Rick Morris, a certified bourbon steward who owns a company manufacturing stills, wanted to distill bourbon in his backyard to experiment with recipes and share them with friends. Scott McNutt, already legally distilling fuel alcohol 261 feet from his home, sought to 'tinker around' creating tastier spirits for potential business ventures. Along with fellow hobby enthusiasts John Prince III and Thomas Cowdrey III, they challenged the federal ban through the Hobby Distillers Association, which claims over 1,300 members seeking legalization of at-home distilling.
Judge Jones declared that while the 1868 law is 'venerable,' the statutory provisions 'do not raise revenue' but instead 'amount to an anti-revenue provision that prevents distilled spirits from coming into existence.' The court emphasized that 'Congress's authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more,' quoting the Supreme Court's NFIB v. Sebelius decision. These plaintiffs, Jones wrote, 'have only the choice not to do as they wish or risk fines and imprisonment.'
The court delivered its sharpest criticism of the government's enforcement approach, noting that the Alcohol and Tobacco Tax and Trade Bureau had warned McNutt in 2014 about potential 'criminal liability' simply because he 'may have purchased a still capable of producing alcohol.' As Jones observed, 'by claim[ing] the authority to ban [the imposition of] a tax liability out of fear of future tax avoidance,' the government 'invites a question: what cannot be banned?' Under this logic, she warned, 'Home-based businesses may be forbidden. Remote work may be deemed a crime.'
The case reached the Fifth Circuit after U.S. District Judge Reed O'Connor of the Northern District of Texas granted relief to McNutt and the HDA while dismissing the other individual plaintiffs for lack of standing. O'Connor had ruled that the relevant statutes, 26 U.S.C. §§ 5178(a)(1)(B) and 5601(6), violated the Constitution's Commerce, Taxation, and Necessary and Proper clauses. The government appealed the constitutional ruling while the dismissed plaintiffs cross-appealed their standing dismissal.
The government defended the prohibition as necessary to prevent tax evasion, arguing that 'a distiller can more easily conceal a spirit's strength (and thus avoid the proper tax rate)—or conceal a distilling operation altogether—if his still is in his house or connected with it.' But Jones rejected this reasoning, writing that 'just as Congress cannot authorize a trade or business within a State in order to tax it,' Congress likewise 'cannot prohibit intrastate activity solely because it might produce products hard to tax.' The court noted that Congress's taxing power 'reaches only existing subjects,' not activity that may generate subjects of taxation.
The Fifth Circuit's ruling extends a growing trend of courts scrutinizing federal regulatory overreach under constitutional taxation authority. The decision creates potential tension with other circuits, as Jones noted that 'a different plaintiff filed a separate lawsuit in Ohio, challenging the exact statute at issue here,' with that case currently pending before the Sixth Circuit. The ruling could significantly impact federal alcohol regulation, as the court found that licensing at-home distilling would subject individuals 'to the same regulatory regime that covers licensed distillers' while actually generating tax revenue.
The decision permanently enjoins enforcement of the home distilling ban, though the government could seek Supreme Court review. For practitioners in taxation and regulatory law, the ruling demonstrates how prohibition-based enforcement can exceed constitutional bounds when it prevents rather than facilitates tax collection. As Judge Jones concluded, the challenged provisions 'are neither plainly adapted to Congress's taxing power nor consistent with the letter and spirit of the Constitution.'