[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 711 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 711

 To amend the Internal Revenue Code of 1986 to simplify the method of 
                 payment of taxes on distilled spirits.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 7, 1997

    Mr. Breaux (for himself, Mr. Bryan, Mr. D'Amato, and Mr. Frist) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to simplify the method of 
                 payment of taxes on distilled spirits.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Distilled Spirits 
Tax Payment Simplification Act of 1997''.
    (b) Reference to 1986 Code.--Except as otherwise expressly 
provided, whenever an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.

SEC. 2. TRANSFER OF DISTILLED SPIRITS BETWEEN BONDED PREMISES.

    (a) In General.--Section 5212 is amended to read as follows:

``SEC. 5212. TRANSFER OF DISTILLED SPIRITS BETWEEN BONDED PREMISES.

    ``Distilled spirits on which the internal revenue tax has not been 
paid as authorized by law may, under such regulations as the Secretary 
shall prescribe, be transferred in bond between bonded premises in any 
approved container. For the purposes of this chapter, except in the 
case of any transfer from a premise of a bonded dealer, the removal of 
distilled spirits for transfer in bond between bonded premises shall 
not be construed to be a withdrawal from bonded premises.''.
    (b) Conforming Amendment.--The first sentence of section 5232(a) 
(relating to transfer to distilled spirits plant without payment of 
tax) is amended to read as follows: ``Distilled spirits imported or 
brought into the United States, under such regulations as the Secretary 
shall prescribe, may be withdrawn from customs custody and transferred 
to the bonded premises of a distilled spirits plant without payment of 
the internal revenue tax imposed on such distilled spirits.''.

SEC. 3. ESTABLISHMENT OF DISTILLED SPIRITS PLANT.

    Section 5171 (relating to establishment) is amended--
            (1) in subsection (a), by striking ``or processor'' and 
        inserting ``processor, or bonded dealer'';
            (2) in subsection (b), by striking ``or as both'' and 
        inserting ``as a bonded dealer, or as any combination 
        thereof'';
            (3) in subsection (e)(1), by inserting ``, bonded dealer,'' 
        before ``processor''; and
            (4) in subsection (e)(2), by inserting ``bonded dealer,'' 
        before ``or processor''.

SEC. 4. DISTILLED SPIRITS PLANTS.

    Section 5178(a) (relating to location, construction, and 
arrangement) is amended by adding at the end the following:
            ``(5) Bonded dealer operations.--Any person establishing a 
        distilled spirits plant to conduct operations as a bonded 
        dealer may, as described in the application for registration--
                    ``(A) store distilled spirits in any approved 
                container on the bonded premises of such plant, and
                    ``(B) under such regulations as the Secretary shall 
                prescribe, store taxpaid distilled spirits, beer, and 
                wine, and such other beverages and items (products) not 
                subject to tax or regulation under this title on such 
                bonded premises.''.

SEC. 5. BONDED DEALERS.

    (a) Definitions.--Section 5002(a) (relating to definitions) is 
amended by adding at the end the following:
    ``(16) Bonded Dealer.--The term `bonded dealer' means any person 
who has elected under section 5011 to be treated as a bonded dealer.
    ``(17) Control State Entity.--The term `control State entity' means 
a State, a political subdivision of a State, or any instrumentality of 
such a State or political subdivision, in which only the State, 
political subdivision, or instrumentality is allowed under applicable 
law to perform distilled spirit operations.''.
    (b) Election To Be Treated as a Bonded Dealer.--Subpart A of part I 
of subchapter A of chapter 51 (relating to distilled spirits) is 
amended by adding at the end the following:

``SEC. 5011. ELECTION TO BE TREATED AS BONDED DEALER.

