Willie Nelson and Toby Keith are probably smiling today based on the Tennessee Legislature's decision to pass legislation that will exempt whiskey barrels from ad valorem property tax in Tennessee. Tennessee has long been recognized as having a high tax on beer, but now Whiskey for my Men and Beer for My Horses has an all new meaning as Tennessee has again favored the whiskey industry by extending an exemption in Tennessee.
The Legislation takes a phrase out of the Tennessee Constitution and provides that
"Articles manufactured from the produce of this state, or any other state of the union, in the hands of the manufacturer" include and have always included aged whiskey barrels during the time in which such barrels are owned or leased by a person that produces or manufactures whiskey in those barrels.
This legislative fiat is offensive to the Tennessee Attorney General who recently issued an opinion that concluded that this legislation in its proposed form was unconstitutional under the Tennessee Constitution.
Under article II, section 30, of the Tennessee Constitution, as interpreted and construed by the Tennessee Supreme Court, an article being used to manufacture another product—such as a barrel being used by a whiskey maker to manufacture aged whiskey—is not entitled to an exemption from constitutionally mandated ad valorem taxation, and it is not within the legislative power to override or modify a judicial interpretation of the Constitution.
The AG concludes that the ability to interpret the Tennessee Constitution is the exclusive province of the judicial branch of Tennessee government and is not within the purview of the legislature.
This is likely not the last we will hear of this issue as there was opposition to the proposal from local government lobbyists. Assuming the Governor signs the legislation, it is likely an issue that the locals will challenge in court, and we will get to see whether the courts are as offended by the legislatures action as the Attorney General appears to be. Until then, enjoy your whiskey ... your beer ... your vodka ... your bourbon ... or whatever fruit tea you like.