Federal Court Recognizes Limits to Federal Power Over At-Home Distilling (Op-Ed)

The Federalist Society
Devin Watkins
September 16, 2024

What are the limits of the federal government’s powers? That critical question has been debated since the nation’s Founding, and a recent federal court decision now serves as the latest chapter in that debate. Earlier this year, in Hobby Distillers Association v. Alcohol and Tobacco Tax and Trade Bureau, a district judge ruled that the federal prohibition on at-home distilling lay beyond the federal government’s power.

Let’s start with a short history of home distilling in America. Americans began distilling roughly a hundred and forty years before the American Revolution. This was often just a way to preserve value gained from agricultural excess rather than letting it go to waste. Most of this distilling was done at home by farmers.

George Washington ran one of the largest distilleries in the country out of his home at Mount Vernon, producing 11,000 gallons of whiskey in 1799. James Madison and Patrick Henry also distilled at home. Shortly after the American Revolution, the federal government imposed a heavy tax on distilled spirits to pay war debts. The tax caused around 600 farmers to rebel, in what was called the Whiskey Rebellion. That tax was repealed in 1802.

At-home distilling of spirits began to decline after the Civil War, in tandem with the nation’s rising prohibitionist attitudes. The movement that would eventually ban all alcohol began with a ban on distilling spirits at home, and most of us are familiar with that movement’s culmination and its eventual collapse, marked as they are by the Constitution’s two Prohibition amendments. After Prohibition ended, home winemaking was allowed; in 1958, an exemption for winemaking’s resultant taxes for personal or family use was enacted. A similar exemption for home brewing was enacted in 1978. But the prohibition on creating distilled spirits at home was never repealed.

Earlier this year, the Hobby Distillers Association challenged this federal prohibition, arguing that it lay beyond the enumerated powers of Congress. Some might think that the federal government could prohibit home distilling based on health or safety concerns, but the Constitution disallows federal legislation that aims primarily at such police-power goals. Such powers are not held by the federal government; they are held by the states.

In response to the HDA suit, the federal government claimed that its ban was authorized under both the federal government’s taxing powers and its Commerce Clause powers. With respect to the Commerce Clause, the government claimed that prohibition of home distillery was supported by the logic of Wickard v. Filburn (1942) and Gonzalez v. Raich (2005). If the government can regulate at-home wheat production, then why not distilling? With respect to the tax power, the government claimed that the ban on home distillery was enacted to protect federal tax revenue, because people who distill at home-as compared to those who distill outside the home-are more likely to hide it from the federal government.

The district court rejected the government’s arguments about the scope of federal power, finding that the prohibition on home distillery was outside the scope of federal constitutional power and therefore unconstitutional.

The district court’s opinion carefully distinguished between the home distillers’ case and previous Supreme Court opinions about the scope of the Commerce Clause. Both Wickard and Raich concerned products that were regulated under a comprehensive interstate regulatory framework that controlled the sale of those products. In Wickard, the Agricultural Adjustment Act of 1938 attempted to control the price of wheat in the interstate market by limiting how much wheat could be produced. The in-state control of wheat production was necessary to control the price of wheat when it was sold between states, and the use of that in-state control was therefore entailed by the operation of a federal power. Likewise, in Raich, the Comprehensive Drug Abuse Prevention and Control Act of 1970 prohibited the sale of marijuana between states. Congress created the local prohibition on possession to ensure the sale of marijuana between states did not occur. The local prohibition was a necessary part of that interstate statutory framework.

The same cannot be said for the at-home distilling ban. The only federal legislation the government could point to that might qualify as a comprehensive interstate regulatory framework was our system of federal taxation. The HDA successfully argued that federal taxation as such simply does not qualify as the kind of comprehensive regulatory framework that can trigger the operation of the Commerce Clause.

The district court’s opinion contained an equally careful analysis of the limits of the tax power, and it identified multiple reasons that the government’s attempt to use the tax power to justify the ban on home distillery was not persuasive. First, the Supreme Court in NFIB v. Sebelius (2012) made it clear that “although the breadth of Congress’s power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior.” In other words, the federal government can control people’s behavior in broad and general ways using the Commerce Clause power, but the taxing power is dimensionally limited to forcing people to pay money into the federal treasury. Once the tax owed is paid, the government lacks any additional authority to regulate the taxpayer’s behavior. In the realm of controlling people’s behavior, the tax power only extends to the control of taxpayers’ actions so as to ensure that the taxes they owe are paid-and the duration of that control ends at the moment that their tax obligations are satisfied. Until a tax obligation comes into existence, the tax power cannot control anyone at all.

Second, the court found that the means that the prohibitory statute used were not “plainly adapted” to executing the taxing power. If Congress had chosen to levy a tax based on the distillery’s capacity, then-as the opinion suggested-an extensive regulation of each distillery location “would likely be fair game,” because the distillery itself was part of what was being taxed. But Congress taxed the spirits, not the distillery: this implies that if the means of taxation are plainly adapted to their ends, the taxation must target taxed goods, not the location of the still, in order for legislation based on the tax power to be constitutionally acceptable.