Bourbon is a signature industry that fuels economic development and tourism in the state of Kentucky. As one of the state’s top global exports, this legendary $9 billion industry sustains more than 23,100 jobs for Kentuckians with more than $1.63 billion in annual payroll. Kentucky distillers are in the middle of a 10-year, $5.4 billion building boom to expand production and create memorable Kentucky Bourbon Trail® tourism experiences for millions of guests from around the world.
For more than a decade, the Kentucky Distillers’ Association – KDA has led the way in working with members of the General Assembly to grow and enhance the states signature distilling industry with the goal of keeping Kentucky the one, true, authentic home of America’s only native spirit.
The KDA is committed to maintaining Bourbon’s role as a signature industry in Kentucky. To ensure Kentucky maintains its distilling dominance, KDA worked closely with the General Assembly to modernize archaic Prohibition-era laws.
From adding privileges essential to distilleries building world-class tourism experiences, to sunsetting repressive taxes, supporting workforce training, and promoting responsibility measures, the KDA and the General Assembly have made great strides for Kentucky.
The KDA plans on continuing to work together to create policies and quickly respond to consumer demands in the new, global marketplace and economy.
Below is a detailed timeline of some of the key steps Kentucky’s General Assembly has taken to modernize, grow and protect the states signature Bourbon industry over the last 10 years.
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Bourbon — It's More Than a Drink.
Kentucky Bourbon’s $9 Billion Economic Impact
The Kentucky Distillers’ Association – KDA has been the leading voice to promote, protect and elevate Kentucky’s signature bourbon and distilled spirits industry for nearly a century and a half. Since its founding in 1880 the non-profit organization has been working with local, state, and federal governments to keep the amber spirit flowing. And this week was no different as distillers and lawmakers joined together at the State Capital in Frankfort to share and celebrate the findings of the 2024 edition of the biennial ‘Bourbon Economic Impact Report’.
Watch the Entire ‘Bourbon Economic Impact Report’ Presentation
The Kentucky Distillers' Association shares the highlights of the 2024 report. “You may have heard me say before, ‘We make the whiskey but it’s the leadership in this room that put us on the map.’” said KDA President Eric Gregory. Kentucky Gov. Andy Beshear replied, “I thought Eric was going to say, ‘We make the whiskey and the leaders in this room consume it.”
Record $6.7 Billion Barrel Valuation
The number of newly filled barrels of Bourbon in Kentucky continued a steady growth of 3% last year. More bourbon means more taxes for the only state in the nation to charge for aging spirits. Distillers are now paying four times as much in barrel taxes than they have aging barrels. But, thanks to the recently approved House Bill 5 that tax will slowly be eliminated over the next 20 years.
House Bill 5: Barrel Tax Phase-Out
This bill phases out Kentucky’s discriminatory barrel tax between 2026 and 2043. As the only U.S. state – and location globally – that taxes aging barrels of spirits, Kentucky’s HB 5 removes a century-long bottleneck in the Commonwealth’s ability to attract new distilling jobs, expansions and startups. Compromises by distillers ensure funding for school, fire and EMS districts will remain whole. As well, HB 5 exempts from the phase out any barrel warehouse in an industrial revenue bond contract. As no other industry pays taxes on goods still in production, HB 5 finally brings distillers parity, treating them like all other Kentucky manufacturers. The legislation builds on the Bourbon Barrel Tax Credit, passed in 2014 via HB 445. (Rep. Jason Petrie, Speaker David Osborne)
Bourbon Maker's Moved Barrels Out of State in the 60s
Could Kentucky Bourbon Makers Move Their Barrels to Another State to Avoid Taxes? Yes, And it’s Been Done Before. “The definition of insanity is doing the same thing over and over and expecting different results.” Though there is no evidence that Einstein ever uttered such words the line is not too far from reality when it comes to taxes on Kentucky Bourbon and where those barrels are left to mature.
Kentucky Bourbon Trail Visitors Exceed 2+ Million Visitors
We are happy to report that visitor numbers to the Kentucky Bourbon Trail and Kentucky Bourbon Trail Craft Tour reached 2,135,555 total visits. That was 38% higher than the previous high set in 2019 of 1.7 million visits. The growth to visits on the Kentucky Bourbon Trail has grown a phenomenal 370% in just the last 10 years.
House Bill 500: Private Barrel Selections, Exclusive Bottles, Satellite Tasting Rooms and Fair & Festival Sales
The bill provides statutory authorization and guidelines for private barrel selection events and allows each distillery that sells souvenir bottles and provides free samples to establish one satellite tasting room each. HB 500 also lets distillers create exclusive bottles, which can be sold only in-person in their gift shops and tasting rooms. The bill also allows distilleries to sell at fairs, festivals and farmer’s markets. These privileges will drive community development, create jobs and attract new and repeat visitors.