    ``(a) Election.--Any wholesale dealer or any control State entity 
may elect, at such time and in such manner as the Secretary shall 
prescribe, to be treated as a bonded dealer if such wholesale dealer or 
entity sells bottled distilled spirits exclusively to a wholesale 
dealer in liquor, to an independent retail dealer subject to the 
limitation set forth in subsection (b), or to another bonded dealer.
    ``(b) Limitation in Case of Sales to Retail Dealers.--
            ``(1) By bonded dealer.--Any person, other than a control 
        State entity, who is a bonded dealer shall not be considered as 
        selling to an independent retail dealer if--
                    ``(A) the bonded dealer has a greater than 10 
                percent ownership interest in, or control of, the 
                retail dealer;
                    ``(B) the retail dealer has a greater than 10 
                percent ownership interest in, or control of, the 
                bonded dealer; or
                    ``(C) any person has a greater than 10 percent 
                ownership interest in, or control of, both the bonded 
                and retail dealer.
        For purposes of this paragraph, ownership interest, not limited 
        to stock ownership, shall be attributed to other persons in the 
        manner prescribed by section 318.
            ``(2) By control state entity.--In the case of any control 
        State entity, subsection (a) shall be applied by substituting 
        `retail dealer' for `independent retail dealer'.
    ``(c) Inventory Owned at Time of Election.--Any bottled distilled 
spirits in the inventory of any person electing under this section to 
be treated as a bonded dealer shall, to the extent that the tax under 
this chapter has been previously determined and paid at the time the 
election becomes effective, not be subject to such additional tax on 
such spirits as a result of the election being in effect.
    ``(d) Revocation of Election.--The election made under this section 
may be revoked by the bonded dealer at any time, but once revoked shall 
not be made again without the consent of the Secretary. When the 
election is revoked, the bonded dealer shall immediately withdraw the 
distilled spirits on determination of tax in accordance with a tax 
payment procedure established by the Secretary.
    ``(e) Equitable Treatment of Bonded Dealers Using LIFO Inventory.--
The Secretary shall provide such rules as may be necessary to assure 
that taxpayers using the last-in, first-out method of inventory 
valuation do not suffer a recapture of their LIFO reserve by reason of 
making the election under this section or by reason of operating a 
bonded wine cellar as permitted by section 5351.
    ``(f) Approval of Application.--Any person submitting an 
application under section 5171(c) and electing under this section to be 
treated as a bonded dealer shall be entitled to approval of such 
application to the same extent such person would be entitled to 
approval of an application for a basic permit under section 104(a)(2) 
of the Federal Alcohol Administration Act (27 U.S.C 204(a)(2)), and 
shall be accorded notice and hearing as described in section 104(b) of 
such Act (27 U.S.C. 204(b)).''.
    (c) Conforming Amendment.--The tables of sections of subpart A of 
part I of subchapter A of chapter 51 is amended by adding at the end 
the following:

                              ``Sec. 5011. Election to be treated as 
                                        bonded dealer.''.

SEC. 6. DETERMINATION OF TAX.

    The first sentence of section 5006(a)(1) (relating to requirements) 
is amended to read as follows: ``Except as otherwise provided in this 
section, the tax on distilled spirits shall be determined when the 
spirits are transferred from a distilled spirits plant to a bonded 
dealer or are withdrawn from bond.''.

SEC. 7. LOSS OR DESTRUCTION OF DISTILLED SPIRITS.

    Section 5008 (relating to abatement, remission, refund, and 
allowance for loss or destruction of distilled spirits) is amended--
            (1) in subsections (a)(1)(A) and (a)(2), by inserting 
        ``bonded dealer,'' after ``distilled spirits plant,'' both 
        places it appears;
            (2) in subsection (c)(1), by striking ``of a distilled 
        spirits plant''; and
            (3) in subsection (c)(2), by striking ``distilled spirits 
        plant'' and inserting ``bonded premises''.

SEC. 8. TIME FOR COLLECTING TAX ON DISTILLED SPIRITS.

    (a) In General.--Section 5061(d) (relating to time for collecting 
tax on distilled spirits, wines, and beer) is amended by redesignating 
paragraph (5) as paragraph (6) and by inserting after paragraph (4) the 
following:
            ``(5) Advanced payment of distilled spirits tax.--
        Notwithstanding the preceding provisions of this subsection, in 
        the case of any tax imposed by section 5001 with respect to a 
        bonded dealer who has an election in effect on September 20 of 
        any year, any payment of which would, but for this paragraph, 
        be due in October or November of that year, such payment shall 
        be made on such September 20. No penalty or interest shall be 
        imposed for the period from such September 20 until the due 
        date determined without regard to this paragraph to the extent 
        that tax due exceeds the tax which would have been due with 
        respect to distilled spirits in the preceding October and 
        November had the election under section 5011 been in effect.''.
    (b) Conforming Amendment.--Section 5061(e)(1) (relating to payment 
by electronic fund transfer) is amended by inserting ``or any bonded 
dealer,'' after ``respectively,''.

SEC. 9. EXEMPTION FROM OCCUPATIONAL TAX NOT APPLICABLE.

    Section 5113(a) (relating to sales by proprietors of controlled 
premises) is amended by adding at the end the following: ``This 
subsection shall not apply to a proprietor of a distilled spirits plant 
whose premises are used for operations of a bonded dealer.''.

SEC. 10. CONFORMING AMENDMENTS.

