I 112th CONGRESS 1st Session H. R. 777 IN THE HOUSE OF REPRESENTATIVES February 17, 2011 Mr. Hinchey introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to reduce the rate of tax on distilled spirits produced by small producers.

1.

Short title

This Act may be cited as the Small Distillery Excise Tax Act of 2011.

2.

Reduced rate of tax on distilled spirits produced by small producers

(a)

In general

Section 5001 of the Internal Revenue Code of 1986 (relating to imposition, rate, and attachment of tax on distilled spirits) is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: (c)

Credit for small producers

(1)

Allowance of credit

In the case of a small distilled spirits producer, there shall be allowed as a credit against the tax imposed by this title (other than chapters 2, 21, and 22) an amount equal to 80 percent of the otherwise applicable tax on the first 65,000 of proof gallons of distilled spirits produced by such producer during the calendar year at qualified facilities in the United States. (2)

Small distilled spirits producer

For purposes of this subsection, the term small distilled spirits producer means any person who produces not more than 100,000 proof gallons of distilled spirits during the calendar year. (3)

Time for determining and allowing credit

The credit allowable by paragraph (1)— (A)shall be determined at the same time the tax is determined under subsection (a), and (B)shall be allowable at the time the tax imposed by subsection (a) is payable as if the credit allowable by this subsection constituted a reduction in the rate of such tax. (4)

Controlled groups

Rules similar to rules of section 5051(a)(2)(B) shall apply for purposes of this subsection. (5)

Denial of deduction

Any deduction under subtitle A with respect to any tax against which a credit is allowed under this subsection shall only be for the amount of such tax as reduced by such credit. (6)

Credit for transferee in bond

If— (A)distilled spirits produced by any person would be eligible for any credit under paragraph (1) if removed by such person during the calendar year, (B)distilled spirits produced by such person is removed during such calendar year by any other person (hereafter in this paragraph referred to as the transferee) to whom such distilled spirits were transferred in bond and who is liable for the tax imposed by this section with respect to such spirits, and (C)such producer holds title to such spirits at the time of its removal and provides to the transferee such information as is necessary to properly determine the transferee's credit under this paragraph, then, the transferee (and not the producer) shall be allowed the credit under paragraph (1) which would be allowed to the producer if the distilled spirits removed by the transferee had been removed by the producer on that date.(7)

Regulations

The Secretary may prescribe such regulations as may be necessary to carry out the purposes of this subsection, including— (A)regulations to prevent the credit provided by this subsection from benefiting any person who produces more than 100,000 proof gallons of distilled spirits during a calendar year, and (B)regulations which reduce the credits allowable by sections 5010 and 5011 in order to properly reflect the reduced effective rate of tax on distilled spirits under this subsection. . (b)

Effective date

The amendments made by this section shall apply to distilled spirits produced in calendar years ending after the date of the enactment of this Act, but shall not apply to distilled spirits on which tax is required to be paid before the date of the enactment of this Act.