[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 362 Introduced in Senate (IS)]

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116th CONGRESS
  1st Session
                                 S. 362

   To amend the Internal Revenue Code of 1986 to reform taxation of 
                          alcoholic beverages.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 6, 2019

    Mr. Wyden (for himself, Mr. Blunt, Mr. Carper, Mr. Roberts, Ms. 
 Stabenow, Mr. Moran, Mr. Casey, Mr. Portman, Mr. Bennet, Mrs. Capito, 
Ms. Baldwin, and Mr. Gardner) 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 reform taxation of 
                          alcoholic beverages.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Craft Beverage Modernization and Tax 
Reform Act of 2019''.

SEC. 2. PERMANENT EXTENSION OF CERTAIN PROVISIONS.

    (a) Production Period for Beer, Wine, and Distilled Spirits.--
            (1) In general.--Paragraph (4) of section 263A(f) of the 
        Internal Revenue Code of 1986, as added by section 13801(a) of 
        Public Law 115-97, is amended to read as follows:
            ``(4) Exemption for aging process of beer, wine, and 
        distilled spirits.--For purposes of this subsection, the 
        production period shall not include the aging period for--
                    ``(A) beer (as defined in section 5052(a)),
                    ``(B) wine (as described in section 5041(a)), or
                    ``(C) distilled spirits (as defined in section 
                5002(a)(8)), except such spirits that are unfit for use 
                for beverage purposes.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to interest costs paid or accrued in calendar years 
        beginning after December 31, 2017.
    (b) Reduced Rate of Excise Tax on Beer.--
            (1) In general.--Paragraph (1) of section 5051(a) of the 
        Internal Revenue Code of 1986, as amended by section 13802(a) 
        of Public Law 115-97, is amended to read as follows:
            ``(1) In general.--
                    ``(A) Imposition of tax.--A tax is hereby imposed 
                on all beer brewed or produced, and removed for 
                consumption or sale, within the United States, or 
                imported into the United States. Except as provided in 
                paragraph (2), the rate of such tax shall be--
                            ``(i) $16 on the first 6,000,000 barrels of 
                        beer--
                                    ``(I) brewed by the brewer and 
                                removed during the calendar year for 
                                consumption or sale, or
                                    ``(II) imported by the importer 
                                into the United States during the 
                                calendar year, and
                            ``(ii) $18 on any barrels of beer to which 
                        clause (i) does not apply.
                    ``(B) Barrel.--For purposes of this section, a 
                barrel shall contain not more than 31 gallons of beer, 
                and any tax imposed under this section shall be applied 
                at a like rate for any other quantity or for fractional 
                parts of a barrel.''.
            (2) Reduced rate for certain domestic production.--
        Subparagraph (A) of section 5051(a)(2) of the Internal Revenue 
        Code of 1986, as amended by section 13802(b) of Public Law 115-
        97, is amended--
                    (A) in the heading, by inserting ``$3.50 a barrel'' 
                before ``rate'', and
                    (B) by striking ``$7'' and all that follows through 
                ``January 1, 2020)'' and inserting ``$3.50''.
            (3) Application of reduced tax rate for foreign 
        manufacturers and importers.--Subsection (a) of section 5051 of 
        the Internal Revenue Code of 1986, as amended by section 
        13802(c) of Public Law 115-97, is amended--
                    (A) in subparagraph (A)(i)(II) of paragraph (1), as 
                amended by paragraph (1) of this subsection, by 
                inserting ``but only if the importer is an electing 
                importer under paragraph (4) and the barrels have been 
                assigned to the importer pursuant to such paragraph'' 
                after ``during the calendar year'', and
                    (B) in paragraph (4)--
                            (i) in subparagraph (A), by striking 
                        ``paragraph (1)(C)'' and inserting ``paragraph 
                        (1)(A)'', and
                            (ii) in subparagraph (B), by striking ``The 
                        Secretary'' and inserting ``The Secretary of 
                        the Treasury, in consultation with the 
                        Secretary of Health and Human Services and the 
                        Secretary of the Department of Homeland 
                        Security,''.
            (4) Controlled group and single taxpayer rules.--Paragraph 
        (5) of section 5051(a) of the Internal Revenue Code of 1986, as 
        amended by section 13802(d) of Public Law 115-97, is amended by 
        striking ``paragraph (1)(C)(i)'' each place it appears and 
        inserting ``paragraph (1)(A)(i)''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to beer removed after December 31, 2017.
    (c) Transfer of Beer Between Bonded Facilities.--
            (1) In general.--Section 5414 of the Internal Revenue Code 
        of 1986, as amended by section 13803(a) of Public Law 115-97, 
        is amended to read as follows:

``SEC. 5414. TRANSFER OF BEER BETWEEN BONDED FACILITIES.

