[Federal Register Volume 85, Number 106 (Tuesday, June 2, 2020)]
[Rules and Regulations]
[Pages 33539-33543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10709]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 18, 19, 24, 25, 26, 27, 28, 30, and 70

[Docket No. TTB-2016-0013; T.D. TTB-159; Re: T.D. TTB-146; Notice No. 
167]
RIN 1513-AC30


Changes to Certain Alcohol-Related Regulations Governing Bond 
Requirements and Tax Return Filing Periods

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Final rule; Treasury decision.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is adopting as 
final, with minor technical corrections, temporary regulations relating 
to excise taxes imposed on distilled spirits, wines, and beer that were 
published in the Federal Register on January 4, 2017. These regulatory 
amendments implement certain changes made to the Internal Revenue Code 
of 1986 (IRC) by the Protecting Americans from Tax Hikes Act of 2015, 
which amended the IRC to remove bond requirements and change tax return 
due dates for certain eligible excise taxpayers.

DATES: This final rule is effective June 2, 2020. As of June 2, 2020, 
the temporary regulations published in the Federal Register as T.D. 
TTB-146 at 82 FR 1108 on January 4, 2017, at 82 FR 1108, are adopted as 
final.

FOR FURTHER INFORMATION CONTACT: Karen A. Thornton, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street, NW, Box 12, Washington, DC 20005; telephone 202-453-2265, ext. 
175.

SUPPLEMENTARY INFORMATION: 

Background

TTB Authority

    The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers 
provisions in chapter 51 of the IRC pertaining to the taxation of 
distilled spirits, wines, and beer (see title 26 of the United States 
Code (U.S.C.), chapter 51 (26 U.S.C. chapter 51)). The IRC also 
contains provisions requiring certain persons who are liable for taxes 
imposed with respect to distilled spirits, wines, and beer to furnish 
bonds, which are formal guarantees to pay tax obligations under the IRC 
(see, e.g., 26 U.S.C. 5173, 5354, and 5401(b)). TTB administers the 
provisions of the IRC, and their implementing regulations, pursuant to 
section 1111(d) of the Homeland Security Act of 2002, codified at 6 
U.S.C. 531(d). The Secretary has delegated various authorities through 
Treasury Department Order 120-01, dated December 10, 2013 (superseding 
Treasury Department Order 120-01, dated January 24, 2003), to the TTB 
Administrator to perform the functions and duties in administration and 
enforcement of these provisions of law.

The PATH Act

    On December 18, 2015, the President signed into law the 
Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Division Q of 
this Act is titled the Protecting Americans from Tax Hikes Act of 2015 
(PATH Act). Section 332 of the PATH Act amends the IRC to change tax 
return due dates and remove bond requirements for certain eligible 
taxpayers beginning January 1, 2017. These PATH Act amendments apply to 
certain taxpayers who reasonably expect to be liable for not more than 
$50,000 in taxes imposed with respect to distilled spirits, wines, and 
beer for the calendar year and who were not liable for more than 
$50,000 in such taxes in the preceding calendar year.

[[Page 33540]]

    With respect to tax return dates, section 332 amends section 
5061(d) of the IRC to authorize a new annual return period for deferred 
payment of tax, in addition to the preexisting semimonthly or quarterly 
periods for the deferred payment of taxes authorized under that 
section. ``Deferred payment'' refers to payment of tax by the 
proprietor of a distilled spirits plant, wine premises, or brewery 
after the product is removed from the facility, rather than payment 
immediately before or at the time the product is removed from the 
facility. To be eligible to use the new annual deferred payment period, 
the taxpayer must reasonably expect to be liable for not more than 
$1,000 in excise tax imposed with respect to distilled spirits, wines, 
and beer for the calendar year and must be liable for not more than 
$1,000 in such taxes in the preceding calendar year. To be eligible to 
use quarterly deferred payment periods, the taxpayer must reasonably 
expect to be liable for not more than $50,000 in such taxes imposed for 
the calendar year and must be liable for not more than $50,000 in such 
taxes in the preceding calendar year.
    Section 332 of the PATH Act also amends several provisions of the 
IRC to remove bond requirements for certain eligible taxpayers. To be 
exempt from bond requirements, taxpayers must be eligible to use 
quarterly or annual return periods and must pay such taxes on a 
deferred basis. Even if taxpayers choose to pay taxes semimonthly, they 
still qualify for the bond exemption if they meet the criteria to pay 
taxes quarterly or annually. In addition, taxpayers are exempt from 
bond requirements with respect to distilled spirits and wine only to 
the extent those products are for nonindustrial use.
    For a more detailed discussion of the provisions of section 332 of 
the PATH Act, see T.D. TTB-146.

