[Federal Register Volume 66, Number 137 (Tuesday, July 17, 2001)]
[Proposed Rules]
[Pages 37198-37200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17692]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 20

[Notice No. 923]
RIN 1512-AB57


Distribution and Use of Denatured Alcohol and Rum (2000R-291P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Bureau of Alcohol, Tobacco and Firearms (ATF) proposes to 
amend the regulations in 27 CFR part 20 by eliminating the requirement 
for users of specially denatured spirits (SDS) to file a bond. ATF 
believes that elimination of the requirement to file a bond will 
greatly reduce and simplify the qualification process for industrial 
alcohol user permits. ATF also proposes to liberalize certain 
qualification requirements relating to industrial alcohol user permits.

DATES: Written comments must be received on or before September 17, 
2001.

ADDRESSES: Send written comments to: Chief, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms, P.O. Box 50221, Washington, DC 
20091-0221, (Attention: Notice No. 923). See ``Public Participation'' 
section of this notice if you want to comment by facsimile or e-mail.

FOR FURTHER INFORMATION CONTACT: Lisa M. Gesser, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms, 650 Massachusetts Avenue NW, 
Washington, DC 20226, (202-927-9347) or e-mail at 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

Background on SDS

    Specially denatured spirits (SDS) are alcohol or rum that have been 
treated with denaturants to make them unfit for beverage use. SDS 
include specially denatured alcohol (SDA) and specially denatured rum 
(SDR). A user purchases SDS to use in a process or in the manufacture 
of a substance, preparation, or product requiring SDS. SDS have many 
uses, such as:
     In laboratories as a solvent, for cleansing purposes, or 
in the preparation of indicator solutions and reagents.
     In the manufacture of such articles as perfumes, 
proprietary solvents, tobacco flavors, lotions, and sprays.
     In conversion processes to produce other substances, such 
as vinegar or ethyl acetate.
    An industrial alcohol user permit is needed to procure, use, 
recover, or deal in SDS. To obtain an industrial alcohol user permit, 
certain registration requirements must be met. These requirements may 
include the submission of a detailed application with supporting data, 
the payment of special (occupational) tax (SOT), and the acquisition of 
bond coverage. Once

[[Page 37199]]

such registration requirements are met, the applicant is issued an 
industrial alcohol user permit and may commence conducting any of the 
uses authorized under the law and regulations for industrial alcohol 
user permittees. The permittee is allowed to purchase and acquire 
alcohol from a registered distilled spirits plant (DSP) free of the 
excise tax payments normally required by the DSP proprietor. For this 
reason, SDS authorized uses are limited or restricted under the law. 
Any permittee who uses SDS in a manner that violates the laws and 
regulations becomes liable for the tax and other provisions of the 
Internal Revenue Code of 1986, 26 U.S.C. 5001(a)(5).

Bonds and Consents of Surety

    Section 5272 of the Internal Revenue Code of 1986 provides that 
bond coverage may be required as part of the industrial alcohol user 
permit qualification process. Prior to 1985, the regulations required 
applicants (other than States, political subdivisions, and the District 
of Columbia) who wished to obtain more than 120 gallons of SDS per 
year, to submit an Industrial Alcohol Bond, ATF Form 5150.25. In 1985, 
the SDS regulations were revised and the exemption from bond coverage 
was expanded. See, T.D. ATF-199, (50 FR 9152), published on March 6, 
1985. Under those revisions, the percentage of users of SDS who were 
exempt from filing a surety bond increased from 43 percent, under the 
prior regulations, to 75 percent under the adopted regulations.
    Subpart E of 27 CFR part 20 still reflects that expansion today. 
Specifically, applicants (other than States, political subdivisions, 
and the District of Columbia) who wish to obtain more than 5,000 
gallons of SDS per year must, in addition to other requirements, submit 
an Industrial Alcohol Bond, ATF Form 5150.25.
    Based on the post-1985 experience in administering part 20, ATF 
believes that bond coverage should no longer be required of any 
applicant for an industrial alcohol use permit. Additionally, ATF 
believes that elimination of the bond requirement under subpart E will 
result in substantially reduced administrative and financial burdens on 
industrial alcohol permittees. Therefore, ATF is soliciting public 
comments on the proposal to delete the bond requirements.

