Tax Breaks Helped Startups

In the summer of 2009, as the U.S. economy shed more than a million jobs, the state of Tennessee changed its liquor laws to allow distilleries to operate in 41 counties where they’d previously been banned. Three lawyers from the Smoky Mountain region on the state’s eastern border jumped at the opportunity. “I had always been around moonshine,” says Joe Baker, a 37-year-old Gatlinburg native. “My family had been involved over the last 200 years or so, since they settled this area.”

Baker and his partners, Cory Cottongim and Tony Breeden, hustled to get approval to open a distillery, Ole Smoky Moonshine, in Gatlinburg. Banks were not eager to lend. “For three guys to go into a bank with zero industry experience and ask for money to make liquor, it probably didn’t appear to be the best loan to make,” Baker says. Instead, he raised money by borrowing against the property value of his law office on the courthouse square in Sevierville and taking out a personal line of credit. Ole Smoky’s founders poured $500,000 into land and equipment to pass muster for a liquor license. Using a tax incentive expanded by the Obama administration, they were able to write off everything from a $120,000 still to $467 worth of bug lights.