[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 434 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                 S. 434

 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

                           February 22, 1999

    Mr. Breaux (for himself, Mr. Bryan, Mr. Dorgan, 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 1999''.
    (b) Amendment of 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) 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) The first sentence of section 5232 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withdrawn from customs custody and transferred to the bonded premises 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 is amended by--
            (1) striking from subsection (a) ``or processor'' and 
        inserting ``processor, or bonded dealer''; and
            (2) striking from subsection (b) ``or both.'' and inserting 
        ``as a bonded dealer, or as any combination thereof.''

SEC. 4. DISTILLED SPIRITS PLANTS.

    Section 5178(a) is amended by adding the following new paragraph 
after paragraph (4):
            ``(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) Section 5002(a) is amended by inserting after subsection 
(a)(15) the following new paragraphs:
            ``(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 or a political subdivision of a State in 
        which only the State or a political subdivision thereof is 
        allowed under applicable law to perform distilled spirit 
        operations, or any instrumentality of such a State or political 
        subdivision.''
    (b) Subpart A of part I of subchapter A of chapter 51 (relating to 
distilled spirits) is amended by adding at the end thereof the 
following new section:

``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. 
Except in the case of a control State entity, this election is not 
available to a retail dealer in liquor. This election is not available 
to any person with gross receipts from the sale of distilled spirits, 
in the 12-month period prior to making such election, of less than 
$5,000,000 (applying the rules of section 5061(e)(3)).
    ``(b) Special Rules.--(1) 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 the bonded dealer has a greater than 10 
percent ownership interest in, or control of the retail dealer; the 
retail dealer has a greater than 10 percent ownership interest in, or 
control of the bonded dealer; or where any person has a greater than 10 
percent ownership interest in, or control of both the bonded and retail 
dealer. For purposes of this subparagraph, ownership interest, not 
limited to stock ownership, shall be attributed to other persons in the 
manner prescribed by section 318.
    ``(2) In the case of any control State entity, subsection (a) shall 
be applied without regard to the word `independent'.
    ``(c) Inventory Owned at Time of Election.--Any bottled distilled 
spirits in the inventory of any person electing under section 5011 to 
be treated as a bonded dealer shall, to the extent that the Federal 
excise tax previously has been determined and paid at the time the 
election becomes effective, not be subject to additional Federal excise 
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 section 5011 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 they would be entitled to approval of an 
application for a basic permit under section 204(a)(2) of title 27 of 
the United States Code (the Federal Alcohol Administration Act) and 
shall be accorded notice and hearing as described in section 204(b) of 
such title 27.''
    (c) Conforming Amendment.--The table of sections of subpart A of 
part I of subchapter A of chapter 51 and the table of contents of 
subtitle E are amended by adding at the appropriate places:

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

SEC. 6. DETERMINATION OF TAX.

    The first sentence of section 5006(a)(1) 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.

    (a) Subsections (a)(1)(A) and (a)(2) of section 5008 are amended by 
inserting ``bonded dealer,'' after ``distilled spirits plant,''.
    (b) Subsection (c)(1) of section 5008 is amended by striking ``of a 
distilled spirits plant under section 5215(a)'' and inserting ``but 
only for destruction, denaturation, redistillation, reconditioning, or 
rebottling''.
    (c) Subsection (c)(2) of section 5008 is amended by striking 
``distilled spirits plant'' and inserting ``bonded premises''.

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

    (a) Section 5061(d) is amended by redesignating paragraph (5) as 
paragraph (6) and by inserting after paragraph (4) the following new 
paragraph:
            ``(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, 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) Section 5061(e)(1) is amended by inserting ``or any bonded 
dealer,'' after ``respectively,''.

SEC. 9. EXEMPTION FROM OCCUPATIONAL TAX NOT APPLICABLE.

    Section 5113(a) is amended by adding after the last sentence the 
following new sentence: ``This exemption shall not apply to a 
proprietor of a distilled spirits plant whose premises are used for 
operations of a bonded dealer.''

SEC. 10. TECHNICAL, CONFORMING, AND CLERICAL AMENDMENTS.

    (a) Technical and Conforming Amendments.--
            (1) Section 5003(3) is amended by striking ``certain''.
            (2) Section 5214 is amended by redesignating subsection (b) 
        as subsection (c) and inserting after subsection (a) the 
        following new subsection:
    ``(b) Exception.--Subsections (a) (1), (2), (3), (5), (10), (11), 
and (12) of this section shall not apply to distilled spirits withdrawn 
from premises used for operations as a bonded dealer.''
            (3) Section 5215(a) is amended by striking all that follows 
        ``bonded premises'' and inserting a period.
            (4) Section 5362(b)(5) is amended by adding at the end the 
        following new sentence: ``This term will not apply to premises 
        used for operations as a bonded dealer.''.
            (5) Section 5551(a) is amended by inserting ``bonded 
        dealer,'' after ``processor,'' each place it appears.
            (6) Section 5601(a) (2), (3), (4), (5), and (b) are amended 
        by inserting ``, bonded dealer'' before ``or processor'' each 
        place it appears.
            (7) Section 5602 is amended by inserting ``, warehouseman, 
        processor, or bonded dealer'' after ``distiller''.
            (8) Sections 5115, 5180, and 5681 are repealed.
    (b) Clerical Amendments.--
            (1) The table of sections for part II of subchapter A of 
        chapter 51 is amended by striking the item relating to section 
        5115.
            (2) The table of sections for subchapter B of chapter 51 is 
        amended by striking the item relating to section 5180.
            (3) 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 from the bonded dealers. Except as provided in 
subsection (c), the amount of the fees for any year shall be 
established by the Director so that the aggregate amount estimate to be 
collected for the year equals the Director's estimate of the increased 
costs of compliance activities of the Bureau 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 $5,000 per bonded premise, except that in the first 
year that an election under section 5011(a) takes effect, an additional 
amount, not to exceed $3,000, shall be paid by each bonded dealer.
    (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 the 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) Except as provided in subsection (b) the provisions of this Act 
shall take effect at the beginning of the first calendar quarter that 
begins after one hundred and twenty days following enactment.
    (b)(1) The amendments made by section 3 of this Act shall take 
effect on the date of enactment of this Act, and
    (2) Each wholesale dealer who is required to file an application 
for registration under section 5171(c) whose operations are required to 
be covered by a basic permit under the Federal Alcohol Administration 
Act (27 U.S.C. 203 and 204) and who has received such basic permits as 
an importer, wholesaler, or as both, and has obtained a bond required 
under this subchapter shall be qualified beginning on the later of--
            (A) the first day of the first calendar quarter that begins 
        at least 8 months after the date of enactment, or
            (B) the first day of the first calendar quarter that begins 
        at least 9 months after the application is filed,
to operate bonded premises until such time as the Secretary takes final 
action on the application. Any control State entity that has obtained a 
bond required under this subchapter shall be qualified to operate 
bonded premises until such time as the Secretary takes final action on 
the application for registration under section 5171(c).
                                 <all>