    ``(a) In General.--Beer may be removed from one brewery to another 
brewery, without payment of tax, and may be mingled with beer at the 
receiving brewery, subject to such conditions, including payment of the 
tax, and in such containers, as the Secretary by regulations shall 
prescribe, which shall include--
            ``(1) any removal from one brewery to another brewery 
        belonging to the same brewer,
            ``(2) any removal from a brewery owned by one corporation 
        to a brewery owned by another corporation when--
                    ``(A) one such corporation owns the controlling 
                interest in the other such corporation, or
                    ``(B) the controlling interest in each such 
                corporation is owned by the same person or persons, and
            ``(3) any removal from one brewery to another brewery 
        when--
                    ``(A) the proprietors of transferring and receiving 
                premises are independent of each other and neither has 
                a proprietary interest, directly or indirectly, in the 
                business of the other, and
                    ``(B) the transferor has divested itself of all 
                interest in the beer so transferred and the transferee 
                has accepted responsibility for payment of the tax.
    ``(b) Transfer of Liability for Tax.--For purposes of subsection 
(a)(3), such relief from liability shall be effective from the time of 
removal from the transferor's bonded premises, or from the time of 
divestment of interest, whichever is later.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to any calendar quarters beginning after December 
        31, 2017.
    (d) Reduced Rate of Excise Tax on Certain Wine.--
            (1) In general.--Section 5041(c) of the Internal Revenue 
        Code of 1986, as amended by section 13804 of Public Law 115-97, 
        is amended--
                    (A) in the heading, by striking ``for Small 
                Domestic Producers'',
                    (B) by amending paragraph (1) to read as follows:
            ``(1) Allowance of credit.--
                    ``(A) In general.--There shall be allowed as a 
                credit against any tax imposed by this title (other 
                than chapters 2, 21, and 22) an amount equal to the sum 
                of--
                            ``(i) $1 per wine gallon on the first 
                        30,000 wine gallons of wine, plus
                            ``(ii) 90 cents per wine gallon on the 
                        first 100,000 wine gallons of wine to which 
                        clause (i) does not apply, plus
                            ``(iii) 53.5 cents per wine gallon on the 
                        first 620,000 wine gallons of wine to which 
                        clauses (i) and (ii) do not apply,
                which are produced by the producer and removed during 
                the calendar year for consumption or sale, or which are 
                imported by the importer into the United States during 
                the calendar year.
                    ``(B) Adjustment of credit for hard cider.--In the 
                case of wine described in subsection (b)(6), 
                subparagraph (A) of this paragraph shall be applied--
                            ``(i) in clause (i) of such subparagraph, 
                        by substituting `6.2 cents' for `$1',
                            ``(ii) in clause (ii) of such subparagraph, 
                        by substituting `5.6 cents' for `90 cents', and
                            ``(iii) in clause (iii) of such 
                        subparagraph, by substituting `3.3 cents' for 
                        `53.5 cents'.'',
                    (C) by striking paragraphs (2) and (8),
                    (D) by redesignating paragraphs (3) through (6) as 
                paragraphs (2) through (5), respectively,
                    (E) by redesignating paragraph (9) as paragraph 
                (6), and
                    (F) by amending paragraph (7) to read as follows:
            ``(7) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including regulations to ensure proper 
        calculation of the credit provided in this subsection.''.
            (2) Allowance of credit for foreign manufacturers and 
        importers.--Subsection (c) of section 5041 of the Internal 
        Revenue Code of 1986, as amended by paragraph (1), is amended--
                    (A) in subparagraph (A) of paragraph (1), by 
                inserting ``but only if the importer is an electing 
                importer under paragraph (6) and the wine gallons of 
                wine have been assigned to the importer pursuant to 
                such paragraph'' after ``into the United States during 
                the calendar year'', and
                    (B) in paragraph (6)--
                            (i) in subparagraph (A), by striking 
                        ``paragraph (8)'' and inserting ``paragraph 
                        (1)'',
                            (ii) in subparagraph (B), by striking ``The 
                        Secretary'' and inserting ``The Secretary of 
                        the Treasury, in consultation with the 
                        Secretary of Health and Human Services and the 
                        Secretary of the Department of Homeland 
                        Security,'', and
                            (iii) in subparagraph (C), by striking 
                        ``paragraph (4)'' and inserting ``paragraph 
                        (3)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to wine removed after December 31, 2017.
    (e) Adjustment of Alcohol Content Level for Application of Excise 
Tax Rates.--
            (1) In general.--Paragraphs (1) and (2) of section 5041(b) 
        of the Internal Revenue Code of 1986, as amended by section 
        13805 of Public Law 115-97, are each amended by striking ``14 
        percent'' and all that follows through ``January 1, 2020'' and 
        inserting ``16 percent''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to wine removed after December 31, 2017.
    (f) Definition of Mead and Low Alcohol by Volume Wine.--
            (1) In general.--Subsection (h) of section 5041 of the 
        Internal Revenue Code of 1986, as added by section 13806 of 
        Public Law 115-97, is amended--
                    (A) in paragraph (2), by striking ``the Secretary 
                shall'' each place it appears and inserting ``the 
                Secretary may'', and
                    (B) by striking paragraph (3).
            (2) Effective date.--The amendments made by this subsection 
        shall apply to wine removed after December 31, 2017.
    (g) Reduced Rate of Excise Tax on Certain Distilled Spirits.--
            (1) In general.--Subsection (c) of section 5001 of the 
        Internal Revenue Code of 1986, as added by subsection (a) of 
        section 13807 of Public Law 115-97 and amended by subsection 
        (c) of such section, is amended--
                    (A) in the heading, by striking ``for 2018 and 
                2019'',
                    (B) in paragraph (3)(B), by striking ``The 
                Secretary'' and inserting ``The Secretary of the 
                Treasury, in consultation with the Secretary of Health 
                and Human Services and the Secretary of the Department 
                of Homeland Security,'', and
                    (C) by striking paragraph (4).
            (2) Effective date.--The amendments made by this subsection 
        shall apply to distilled spirits removed after December 31, 
        2017.
    (h) Bulk Distilled Spirits.--
            (1) In general.--Section 5212 of the Internal Revenue Code 
        of 1986, as amended by section 13808 of Public Law 115-97, is 
        amended--
                    (A) by striking the last two sentences,
                    (B) by striking ``Bulk distilled spirits on which'' 
                and inserting ``Distilled spirits on which'', and
                    (C) by striking ``bulk distilled spirits for'' and 
                inserting ``distilled spirits for''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to distilled spirits transferred in bond after 
        December 31, 2017.
    (i) Simplification of Rules Regarding Records, Statements, and 
Returns.--
            (1) In general.--Subsection (a) of section 5555 of the 
        Internal Revenue Code of 1986 is amended by striking ``For 
        calendar quarters beginning after the date of the enactment of 
        this sentence, and before January 1, 2020, the Secretary'' and 
        inserting ``The Secretary''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to any calendar quarters beginning after February 
        9, 2018.

