Two federal circuit courts have recently considered challenges to the 1868 law banning home distilling. One court has struck down the ban, while another court has upheld it. This issue is part of a running national debate about the scope of the powers of Congress to regulate commerce and taxation and will be appealed to the Supreme Court.
At issue are the laws which prohibits the production of distilled spirits at home. Some home distillers and the Hobby Distillers Association through their libertarian think tank and related law firms brought a lawsuit in Texas while a single plaintiff via a libertarian think tank brought a lawsuit in Ohio.
Recently, the Fifth Circuit upheld a Texas district court which had struck the constitutionality of the home distilling prohibition laws in question. The Fifth Circuit panel held that the tax code’s ban improperly tries to stop an activity — distilling spirits at home — before it becomes taxable in the name of preventing tax evasion. The Fifth Circuit held that this violates the Constitution’s taxation clause, which allows Congress to tax only “existing subjects,” not activities that might generate taxes in the future.
The Fifth Circuit held, “The government defends the statutory prohibition on at-home distillation of spirits as a “necessary and proper” exercise of Congress’s power to “tax.” We disagree. First, contrary to the government’s assumption, Section 5178 and Section 5601 are outside the scope of Congress’s taxing power under the Constitution. Second, contrary to federalism principles, the statutory prohibition is not plainly adapted to executing Congress’s taxing power and violates the Necessary and Proper Clause.”
However, two weeks later, the Sixth Circuit upheld the law against its challenge. While the Ohio district court dismissed the case on standing grounds, the majority in the Sixth Circuit would have granted standing but ruled against the plaintiffs on the merit. Circuit Court Judge Mathis dissented and said the plaintiff did not have standing so he would not reach the merits of the constitutional claims.
The Sixth Circuit’s opinion pointed out that this 160-year-old law was not just dropped on the American citizen out of the sky. It noted the contested history of alcohol tax evasion in the United States starting with the Whiskey Rebellion. It noted the comprehensive set of hearings held by Congress to determine a system to stymie tax evasion before passage of the challenged laws in 1868. “In 1868, evasion of excise taxes on spirits had been rampant for literally all of the nation’s history. By all appearances, spirits distilled at home were no exception. The 1868 Act was a monumental effort, running some 109 sections, to bring these “stupendous frauds” to an end.”
The Court concluded that Congress did not exceed its taxing authority or the use of laws necessary and proper to collect them with this legislation that has served without objection for a long time. “Indeed, for us to conclude that a law of 160 years’ vintage, with this kind of empirical pedigree, has all along been both unnecessary and improper, would border on rationalist conceit… The rule that Ream challenges addressed an actual problem that had confounded the federal government from its earliest days. The home-distilling ban was lawful when enacted, and remains so today.” The plaintiff’s lawyer has announced he will appeal the decision to the Supreme Court. Briefings will be started over the summer, and the Supreme Court would likely decide whether or not to take this appeal late in the fall of 2026 with a hearing in 2027 if they decide to take this case.
The 5th and 6th Circuit opinions can be found below:
Leave a Reply