Qualification Requirements

    Section 5271 of the Internal Revenue Code of 1986 requires the 
submission of an application before a permit may be issued to procure, 
deal in, or use SDS. Current regulations require the submission of a 
detailed application with supporting data by all applicants. The 
appropriate ATF officer is authorized to waive some of the application 
and supporting data requirements for applicants who are a State, 
political subdivisions thereof, or the District of Columbia, or whose 
annual withdrawal and sale or usage of SDS will not exceed 5,000 proof 
gallons.
    ATF believes that this waiver should be available to all applicants 
when the appropriate ATF officer concludes that the revenue is 
adequately protected with respect to the person submitting the 
application and that there is no hindrance to the effective 
administration of part 20. Therefore, ATF is soliciting public comments 
on the proposal to amend the regulations to allow the appropriate ATF 
officer to waive detailed applications with supporting data for all 
applicants.

Regulatory Flexibility Act

    It is hereby certified that these proposed regulations will not 
have a significant economic impact on a substantial number of small 
entities. The proposed regulations will simplify the qualification 
process for an industrial alcohol user permit by eliminating the 
requirement to obtain a bond. A copy of the proposed rule was submitted 
to the Chief Counsel for Advocacy of the Small Business Administration 
in accordance with 26 U.S.C. 7805(f). No comments were received.

Executive Order 12866

    It has been determined that this regulation is not a significant 
regulatory action as defined by Executive Order 12866. Accordingly, the 
proposed rule is not subject to the analysis required by this Executive 
Order.

Paperwork Reduction Act

    The provisions of the Paperwork Reduction Act of 1995, 44 U.S.C. 
Chapter 35, and its implementing regulations, 5 CFR part 1320, do not 
apply to this proposed rule because there are no new reporting or 
recordkeeping requirements.

Public Participation

Who May Comment on This Notice?

    ATF requests comments from all interested parties. In addition, ATF 
specifically requests comments on the clarity of this proposed rule and 
how it may be made easier to understand. Comments received on or before 
the closing date will be carefully considered. Comments received after 
that date will be given the same consideration if it is practical to do 
so. However, assurance of consideration can only be given to comments 
received on or before the closing date.

Can I Review Comments Received?

    Copies of the proposed regulations and any written comments 
received will be available for public inspection during normal business 
hours at the ATF Reading Room, Office of the Liaison and Public 
Information, Room 6480, 650 Massachusetts Avenue, NW., Washington, DC 
20226.

Will ATF Keep My Comments Confidential?

    ATF will not recognize any comment as confidential. All comments 
and materials may be disclosed to the public. If you consider your 
material to be confidential or inappropriate for disclosure to the 
public, you should not include it in the comments. We will also 
disclose the name of any person who submits a comment.

Can I Request a Public Hearing?

    During the comment period, any person may request an opportunity to 
present oral testimony at a public hearing. However, the Director 
reserves the right to determine, in light of all circumstances, whether 
a public hearing will be held.

How Do I Send Facsimile Comments?

    You may submit comments by facsimile transmission to (202) 927-
8525.
    Facsimile comments must:
     Be legible.
     Reference this notice number.
     Be on paper 8\1/2\" x 11" in size.
     Contain a legible written signature.
     Be not more than three pages.
    We will not acknowledge receipt of facsimile transmissions. We will 
treat facsimile transmissions as originals.

How Do I Send Electronic Mail (E-Mail) Comments?

    You may submit comments by e-mail by sending the comments to 
[email protected]. You must follow these instructions. E-mail 
comments must:
     Contain your name, mailing address, and e-mail address.
     Reference this notice number.
     Be legible when printed on not more than three pages, 8\1/
2\" x 11" in size.
    We will not acknowledge receipt of e-mail. We will treat comments 
submitted by e-mail as originals.

[[Page 37200]]

How Do I Send Comments to the ATF Internet Web Site?

    You may also submit comments using the comment form provided with 
the online copy of the proposed rule on the ATF internet web site at 
www.atf.treas.gov/alcohol/rules/index.htm.

Drafting Information

    The principal author of this document is Lisa M. Gesser, 
Regulations Division, Bureau of Alcohol, Tobacco and Firearms.