            (1) Section 5003(3) is amended by striking ``certain''.
            (2) Section 5214 is amended by redesignating subsection (b) 
        as subsection (c) and by inserting after subsection (a) the 
        following:
    ``(b) Exception.--Paragraphs (1), (2), (3), (5), (10), (11), and 
(12) of subsection (a) shall not apply to distilled spirits withdrawn 
from premises used for operations as a bonded dealer.''.
            (3) Section 5215 is amended--
                    (A) in subsection (a), by striking ``the bonded 
                premises'' and all that follows through the period and 
                inserting ``bonded premises.'';
                    (B) in the heading of subsection (b), by striking 
                ``a Distilled Spirits Plant'' and inserting ``Bonded 
                Premises''; and
                    (C) in subsection (d), by striking ``a distilled 
                spirits plant'' and inserting ``bonded premises''.
            (4) Section 5362(b)(5) is amended by adding at the end the 
        following: ``The term does not mean premises used for 
        operations as a bonded dealer.''.
            (5) Section 5551(a) is amended by inserting ``bonded 
        dealer,'' after ``processor'' both places it appears.
            (6) Subsections (a)(2) and (b) of section 5601 are each 
        amended by inserting ``, bonded dealer,'' before ``or 
        processor'' .
            (7) Paragraphs (3), (4), and (5) of section 5601(a) are 
        each amended by inserting ``bonded dealer,'' before ``or 
        processor'' .
            (8) Section 5602 is amended--
                    (A) by inserting ``, warehouseman, processor, or 
                bonded dealer'' after ``distiller''; and
                    (B) in the heading, by striking ``by distiller''.
            (9) Sections 5115, 5180, and 5681 are repealed.
            (10) The table of sections for part II of subchapter A of 
        chapter 51 is amended by striking the item relating to section 
        5115.
            (11) The table of sections for subchapter B of chapter 51 
        is amended by striking the item relating to section 5180.
            (12) The item relating to section 5602 in the table of 
        sections for part I of subchapter J of chapter 51 is amended by 
        striking ``by distiller''.
            (13) The table of sections for part IV of subchapter J of 
        chapter 51 is amended by striking the item relating to section 
        5681.

SEC. 11. REGISTRATION FEES.

    (a) General Rule.--The Director of the Bureau of Alcohol, Tobacco, 
and Firearms shall, in accordance with this section, assess and collect 
registration fees solely to defray a portion of any net increased costs 
of regulatory activities of the Government resulting from enactment of 
this Act.
    (b) Persons Subject to Fee.--Fees shall be paid in a manner 
prescribed by the Director by the bonded dealer.
    (c) Amount and Timing of Fees.--Fees shall be paid annually and 
shall not exceed $1,000 per bonded premise.
    (d) Deposit and Credit.--The moneys received during any fiscal year 
from fees described in subsection (a) shall be deposited as an 
offsetting collection in, and credited to, the account providing 
appropriations to conduct the regulatory activities of the Government 
resulting from enactment of this Act.
    (e) Limitation.--The aggregate amount of fees assessed and 
collected under this section may not exceed in any fiscal year the 
aggregate amount of any net increased costs of regulatory activity 
referred to in subsection (a).

SEC. 12. COOPERATIVE AGREEMENTS.

    (a) Study.--The Secretary of the Treasury shall study and report to 
Congress concerning possible administrative efficiencies which could 
inure to the benefit of the Federal Government of cooperative 
agreements with States regarding the collection of distilled spirits 
excise taxes. Such study shall include, but not be limited to, possible 
benefits of the standardization of forms and collection procedures and 
shall be submitted 1 year after the date of enactment of this Act.
    (b) Cooperative Agreement.--The Secretary of the Treasury is 
authorized to enter into such cooperative agreements with States which 
the Secretary deems will increase the efficient collection of distilled 
spirits excise taxes.

SEC. 13. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), the 
amendments made by this Act take effect on the date which is 120 days 
after the date of enactment of this Act.
    (b) Exceptions.--
            (1) Establishment of distilled spirits plant.--The 
        amendments made by section 3 take effect on the date of 
        enactment of this Act.
            (2) Special rule.--Each wholesale dealer who is required to 
        file an application for registration under section 5171(c) of 
        the Internal Revenue Code of 1986 whose operations are required 
        to be covered by a basic permit under sections 103 and 104 of 
        the Federal Alcohol Administration Act (27 U.S.C. 203, 204) and 
        who has received such basic permits as an importer, wholesaler, 
        or as both, and has obtained a bond required under subchapter B 
        of chapter 51 of subtitle E of such Code before the close of 
        the fourth month following the date of enactment of this Act, 
        shall be qualified to operate bonded premises until such time 
        as the Secretary of the Treasury takes final action on the 
        application. Any control State entity (as defined in section 
        5002(a)(17) of such Code, as added by section 5(a)) that has 
        obtained a bond required under such subchapter shall be 
        qualified to operate bonded premises until such time as the 
        Secretary of the Treasury takes final action on the application 
        for registration under section 5171(c) of such Code.
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