SEC. 3. USE OF WHOLESOME PRODUCTS SUITABLE FOR HUMAN FOOD CONSUMPTION 
              IN THE PRODUCTION OF FERMENTED BEVERAGES.

    (a) In General.--Not later than the date that is 1 year after the 
date of the enactment of this Act, the Secretary of the Treasury or the 
Secretary of the Treasury's delegate shall amend subpart F of part 25 
of subchapter A of chapter I of title 27, Code of Federal Regulations, 
to ensure that, for purposes of such part, wholesome fruits, 
vegetables, and spices suitable for human food consumption that are 
generally recognized as safe for use in an alcoholic beverage and that 
do not contain alcohol are generally recognized as a traditional 
ingredient in the production of fermented beverages.
    (b) Definition.--For purposes of this section, the term ``fruit'' 
means whole fruit, fruit juices, fruit puree, fruit extract, or fruit 
concentrate.
    (c) Rule of Construction.--Nothing in this section shall be 
construed to revoke, prescribe, or limit any other exemptions from the 
formula requirements under subpart F of part 25 of subchapter A of 
chapter I of title 27, Code of Federal Regulations, for any ingredient 
that has been recognized before, on, or after the date of the enactment 
of this Act as a traditional ingredient in the production of fermented 
beverages.

SEC. 4. INCREASED FUNDING FOR THE ALCOHOL AND TOBACCO TAX AND TRADE 
              BUREAU.

    (a) In General.--In addition to any other amounts authorized to be 
appropriated to the Alcohol and Tobacco Tax and Trade Bureau, there is 
authorized to be appropriated--
            (1) for fiscal year 2019, $15,000,000, to remain available 
        until September 30, 2020; and
            (2) for fiscal year 2020, $15,000,000, to remain available 
        until September 30, 2021.
    (b) Availability of Funds.--Of the amounts authorized to be 
appropriated under subsection (a), for each of fiscal years 2019 and 
2020--
            (1) $5,000,000 shall be for the costs of accelerating the 
        processing of formula and label applications;
            (2) $5,000,000 shall be for the costs of programs to 
        enforce trade practice violations of the Federal Alcohol 
        Administration Act (27 U.S.C. 201 et seq.); and
            (3) $5,000,000 shall be for the purpose of carrying out the 
        provisions of this Act and the amendments made by this Act, 
        including accelerating the processing of permit applications 
        for non-industrial alcohol production and distribution.
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