[Congressional Record Volume 143, Number 27 (Wednesday, March 5, 1997)]
[Senate]
[Pages S1981-S1984]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

       By Mr. BREAUX (for himself and Mr. Bryan):

  S. 395. A bill to amend the Internal Revenue Code of 1986 to simplify 
the method of payment of taxes on distilled spirits; to the Committee 
on Finance.


      THE DISTILLED SPIRITS TAX PAYMENT SIMPLIFICATION ACT OF 1997

  Mr. BREAUX. Mr. President, today I introduce the ``Distilled Spirits 
Tax Payment Simplification Act of 1997,'' a bill more readily known as 
All-In-Bond. This bill would streamline the way in which the Government 
collects Federal excise tax on distilled spirits by extending the 
current system of collection now applicable only to imported products 
to domestic products as well.
  Today wholesalers purchase foreign-bottled distilled spirits in 
bond--tax free--paying the Federal excise tax directly after sale to a 
retailer. In contrast, when the wholesaler buys domestically bottled 
spirits--nearly 86 percent of total inventory--the price includes the 
Federal excise tax, prepaid by the distiller. This means that hundreds 
of U.S. family-owned wholesale businesses increase their inventory 
carrying costs by 40 percent when buying U.S. products, which often 
have to be financed through borrowing.
  Under my bill, wholesalers would be allowed to purchase domestically 
bottled distilled spirits in bond from distillers just as they are now 
permitted to purchase foreign-produced spirits. Products would become 
subject to tax on removal from wholesale premises. This legislation is 
designed to be revenue neutral and includes the requirement that any 
wholesaler electing to purchase spirits in bond must make certain 
estimated tax payments to Treasury before the end of the fiscal year.
  All-In-Bond is an equitable and sound way to streamline our tax 
collection system. I hope my colleagues will join me in cosponsoring 
this important legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 395

       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)

[[Page S1983]]

     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. 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.
       By Ms. MIKULSKI (for herself and Mr. SARBANES):

  S. 396. A bill to amend titles 5 and 37, United States Code, to 
provide for the continuance of pay and the authority to make certain 
expenditures and obligations during lapses in appropriations; to the 
Committee on Governmental Affairs.


            THE FEDERAL EMPLOYEE COMPENSATION PROTECTION ACT

 Ms. MIKULSKI. Mr. President, today I am introducing an 
important piece of legislation called the Federal Employee Compensation 
Protection Act.
  With the 1995 to 1996 Government shutdown fresh in our minds, I think 
it is crucial that we take steps in this Congress to keep faith with 
our Federal employees and make sure they are never again sent home 
without pay. My bill will keep that faith by protecting Federal 
employee pay and benefits during a future Government shutdown. This 
bill ensures that Federal employees in Maryland and across the Nation

[[Page S1984]]

will be able to make their mortgage payments, put food on the table, 
and provide for their families during a shutdown.
  The last shutdown of the Federal Government severely disrupted the 
lives of thousands of Federal employees and their families. In my State 
of Maryland alone, there are more than 280,000 Federal employees. They 
are some of the most dedicated and hard-working people in America 
today. These employees have devoted their careers and lives to public 
service, and they should not have been used as pawns in a game of 
political brinkmanship.
  During the last several years, Federal employees have endured their 
fair share of hardship. Downsizing, diet COLA's, delayed COLA's, and 
attacks on pensions and health benefits have damaged morale at nearly 
every Federal agency. These assaults must stop. We cannot continue to 
denigrate and downgrade Federal employees and at the same time expect 
Government to work more efficiently.
  I urge my colleagues to support this legislation and also work to 
prevent any future shutdowns of our Government. We have a contract with 
our Federal employees, and we should encourage their dedication by 
ensuring that the contract is honored and their pay and benefits are 
not put in jeopardy.
 Mr. SARBANES. Mr. President, I am pleased to join my colleague 
from Maryland, Senator Mikulski, in introducing this important 
legislation to ensure the protection of Federal employee pay and 
benefits in the event of a furlough.
  We have a responsibility to the men and women who have dedicated 
themselves to public service and I would hope that my colleagues would 
join Senator Mikulski and me in our ongoing effort to maintain the 
Federal Government's commitment to its dedicated work force.
  Federal workers have just experienced the most difficult Congress in 
recent history. Federal employees became hostages in the budget battle 
which resulted in two successive Government shutdowns. At this time 
last year, Federal employees were in a constant state of anxiety--
concerned about the future of their jobs, whether they would be laid 
off or have to work without pay, all as their workloads continued to 
accumulate. Despite this tremendous pressure and the constant attacks 
on their pay and earned benefits, Federal workers continue to provide 
consistent, quality service on behalf of all Americans.
  As I have stated many times before, Federal employees have already 
made significant sacrifices in past years in the form of downsizing 
efforts, delayed and reduced cost of living adjustments, and other 
reductions in Federal employee pay and benefits. It is, in my view, 
critical that we protect Federal employees from the type of senseless 
abuse they endured during the Government shutdowns last Congress. 
Federal workers should never again find themselves in a situation 
where, through no fault of their own, they may have to either work 
without pay or be prohibited from coming to work at all.
  Mr. President, Federal employees have made a choice to serve their 
country and we should respect and reward that choice by supporting 
these hardworking, dedicated individuals. Through the legislation 
Senator Mikulski and I are reintroducing today, we will continue to 
send the message to the Federal work force and to all American citizens 
that Congress honors and values the commitment those who work for the 
Government have made.
                                 ______