Publication of Temporary Regulations and Notice of Proposed Rulemaking

    On January 4, 2017, TTB published in the Federal Register at 82 FR 
1108, T.D. TTB-146, amending the regulations in parts 18, 19, 24, 25, 
26, 27, 28, and 30. The temporary rule was effective January 4, 2017, 
and would have expired on January 4, 2020, if not finalized prior to 
that date. The temporary rule amended the regulations in 27 CFR parts 
19, 24, 25, and 26 to incorporate the new annual tax return period 
provisions for eligible taxpayers, and it also amended parts 19, 24, 
25, 26, and 28 to remove the bond requirements for taxpayers who are 
eligible for the bond exemption. In conjunction with removing bond 
requirements, TTB made other amendments to implement the bond 
exemption, including new procedures for eligible proprietors to 
terminate existing bonds and identify themselves as eligible for the 
bond exemption.
    In addition, the temporary rule included amendments to parts 19, 
24, 25, 26, and 28 to conform other regulatory language to the new tax 
return periods and bond exemptions, to remove provisions made obsolete 
by the provisions of section 332 of the PATH Act, to make technical 
corrections, and to update the information that the regulations 
prescribe for forms relating to tax payments and bonds.
    For a detailed discussion of the specific amendments included in 
the temporary final rule, see T.D. TTB-146.
    TTB solicited comments on the amendments adopted in the temporary 
rule through a notice of proposed rulemaking published in the Federal 
Register (Notice No. 167, 82 FR 780). TTB did not receive comments on 
the temporary regulations. Accordingly, TTB is adopting the regulations 
in the temporary rule as final. In conjunction with finalizing the 
regulations, TTB is making technical amendments and corrections to 
these regulations as discussed later in this document.

Notice of Proposed Rulemaking Pertaining to Reporting Requirements

    In Notice No. 167, TTB also proposed to amend the regulations 
governing reporting requirements for distilled spirits plants (DSPs) 
and brewers generally to align the frequency of submitting reports with 
the new tax filing periods. That is, an industry member who was 
eligible to pay tax annually or quarterly and did so, would also file 
reports either annually or quarterly, as applicable. This new 
requirement was intended to reduce regulatory burden. TTB also 
solicited comments on whether to make any amendments to current 
reporting requirements for bonded wine cellars (including bonded 
wineries), although current regulations for bonded wine cellars include 
reduced reporting requirements for certain proprietors who pay taxes 
using annual or quarterly return periods. TTB sought comment in Notice 
No. 167 on these new reporting requirements for proprietors who pay 
taxes less frequently under Section 332 of the PATH Act, but the PATH 
Act amendments did not require any changes to TTB's reporting 
regulations for DSPs, bonded wine cellars, or brewers.
    TTB did not receive comments in response to Notice No. 167 
regarding the proposed reporting requirements for DSPs and brewers or 
regarding whether it should amend current reporting requirements for 
bonded wine cellars. Because no changes to TTB's reporting regulations 
are required under the PATH Act amendments, TTB has decided not to move 
forward with new reporting regulations in this final rule, even those 
that might require less frequent reporting, but also less flexibility 
in instances in which an industry member may not want to change its 
reporting frequency. Instead, TTB is reviewing its current reporting 
requirements to identify any reductions it can make in the information 
collected and the frequency in reporting, and intends to address such 
changes in the future.

Miscellaneous Technical Amendments and Corrections

    In addition to the temporary regulations TTB is adopting through 
this final rule, TTB is also making several technical amendments and 
corrections, as follows:
     In Sec. Sec.  26.200(e), 26.300, 27.48(b), 27.171(b) and 
(c), and the heading of subpart L of part 27, TTB is removing or 
modifying certain references to bonds to clarify that the regulations 
apply to facilities that are required to have a bond, as well as to 
facilities that are exempt from bond requirements under section 332 of 
the PATH Act. See section 5551(d)(2) of the IRC, which provides that 
taxpayers exempt from bond requirements under section 5551(d)(1) 
``shall be treated as if sufficient bond has been furnished for 
purposes of covering operation and withdrawals of distilled spirits or 
wines for nonindustrial use or of beer for purposes of any requirements 
relating to bonds under [chapter 51 of the IRC].'' These conforming 
amendments were inadvertently omitted from the temporary final rule 
(T.D. TTB-146).
     The last two sentences of paragraph (k) of Sec.  24.109 
are redesignated as a new paragraph (m) in order to clarify that all 
applicants shall furnish additional information upon request by the 
appropriate TTB officer and shall notify the appropriate TTB officer if 
any submitted information changes during the pending application. The 
addition of a new paragraph (l) to this section by T.D. TTB-146 had the 
unintended effect of making it appear as though the requirements in 
paragraph (k) to respond to requests for additional information and to 
inform TTB of information changes only applied to applicants who 
conduct other operations not specifically authorized by 27 CFR part 24 
on wine premises.

