Laura D. Francis (Bloomberg Law): Home Distilling Limits in Tax Code Struck Down by Appeals Court

The US Tax Code’s Reconstruction-era ban on home distilling is unconstitutional and can’t be enforced, a federal appeals court ruled Friday.

Siding with Texas-based “certified bourbon steward” Rick Morris and other members of his Hobby Distillers Association, the US Court of Appeals for the Fifth Circuit said the ban goes beyond Congress’ taxation powers and isn’t “necessary and proper” to carrying out that function.

The purpose of taxation is to collect money and to generate revenue to fund government operations and is limited to those functions, Judge Edith H. Jones wrote for the court. Sections 5601(a)(6) and 5178(a) of the Tax Code don’t comport with those limits, she said.

“Primarily, neither provision raises revenue. Not only do they prohibit at-home distilleries, but in so doing, they amount to an anti-revenue provision that prevents distilled spirits from coming into existence,” the court said. “The provisions operate to reduce revenue instead of raising it.”

The decision overturns a 158-year-old restriction on distilling homes, sheds, yards, boats, and enclosures connected to houses, as well as premises where beer and wine are produced, where liquors are retailed, and where most other businesses are carried on. The Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau is tasked with enforcement through fines.

The fate of the home distilling ban is also before the Sixth Circuit, which heard oral arguments in December in a case brought by a would-be home distiller in Ohio.

These developments will surely be celebrated on Rocky Top!