Nebraska senators advance package of alcohol bills to benefit craft breweries, hard ciders

Craft breweries, cider drinkers and beer aficionados could benefit from alcohol legislation that cleared first-round debate Tuesday in the Nebraska Legislature.

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Senators voted 32-3 to advance a measure that would provide a tax credit for brewers who use Nebraska-grown hops and barley; would redefine hard cider as beer, rather than wine; and would allow more restaurants and bars to sell growlers — refillable large bottles — of craft beers to customers for off-site consumption.

The bill includes liquor initiatives from a handful of senators in what sponsor Sen. Tyson Larson of O'Neill called a perennial update to the Nebraska Liquor Control Act. But this year, the bill is more than housekeeping procedure, said Nebraska Liquor Control Commission Executive Director Hobert Rupe.

"It's a little more interesting," Rupe said.

Redefining cider as beer would allow it to be taxed at a lower rate.

The tax credits for in-state and out-of-state brewers that use Nebraska-grown hops and barley would be for the first 20,000 barrels of beer. If 10 to 40 percent of the barley and hops used were Nebraska-grown, the credit would be 15 percent. Forty to 70 percent Nebraska crops would receive a 25 percent tax credit, and manufacturers using more than 70 percent would receive a 35 percent tax credit.

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Nebraska has 38 breweries with licenses or license requests, but the state had just 12 acres of hops last year, said Shad Rhynalds, former president of the Nebraska Hop Growers Association. Rhynalds grows about an acre of hops with his father and brother near Prague and has worked with Lincoln-based Blue Blood Brewing Company to create locally sourced beers.

At 31 cents per gallon, Nebraska has the highest beer tax of its surrounding neighbors. Brewers are looking for locally sourced products, and Nebraska farmers need a reason to grow more hops.

"I don't see why Nebraska couldn't do it. There's so much land out here," Rhynalds said. "It's been proven that local crops sell quick."

Bruce Wiles, a soybean farmer who also co-owns Midwest Hops near Plattsmouth, said certain kinds of hops, specifically the cascade variety, do well in Nebraska soil.

"They're no different than any other crop," Wiles said. "Got to give them a lot of TLC to get the highest return."

Midwest Hops is planning to plant five to seven more acres of the crop this year.

The state has already lowered taxes for Nebraska wineries that source 75 percent of their products from within the state.

Larson's original bill would also have given the Liquor Control Commission jurisdiction over powdered alcohol, an issue that soared to the forefront of debate.

Sen. Mark Kolterman of Seward added an amendment Tuesday to ban the substance completely, saying he became concerned when the U.S. Alcohol and Tobacco Tax and Trade Bureau approved the product in March. Six other states have already banned powdered alcohol.

Larson fought the amendment, saying the state Liquor Control Commission should have the ability to approve or deny product licenses as it sees fit.

But senators said the effects of powdered alcohol have not been tested and the Legislature has a responsibility to protect residents from potentially harmful substances. The bill advanced with the ban penalizing possession, sale or use of powdered alcohol with up to one year in prison or a $1000 fine.

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The bill is LB330