LOUISVILLE, Ky. (WDRB) -- Distillers across the commonwealth of Kentucky say the General Assembly is giving them a bit of a tax break -- and the organization representing the bourbon industry, the Kentucky Distillers' Association (KDA), says that relief will allow them to better compete in the global economy.

Kentucky, of course, is known the world over as the home of bourbon.

Right now, there are almost 5 million barrels of bourbon aging in Kentucky warehouses. That's more than the state's population of 4.3 million people.

Each year, the barrels are taxed, both at the state and local level.

"Kentucky is the only place in the world that taxes aging barrels of spirits," said KDA President Eric Gregory, "so it is a discriminatory tax that is unfair to the bourbon industry."

The distilling industry maintains the tax increases production costs and harms the industry's ability to expand and invest.

So now the Kentucky General Assembly has approved legislation that allows distillers to take a state corporate income tax credit against the amount of barrel taxes they pay.

But the tax relief legislation requires the distilleries to re-invest their tax savings back into their operations.

"It is a win for everybody," said Gregory, "and it will create more jobs and spur more investment."

Right now there are 9,000 jobs in the Kentucky bourbon industry.

The legislation is expected to help not only the bigger, well known brands, but also the emerging craft bourbon industry.

"We rank 8th right now in the country in the number of craft distillers," explained Gregory, "and a lot of them are now bypassing Kentucky because of this barrel tax; so now while leveling the playing field, we want to bring those craft distilleries to our state and keep Kentucky the one true authentic home for bourbon."

Starting next year, the tax credit will be phased in during the next five years as the bourbon boom continues.

"We exported more Kentucky bourbon last year than any year before to 126 countries around the world," added Gregory.

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