.
Farm Bill Provisions
With the Farm Bill stalled for the past two years, the House and Senate agricultural committees pushed into the OBBB some of the provisions normally included in the omnibus legislation that funds U.S. growers. “Good things are in there that we were waiting on,” says Kaiser. And with some of the pressure off, “this allows for a ‘skinny’ Farm Bill to get passed by the end of the year.”
The OBBB more than doubled the Specialty Crop Research Initiative, allocating $175 million in grants to address pest and disease control, crop breeding, and other needs. It increased funding for the Specialty Crop Block Grant Program to state departments of agriculture to shore up the market competitiveness of these crops. “We can access these funds to work on special initiatives around wine grapes, growing viticulture, and sustainability,” says Charles Jefferson, the vice president of federal and international public policy at the Wine Institute, the main advocacy organization for the California wine industry.
As the Trump administration mounts multiple trade wars, the most important provision in H.R.1, in Jefferson’s opinion, effectively doubles the power of the Market Access Program (MAP) and the Foreign Market Development Program (FMD), two funding streams that the Wine Institute and other entities access to build international markets and grow exports.
“It’s a significant change because funding for those programs have been flat for close to a decade,” says Jefferson. The allocated $469 million “will help fill the gaps in a very challenging international wine trade environment, first and foremost with our most important export market, Canada.” Historically, 35 percent, or $1.1 billion, of California wine exports went to Canada, but the products have been “basically banned from Canadian markets” since Trump unleashed his second term tariffs. With the new funding, Jefferson is optimistic that the Wine Institute can grow its foreign markets again.
Environmental Reversals
When it comes to green energy and the environment, industry insiders are less sanguine. Some changes are welcome. Sorini points to Section 45Q of the tax code, which originally provided a tax credit to companies sequestering CO2. The OBBB added CO2 usage to the credit, an important change for the beer industry, which not only generates CO2 through fermentation but utilizes it for forced carbonation, keg taps, and other purposes. As carbon capture and storage technology advances, more craft breweries might recycle their own CO2. But, for now, says Sorini, “most craft brewers obtain their CO2 from commercial sources that receive that CO2 from industrial operations, like ethanol fuel plants. When Section 45Q was created, it gave rise to a risk for reuse, which would lead to higher CO2 prices and possible shortages.” The tweak to 45Q eliminated that risk.
Other changes are tangible reversals. “A lot of wineries and vineyards are trying to move toward sustainability, and they eliminated a lot of the green energy tax benefits,” says Kaiser. The bill rescinded credits for clean commercial vehicles, low-carbon shipping, low-emissions energy sources, energy-efficient commercial buildings, and other green business expenses.
While Carl applauds a shoring up Section 179 of the tax code, which will restore a 100 percent, first-year deduction for most capital improvements—“If you have the right accounting method, you can actually write off your vineyard when you plant it,” he explains—Sorini bemoans the repeal of Section 179D, designed to incentivize environmentally motivated capital improvements, such as energy-efficient buildings.
“With it gone, the vehicle for the CHEERS Act disappeared,” he explains, referring to the Creating Hospitality Economic Enhancement for Restaurants and Servers (CHEERS) Act, proposed in May to provide targeted tax relief to establishments with draft beer systems, which are more sustainable. “The CHEERS Act would have made draft equipment a very energy-efficient way to deliver beer to consumers, subject to Section 179D.” The section’s rescission was a knock, not only for craft beer’s environmental sustainability but also for its economic sustainability. “Incentivizing draft at retail helps beer generally, as craft brewers over-index on draft.”
“The wine sector has yet to experience the full impact of this bill but we are seeing that the withdrawal of support for green initiatives from the administration means that some wineries are reassessing their priorities.” —Charlotte Hey, IWCA
The green rescissions have climate-smart drinks producers particularly worried. “The wine sector has yet to experience the full impact of this bill but we are seeing that the withdrawal of support for green initiatives from the administration means that some wineries are reassessing their priorities,” says Charlotte Hey, the executive director of the International Wineries for Climate Action (IWCA). In other words, without federal grants and credits for green projects, the industry at large might backslide on climate action. Overseas IWCA members are watching the results of H.R.1 carefully. “Any retrenchment in climate-forward policies is worrisome for the climate-smart wine sector, as it risks slowing collective progress against climate change.”
The green rescissions have also sown what looks like confusion and conflict within the government. A few days after the OBBB’s passage removed many green incentives, Agriculture Secretary Brooke Rollins and Health and Human Services Secretary Robert F. Kennedy Jr., announced that U.S. farming needs to move toward regenerative and biodynamic production. “It seems counterintuitive, which is illustrative of this administration from the beginning,” says Kaiser. “They’re all over the place. One hand doesn’t seem to talk to the other.”
Sweeping Expansion of Immigration Enforcement
For many in the industry the most troubling of all in H.R.1 is the radical expansion of immigration enforcement. The bill allocates $59 billion for Customs and Border Protection, $45 billion for detention, and $31 billion for the Immigration and Customs Enforcement (ICE) Agency, which has already raided vineyards and detained and deported vineyard stewards. The increased funding has made ICE richer than 15 of the world’s militaries. “Harvest is just starting in Texas and will start in other places in a couple weeks to a month,” says Kaiser. “So this is something the industry has to deal with. It’s not necessarily that the labor is undocumented but the fact that they’re almost scared to come to work now because, obviously, ICE has been detaining people who have been here legally.”
At the same time, the OBBB increases the application filing fees for lawful pathways to documentation, including asylum, temporary protected status, and legal residency, says American Immigration Lawyers Association (AILA) member Carmen Naranjo, a Bay Area attorney who has been consulting with wine groups like Napa Valley Vintners on responding to Trump-era immigration enforcement. With broader enforcement and less access to legality, Trump’s OBBB is actually “a blueprint for deportation and fear,” says Naranjo. As AILA executive director Benjamin Johnson noted in a press release, “These exorbitant new fees will force desperate families to choose between food and freedom.”
The bill is so extreme on immigration that Naranjo and Kaiser both see a bright spot in moderate Republicans’ reactions against it. “There are a couple smaller, bipartisan bills that gave us almost positive thoughts about where this issue is settling,” says Kaiser. For example, the Farm Workforce Modernization Act, introduced in five consecutive Congresses, would reform and streamline the H2A visa process, and The Dignity Act, introduced in July after the passage of H.R.1, would give undocumented immigrants who have been in the U.S. since 2021 or earlier a path to legal residency.
Now that the Trump administration has a massive amount of money for enforcement, it might be the time for these reforms to happen, says Kaiser. “I don’t know if that’s naive,” he admits. “Trump goes back and forth. One day he mentions carve-outs for agricultural and hospitality workers, and the next day he says ‘no’ again. With this president, whoever has the last word with him is where he will go on policy.”
If Naranjo has her way, the drinks industry will speak up even more now on behalf of both its owners and its immigrant workforce. After all, with his winery and hotels, “Trump has a base in farming and hospitality, and these industries could put pressure on him to pass something to help people who have been here for a long time,” she says. “He’s not being pressured enough.”
Dispatch
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Betsy Andrews is an award-winning journalist and poet and the co-author of Coastal: 130 Recipes from a California Road Trip. Her writing can be found at betsyandrews.contently.com.