[[Page 33541]]

     TTB is removing references to ``the bonded premises of a 
distilled spirits plant'' in Sec.  27.171(b) and (c) that were added 
due to an inadvertent error in an amendatory instruction of T.D. TTB-
146, and is replacing those references with the words ``cellar'' and 
``brewery,'' respectively.
     TTB is amending several regulations in 27 CFR part 70 to 
reflect current requirements pertaining to tax returns and bond 
requirements. In 27 CFR 70.411(c)(26), TTB is replacing the words 
``internal revenue bond'' with the words ``distilled spirits plants'' 
because the term ``distilled spirits plant'' refers to those plants 
that are required to have a bond, as well as those that are exempt from 
bond requirements under section 332 of the PATH Act. This change is in 
a cross-reference to part 26, and is intended to accurately describe 
the regulations in part 26. TTB is also amending 27 CFR 70.412(a) to 
add references to annual return periods. Finally, TTB is removing the 
word ``bonded'' from 27 CFR 70.414(b) to reflect the fact that 27 CFR 
part 20 does not currently require dealers and users of specially 
denatured spirits to hold bonds.

Regulatory Analyses and Notices

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), TTB certifies that this final rule will not have a significant 
economic impact on a substantial number of small entities. The final 
rule will not impose, or otherwise cause, a significant increase in 
reporting, recordkeeping, or other compliance burdens on a substantial 
number of small entities. The final rule implements certain changes 
made to the Internal Revenue Code of 1986 by the Protecting Americans 
from Tax Hikes Act of 2015 (see Pub. L. 114-113, Division Q, section 
332). These statutory changes eliminate bond requirements and reduce 
tax return filing frequency for certain eligible taxpayers. The 
regulatory amendments provide for taxpayers to use TTB's existing 
qualification procedures to establish that they are exempt from bond 
requirements, and any minor increased burden associated with conveying 
to TTB an industry member's eligibility for the exemption flows 
directly from the statutory changes that prescribe the criteria for 
eligibility for the exemption. Pursuant to section 7805(f) of the IRC 
(26 U.S.C. 7805(f)), TTB submitted the temporary regulations to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on the impact of the temporary regulations on small businesses; 
TTB received no comment in reply.

Executive Order 12866

    This regulation is not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Department of the Treasury and the Office of 
Management and Budget regarding review of tax regulations.

Paperwork Reduction Act

    Regulations addressed in this final rule contain current 
collections of information that have been previously reviewed and 
approved by the Office of Management and Budget (OMB) in accordance 
with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3507). An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a valid 
control number assigned by OMB.
    The collections of information associated with the regulations 
adopted in T.D. TTB-146 are assigned control numbers 1513-0005, 1513-
0009, 1513-0015, 1513-0031, 1513-0037, 1513-0038, 1513-0048, 1513-0050, 
1513-0083, 1513-0123, 1513-0125, and 1513-0135. Revisions to these 
collections and their connections to the regulatory amendments in T.D. 
TTB-146 are described in detail in that document, which also solicited 
comment regarding the revisions. TTB received no comments on the 
revisions. In cases where TTB revised the collections, these revisions 
were submitted to and approved by OMB.

Inapplicability of Prior Notice and Public Comment and Delayed 
Effective Date Procedures

    TTB is finalizing the temporary regulations set forth in T.D TTB-
146 in this final rule without a delayed effective date, pursuant to 
the provisions of 5 U.S.C. 553(d)(1) and (d)(3). As provided for in 
section 553(d)(1), the temporary regulations being finalized in this 
final rule recognize a statutory exemption from bond requirements and 
authorize a new voluntary annual tax return period. TTB has also 
determined that good cause exists under section 553(d)(3) to provide 
industry members with guidance on procedures to apply for and obtain 
the bond exemption authorized under provisions of a law that are 
already in effect.
    The technical corrections in this final rule address typographical 
errors, and are meant to clarify the uniformity of the regulations, 
rather than change the Bureau's interpretation. Therefore, TTB has 
determined that no notice of proposed rulemaking and public comment 
period are required under section 553(b) for the technical corrections 
set out in this final rule. For these same reasons, TTB has determined 
that the technical corrections in this final rule are exempt from the 
delayed effective date procedure under section 553(d)(3).