List of Subjects in 27 CFR Part 20

    Administrative practice and procedure, Advertising, Alcohol and 
alcohol beverages, Authority delegations, Claims, Excise taxes, 
Reporting and recordkeeping requirements, Surety bonds.

Authority and Issuance

    ATF is proposing to amend part 20 in title 27 of the Code of 
Federal Regulations as follows:

PART 20--DISTRIBUTION AND USE OF DENATURED ALCOHOL AND RUM

    Paragraph. 1. The authority citation for 27 CFR part 20 continues 
to read as follows:

    Authority: 26 U.S.C. 5001, 5206, 5214, 5271-5275, 5311, 5552, 
5555, 5607, 6065, 7805.


Sec. 20.3  [Amended]

    Par. 2. Amend Sec. 20.3, Related Regulations, by removing the cite 
to ``31 CFR Part 225.''


Sec. 20.21  [Amended]

    Par. 3. Amend Sec. 20.21(a) by removing the word ``bonds'' from the 
first sentence.


Sec. 20.22  [Amended]

    Par. 4. Amend Sec. 20.22 as follows:
    a. Remove paragraph (a)(3); and
    b. Redesignate paragraph (a)(4) as paragraph (a)(3).


Sec. 20.26  [Removed]

    Par. 5. Remove Sec. 20.26.
    Par. 6. Amend Sec. 20.43 by revising paragraphs (a)(2) and (b) to 
read as follows:


Sec. 20.43  Exceptions to application requirements.

    (a) * * *
    (2) Applications, Form 5150.22, filed by applicants, where the 
appropriate ATF officer has determined that the waiver of such 
requirements does not pose any jeopardy to the revenue or a hindrance 
of the effective administration of this part.
    (b) The waiver provided for in this section will terminate for a 
permittee, other than States or political subdivisions thereof or the 
District of Columbia, when the appropriate ATF officer determines that 
the conditions justifying the waiver no longer exist. In this case, the 
permittee will furnish the information in respect to the previously 
waived items, as provided in Sec. 20.56(a)(2).
    Par. 7. Amend the second sentence of Sec. 20.58 to read as follows:


Sec. 20.58  Adoption of documents by a fiduciary.

    * * * The fiduciary may adopt the formulas and statements of 
process of the predecessor. * * *


Sec. 20.59  [Amended]

    Par. 8. Amend Sec. 20.59 as follows:
    a. Remove paragraph (b);
    b. Redesignate paragraph (c) as paragraph (b); and
    c. Redesignate paragraph (d) as paragraph (c).


Sec. 20.61  [Amended]

    Par. 9. Amend Sec. 20.61 by removing the last sentence of the text.


Sec. 20.62  [Amended]

    Par. 10. Amend Sec. 20.62 as follows:
    a. Remove the paragraph letter and title designation ``(a) 
Permit''; and
    b. Remove paragraph (b).


Sec. 20.68  [Amended]

    Par. 11. Amend Sec. 20.68 as follows:
    a. Remove paragraph (b).
    b. Redesignate paragraph (c) as paragraph (b).

Subpart E--[Removed and Reserved]

    Par. 12. Remove and reserve Subpart E--Bonds and Consents of 
Surety.
    Par. 13. Revise paragraph (c) of Sec. 20.175 to read as follows:


Sec. 20.175  Shipment for account of another dealer.

* * * * *
    (c) The dealer who ordered the shipment shall be liable for the tax 
while the specially denatured spirits are in transit and the person 
actually shipping the specially denatured spirits shall not be liable.


Sec. 20.177  [Amended]

    Par. 14. Amend paragraph (b) of Sec. 20.177 by removing the word 
``bonded'' in the first sentence.


Sec. 20.232  [Amended]

    Par. 15. Amend Sec. 20.232 as follows:
    a. Remove paragraph (b).
    b. Redesignate paragraph (c) as paragraph (b).


Sec. 20.241  [Amended]

    Par. 16. Amend Sec. 20.241 by removing the words ``and filing of a 
bond are'' and add, in their place, the word ``is.''

    Signed: April 20, 2001.
Bradley A. Buckles,
Director.
    Approved: June 11, 2001.
Timothy E. Skud,
Acting Deputy Assistant Secretary (Regulatory, Tariff and Trade 
Enforcement).
[FR Doc. 01-17692 Filed 7-16-01; 8:45 am]
BILLING CODE 4810-31-P