(Rep. Chad McCoy)
Kentucky Bourbon Trail Attendance Rebounds
While distilled spirits sales soared during lockdowns in 2021, visitors to the world-famous Kentucky Bourbon Trail® and Kentucky Bourbon Trail Craft Tour® combined dropped.
On the bright side, despite the Kentucky Bourbon Trail (think large heritage distilleries) overall numbers seeing a slight decline the Craft Tour Trail (think small businesses, craft spirits makers) saw a record year.
House Bill 415: Direct-to-Consumer Shipping
Updates the 2020 National Model Legislation for Direct- to-Consumer Shipping
The bill allows the use of third-party fulfillment centers to efficiently ship bottles; sets a level playing field for state tax collection on distillery gift shop sales; and establishes guidelines for shipping alcohol samples to media, business and marketing partners, among other measures. Kentucky continues to be a national model and helps to lay the groundwork for other states to pass reciprocal laws. (Rep. Adam Koenig)
What is the Napa-fication of Kentucky?
When people hear the name Kentucky they generally think of two things; thoroughbred horses and bourbon. In fact, it’s not uncommon while traveling around the Bluegrass State to see a thoroughbred farm surrounded by a picturesque four board fence while traveling to visit one’s favorite distillery. Horses and bourbon actually have a lot in common in particular limestone water. They say that Kentucky’s unique rolling hills and water aquifers contribute to this ideal water source.
Senate Bill 67: Take-Home Cocktails for Restaurants
This bill makes permanent the popular privilege that allows restaurants to sell take-home cocktails with a prepared meal. This privilege was a lifeline for the restaurant and hospitality industry. (Sen. John Schickel)
Senate Bill 68: Strengthening Distillers’ Workforce Development
This legislation exempts KDA education partners that offer distilling courses and education-based industry research from the 600-gallon minimum standards of production to get a state distiller’s license. (Sen. John Schickel)
Senate Bill 5: Business Legal Liability Relief
This legislation provides liability protection for business owners and others during a time of declared emergency. This legislation was made necessary because of the COVID-19 Pandemic. The bill will help protect distilleries who produced much needed hand sanitizer and other businesses from being sued on issues related to the pandemic while they put forth their best efforts to comply with regulations. (Sen. President Robert Stivers)
House Bill 415: Direct to Consumer – DTC Shipping
Kentucky’s passage of in-person shipping from distilleries in 2018 sparked a national conversation on the growing direct-to-consumer movement among consumers and regulators. It quickly became clear that Kentucky needed to reform its laws to keep up with increasing consumer demand for our signature spirits as well as the shipment of wine into Kentucky. HB 415 removed the in-person provision and allowed all alcohol manufacturers in Kentucky to ship its products “direct-to-consumer” and set up the necessary regulatory, licensing and taxing structure. Kentucky’s spirits shipping law is now a model for other states to adopt. (Rep. Chad McCoy)
House Bill 351: Tax Exemption Fix for Purchasing New Distilling Equipment & Fully Funding the Ignition Interlock Program
The state Department of Revenue began auditing craft beer producers and disqualifying them from claiming the sales tax exemption on the purchase of new manufacturing equipment because they have a retail presence in their manufacturing footprint. This legislation clarified in the tax law that all alcohol producers are eligible for this sales tax exemption. HB 351 also fully funded the revamped Ignition Interlock program that was established in 2019. The program is paid for by violators through an increased DUI service fee. (Rep. Steven Rudy)
Senate Bill 99: More Regulatory Reforms
As Kentucky’s Bourbon industry thrives as a leader in manufacturing and tourism, state laws struggle to keep up. SB 99 tackled a variety of alcohol regulatory reforms, including three provisions for the Bourbon industry.
