1st BATCH OF FILES AVAILABLE NOW!

Broadening the reasoning and deepening the cuts against the fed govt arguments trying to save its long-standing prohibition against home distilling, the 5th Circuit Ct of Appeals upheld a ruling from a District Ct in Tex on Friday. The panel of 3 appellate judges unanimously agreed that each plaintiff in the suit had standing, not just the one granted the right to sue by the lower ct. But that ct got the overall analysis right, in the panel's view, also agreeing that the ban on home distilling isn't a tax and isn't "necessary and proper" for collecting the tax on spirits. In fact, the challenged laws "only inhibit revenue raising," the judges repeated. Grant of Standing Expanded In this suit, originating in Texas, 4 separate individuals plus the non-profit Hobby Distillers Assn sued the TTB claiming that the ban on home distilling dating back to 1868 is unconstitutional. But the lower ct said that only 1 of the prospective home distillers had standing. Last wk, the 5th Circuit panel disagreed, believing each individual had a "serious intention" to distill at home and faced "a credible threat of prosecution." Given this expanded view of their intentions and the govt's threats, the judges also believed the assn had standing to sue."Neither Provision Raises Revenue," They "Reduce" It; Risks of Govt's Logic The 5th Circuit panel drove the same nail into the TTB's arguments again and again: laws establishing the ban and punishments for violations do not help the agency collect tax, they inhibit it. "Neither provision raises revenue," the judges wrote. By barring "at-home distilleries," the provisions instead are "anti-revenue" because they "operate to reduce revenue instead of raising it," the opinion emphasizes.Back when the laws were enacted, the govt sought to block admittedly "rampant evasion of the spirits tax." TTB continued to argue that allowing individuals to distill at home makes it easier for them to hide that taxable conduct. But "Congress cannot prohibit intrastate activity solely because it might produce products hard to tax," the judges responded. And fed arguments that the provisions are "necessary and proper" to protect fed tax revenue ran into the same problem as before. Rather than helping it exercise its taxing power, the ban "criminalizes the conduct of a person in order to prevent its taxation power from taking effect," they wrote. Said another way: it's "a pure prohibition of conduct that might otherwise have generated taxable products."Further agreeing with plaintiffs and the lower ct, the ban appears to be an improper exercise of police power, reserved for the states. And the same logic could be used to "criminalize nearly any at-home conduct only because it has the possibility of concealing taxable activity," including home businesses or remote work, the judges wrote.Open Questions about Commerce Clause; Will 6th Circuit Go the Same Way? Plaintiffs originally claimed that the ban violated 3 separate clauses of the constitution: Taxation; Necessary and Proper; and Commerce. And the lower ct agreed with them on all 3. But on appeal, the govt opted not to bring the commerce clause arguments to the 5th Circuit. In a brief footnote, the panel acknowledges "the broader ability to control individual behavior" under the Commerce clause, a line of thinking that some observers suggest could be used to protect the home distilling ban. Probably not before this court, though.While the TTB could seek review by the full 5th Circuit, attention turns to the 6th Circuit, where a separate panel of 3 judges is considering essentially the same arguments. Recall tho, the lower ct in Ohio made a very different call on standing, arguing that the plaintiffs didn't face a real threat of enforcement. And after admonishing fed attys for only submitting arguments on the issue of standing and not the substantive issues of law and constitutionality, the case is now fully briefed and awaiting their further attention.

5th Circuit Blocks 150-Yr-Old Ban on Home Distilling, Turning Attention to Similar 6th Circuit Case

Publishing Info