By Jason Hordyk, a summer 2024 intern at Washington Legal Foundation who is entering his junior year at Rutgers University.

The U.S. Constitution limits the power of government, and, in turn, protects Americans’ liberties, in several ingenious ways. The Constitution indirectly limits government by creating three distinct branches which hold each other accountable through a series of checks and balances—the “separation of powers.” The document’s first three Articles also directly limit federal authority. Article I, Section 8, for instance, lists the powers of Congress, best known as the “Enumerated Powers.” Within Section 8 are two important general limitations, the Necessary and Proper Clause and the Commerce Clause, which set additional boundaries on Congress.

The specific and general limits in Section 8 prevent Congress from treading on both economic and individual liberties. A recent example of the Constitution protecting the latter of the two, in this instance a hobby, is playing out in separate federal lawsuits in Texas and Ohio.

A De Facto Prohibition on Home Distilling

Americans can lawfully produce beer and wine for home consumption in their basements, their kitchens, and even their bathtubs. Homebrewers cannot, however, take their hobby to another level by distilling the beer or wine down to a distilled spirit, i.e., liquor. Federal law requires liquor producers to obtain a permit. For home distillers, this is impossible because of two federal statutory provisions Congress passed over 150 years ago. The first provision, 26 U.S.C. § 5178(a)(1)(B), states that “no distilled spirit plants . . . shall be located in any dwelling house, in any shed, yard or inclosure [sic] connected with any dwelling house.” The second provision, 26 U.S.C. § 5601(6), states that anyone that uses or possess a still for the purposes of making distilled spirits in the locations described in § 5178(a)(1)(B) shall be fined up to $10,000 or face imprisonment for up to 5 years.

Home Distillers Go to Court

Two free-market-oriented organizations, Competitive Enterprise Institute (CEI) and The Buckeye Institute, on behalf of individual distillers and an association, filed constitutional challenges in Texas and Ohio against the Alcohol and Tobacco Tax and Trade Bureau (TTB), respectively. CEI’s clients are four individual plaintiffs and the Hobby Distillers Association. Buckeye Institute’s client is John Ream, the owner of Trex Brewing. Both complaints allege the laws exceed Congress’s Enumerated Powers, are not Necessary and Proper to carry out the taxation power and violate the Commerce Clause. Mr. Ream also alleges a violation of the Tenth Amendment.

On March 7, 2024, the plaintiffs in the Texas case (Hobby Distillers Ass’n v. TTB) filed a motion for preliminary injunction in the Northern District of Texas. The court treated the plaintiffs’ injunction motion as a motion for summary judgment on the merits of the case. A little over four months later, on July 10, the court issued an opinion.

The court first examined the plaintiffs’ standing to sue. Of the four individual plaintiffs, the court found only Scott McNuff had standing. Because he produced a notice from TTB warning him of prosecution, Mr. McNuff met the legal test of facing “a credible threat of prosecution.” On the question of associational standing, the court ruled that the Hobby Distillers Association met the legal test: 1. Its members would be able to sue in their own right; 2. The interest it seeks to protect is relevant to the organization’s purpose; and 3. Neither the claim asserted, or relief requested, requires the participation of members in the lawsuit.

The court next turned to the constitutional claims, first considering the plaintiffs’ argument that the ban on distilling is not a proper use of Congress’s power to tax. The government contended that the ban is a proper use of this power as it protects the tax revenue generated by distilled spirits. The court assessed whether Sections 5178(a)(1)(B) and 5601(6) were appropriate uses of the taxing power, looking to their “function over form.” It concluded that the laws do not raise revenue but simply prohibit owning a still: “Congress did nothing more than statutorily ferment a crime—without any reference to taxation, exaction, protection of revenue, or sums owed to the government.”

TTB’s arguments on the taxing power were not, the court quipped, “the government’s last call, because Congress may still take necessary and proper actions to effectuate otherwise valid power.” To fall within the Necessary and Proper Clause, the laws at issue must be “needful and ‘plainly adapted’ to executing Congress’s taxes on spirits.” After an extensive review of spirits taxation and legislative history, the court concluded the statutes failed to meet that test. While the provisions may have been a convenient means to preserve tax revenue from spirits, the government did not make it sufficiently clear that this ban was necessary.

Finally, the court considered the plaintiffs’ claim that the criminalization of home distilling exceeds Congress’s power under the Commerce Clause. The court applied the “substantial effects” test, evaluating whether “the prohibition serves a comprehensive market regulation and is needed to make that regulation effective.” (emphasis added).

The government relied on two Supreme Court rulings, Wickard v. Filburn and Gonzalez v. Raich, both of which involved home production of products and laws that regulated those non-commercial activities. The court reasoned that the situation in Hobby Distillers Ass’n differs from those in Wickard and Raich in that the framework for regulating spirits is not nearly as “comprehensive” as those for wheat and marijuana. The court stated that federal regulation is not comprehensive as it does not give Congress the ability to intervene in every related local activity in the liquor market. There is not enough control over the production, distribution, and consumption of alcohol to consider the regulatory framework comprehensive.

The court also concluded that even if Congress imposed a comprehensive framework, the laws at issue would not be necessary for enforcement because installing a still in one’s home does not automatically affect interstate commerce. The laws do not address issues regarding interstate commerce such as transporting still parts or homemade alcohol across state lines. The court thus held that “the Commerce Clause does not authorize [the two laws] as enacted.”

The court issued a permanent injunction against TTB enforcing the unconstitutional statutes against the plaintiffs, which it stayed for 14 days to allow the government to file an emergency appeal. With that deadline now passed, the stay has gone into effect. TTB has until mid-September to decide whether to appeal to the Fifth Circuit.

Briefing in the case before the Southern District of Ohio, Ream v. U.S. Department of Treasury, is ongoing. Mr. Ream’s constitutional arguments, other than his Tenth Amendment claim, are similar to the plaintiffs’ successful arguments in Hobby Distillers Ass’n. If he can overcome the government’s standing challenge, the Texas court’s reasoning on the Article I, Section 8 claims could prove quite persuasive to the Ohio federal court.

Conclusion

The Texas federal court decision is a welcome step in curtailing needless government intervention into Americans’ personal lives. At least for now, Mr. McNutt and the association members can pursue their hobby without fear of imprisonment or hefty fines. If the Ohio federal court follows suit, together the decisions could provide momentum for a broader national effort to invalidate the statutes and allow home distilling to flourish as homebrewing has over the past 40 years. We have the legalization of homebrewing to thank for the growth of craft beer as well as the creation of jobs and the expanded (and federally taxable) beer choices that accompanied it. The same might occur if home distilling is decriminalized. One can imagine that our first President and Founding Father, George Washington—who operated a commercial distillery at Mount Vernon—would find this outcome quite refreshing.