The first sets minimum standards of production for distilleries, requiring them to produce a minimum of 600 gallons a year to maintain a distilling license and associated tourism privileges. The second item allows distillery gift shops to sell collaborative beer endeavors between breweries and distilleries. Lastly, SB 99 allows for local option precinct elections in dry territories for distilleries to be able to offer sales and samples there. (Sen. John Schickel)
Senate Bill 150: COVID Assistance
When COVID19 caused hand sanitizer shortages, distilleries immediately shifted production to create and donate hundreds of thousands of gallons of hand sanitizer for health care workers, first responders and other key businesses. SB 150 contained legal liability protections for distillers and others who manufacture personal protective equipment during the state of emergency. The legislation also contained a provision allowing bars and restaurants to sell alcohol “to go” in conjunction with food orders, a job-saving change. (Conference Committee Report)
Senate Bill 85: Ignition Interlocks Reform
The KDA takes seriously its work to ensure Kentucky Bourbon is consumed responsibly. The landmark ignition interlock legislation passed in 2015 had encountered logistical challenges to create a successful interlock program for DUI offenders. Recognizing the challenges, the KDA convened a workgroup of stakeholders and spent months developing draft legislation so the interlock program could be used more effectively. SB 85 was the result of a partnership between the KDA, Mothers Against Drunk Driving and many other groups to strengthen and improve ignition interlock laws for DUI offenders. (Sen. Whitney Westerfield)
House Bill 400: Distillery Visitor Center Shipping
The No. 1 request from Kentucky Bourbon Trail® visitors has been the ability to purchase bottles in a distillery gift shop and ship them back home. HB 400 allowed in-person visitors to Kentucky distilleries to ship spirits home if the destination state allowed reciprocal shipping. This legislation positioned Kentucky as a national model for other states to allow for spirits shipping, much like the 45+ states that allow wine shipments. (Rep. Chad McCoy)
House Bill 100: Vintage & Antique Spirits, Kentucky Whiskey Protections
With the skyrocketing rise in premium single barrel and small batch Bourbons, Kentucky was missing out on a popular growing movement - the sale of “vintage” or “antique” spirits produced decades ago, and some even produced before Prohibition. These rare bottles are highly sought after by Bourbon enthusiasts, restaurants and bars around the world so consumers can actually sample a historic taste of vintage whiskeys. HB 100 allowed consumers to sell these unopened dusty or limited-edition bottles to licensed retailers for resale to the public. Kentucky is now hailed as a worldwide leader in this growing market as many bars and liquor stores have created world-class whiskey libraries and offer vintage spirits to visitors making the pilgrimage to the Birthplace of Bourbon. This legislation also protected the sacred name of Kentucky Bourbon by requiring whiskey to be distilled and fermented inside the Commonwealth and aged for at least a year in order to put the state name on the label. (Rep. Chad McCoy)
Craft Beverage Modernization & Tax Reform
The Largest Distilled Spirits Victory in Modern History - With the stroke of a pen, its official, for the first time since the Civil War the Federal Excise Tax (FET) on distilled spirits has been reduced. In a signing ceremony today at the White House, President Trump signed into law the major tax reform bill called the Tax Cuts and Jobs Act. The legislation contains the tax related provisions of the Craft Beverage Modernization & Tax Reform, which includes a reduction in the Federal Excise Tax for craft distillers. The rate will drop from $13.50 to $2.70 for the first 100,000 proof gallons.
Senate Bill 11: Bourbon Tourism Reforms
The world-famous Kentucky Bourbon Trail® experiences are among the state’s most popular tourism attractions, with affluent demographics that are literally changing the face of visitors to Kentucky and pouring much-needed revenue into local communities. However, Kentucky’s archaic alcohol laws hindered the ability of distilleries to offer an authentic hospitality experience and meet growing consumer demand. SB 11 boldly modernized the KBT® experience by allowing distilleries to offer more free samples, operate restaurants, serve cocktails by the drink, increase gift shop bottle sales, and allowing distilleries to give free novelty items or production byproducts in gift shops or to charity auctions. (Sen. John Schickel)
House Bill 445: Bourbon Barrel Tax Credit
Kentucky was the only place in the world that taxes aging barrels of spirits each and every year. This discriminatory barrel tax puts Kentucky at a competitive disadvantage as we compete with other states and countries to attract distilleries, jobs and vital economic investment. After years of educating legislators on how this barrel tax harms our key manufacturing industry and its future, the General Assembly allowed distilleries to take a corporate income tax credit against the amount of barrel taxes paid, and reinvest those savings back into distillery operations. However, this credit worked too well as barrel inventories have reached record highs in the last five years. Therefore, distilleries can’t fully monetize those credits, which restricts growth and investment. The KDA is now asking the legislature to make this credit refundable so the entire amount can be used to create more jobs and investment in the Commonwealth. (Sen. President Robert Stivers & Rep. Rick Rand)
Senate Bill 83: Modernizing Alcohol Laws and License Types
Recognizing the need to update Kentucky’s alcohol laws, legislators and the Department of Alcoholic Beverage Control worked together to streamline the types of alcohol licenses and simplify rules and regulations. As part of this effort, the legislature created a Craft Distillers License with a lower fee to help these small, startup businesses succeed. (Sen. John Schickel)
House Bill 475: Alcohol in State Parks
For decades, Kentucky’s acclaimed system of state parks struggled to attract out-of-state visitors due to the lack of modern hospitality amenities including alcohol sales, especially at golf courses. HB 475 allowed residents to choose whether to allow the sale of alcohol at their state park in a local option precinct election. (Rep. Larry Clark)
Senate Bill 13: Election Day Sales
Removed the prohibition of alcohol sales on election day and allowed local governments to regulate those sales by ordinance. This pre-Prohibition policy was enacted when saloons and bars were used as polling places and alcohol was given to sway votes. Almost 100 years later, it was time to join other states in removing this outdated restriction to reflect the modern marketplace. (Sen. John Schickel)
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