[Congressional Record Volume 143, Number 58 (Wednesday, May 7, 1997)]
[Senate]
[Pages S4108-S4110]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BREAUX (for himself, Mr. Bryan, Mr. D'Amato, and Mr. 
        Frist):
  S. 711. 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, I rise today with Mr. Bryan, Mr. D'Amato 
and Mr. Frist to 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, pre-paid 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. 711

       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:

[[Page S4109]]

     ``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.

[[Page S4110]]

       (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.
                                 ______