Drafting Information

    Karen A. Thornton of the Regulations and Rulings Division drafted 
this document with the assistance of other Alcohol and Tobacco Tax and 
Trade Bureau personnel.

List of Subjects

27 CFR Part 18

    Alcohol and alcoholic beverages, Fruits, Reporting and 
recordkeeping requirements, Spices and flavorings.

27 CFR Part 19

    Administrative practice and procedure, Alcohol and alcoholic 
beverages, Authority delegations (Government agencies), Caribbean Basin 
initiative, Chemicals, Claims, Customs duties and inspection, 
Electronic funds transfers, Excise taxes, Exports, Gasohol, Imports, 
Labeling, Liquors, Packaging and containers, Puerto Rico, Reporting and 
recordkeeping requirements, Research, Security measures, Spices and 
flavorings, Stills, Surety bonds, Transportation, Vinegar, Virgin 
Islands, Warehouses, Wine.

27 CFR Part 24

    Administrative practice and procedure, Claims, Electronic funds 
transfers, Excise taxes, Exports, Food additives, Fruit juices, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Research, Scientific equipment, Spices and 
flavorings, Surety bonds, Vinegar, Warehouses, Wine.

27 CFR Part 25

    Beer, Claims, Electronic funds transfers, Excise taxes, Exports, 
Labeling, Packaging and containers, Reporting and recordkeeping 
requirements, Research, Surety bonds.

27 CFR Part 26

    Alcohol and alcoholic beverages, Caribbean Basin initiative, 
Claims, Customs duties and inspection, Electronic funds transfers, 
Excise taxes, Packaging and containers, Puerto Rico, Reporting and 
recordkeeping requirements, Surety bonds, Virgin Islands, Warehouses.

[[Page 33542]]

27 CFR Part 27

    Alcohol and alcoholic beverages, Beer, Cosmetics, Customs duties 
and inspection, Electronic funds transfers, Excise taxes, Imports, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Wine.

27 CFR Part 28

    Aircraft, Alcohol and alcoholic beverages, Armed forces, Beer, 
Claims, Excise taxes, Exports, Foreign trade zones, Labeling, Liquors, 
Packaging and containers, Reporting and recordkeeping requirements, 
Surety bonds, Vessels, Warehouses, Wine.

27 CFR Part 30

    Liquors, Scientific equipment.

27 CFR Part 70

    Administrative practice and procedure, Claims, Excise taxes, 
Freedom of information, Law enforcement, Penalties, Reporting and 
recordkeeping requirements, Surety bonds.

Amendments to the Regulations

    The temporary rule that amended 27 CFR parts 18, 19, 24, 25, 26, 
27, 28, and 30, and published as T.D. TTB-146 at 82 FR 1108, January 4, 
2017, is adopted as a final rule without change.
    Further, as discussed in the preamble, TTB is making technical 
amendments and corrections to 27 CFR, chapter I, parts 24, 26, 27, and 
70, as set forth below.

PART 24--WINE

0
1. The authority citation for part 24 continues to read as follows:

    Authority: 5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042, 
5044, 5061, 5062, 5121, 5122-5124, 5173, 5206, 5214, 5215, 5351, 
5353, 5354, 5356, 5357, 5361, 5362, 5364-5373, 5381-5388, 5391, 
5392, 5511, 5551, 5552, 5661, 5662, 5684, 6065, 6091, 6109, 6301, 
6302, 6311, 6651, 6676, 7302, 7342, 7502, 7503, 7606, 7805, 7851; 31 
U.S.C. 9301, 9303, 9304, 9306.

0
2. Section 24.109 is amended:
0
a. By removing the last two sentences of paragraph (k);
0
b. By removing the period at the end of paragraph (l) and adding in its 
place ``; and'';
0
c. By adding paragraph (m); and
0
d. By revising the Office of Management and Budget control number 
reference at the end of the section.
    The addition and revision read as follows:


Sec.  24.109   Data for application.

* * * * *
    (m) The applicant shall, when required by the appropriate TTB 
officer, furnish as part of the application, additional information as 
may be necessary to determine whether the application should be 
approved. If any of the submitted information changes during the 
pending application, the applicant shall immediately notify the 
appropriate TTB officer of the revised information.

(Approved by the Office of Management and Budget under control number 
1513-0009)

PART 26--LIQUORS AND ARTICLES FROM PUERTO RICO AND THE VIRGIN 
ISLANDS

0
3. The authority citation for part 26 continues to read as follows:

    Authority: 19 U.S.C. 81c; 26 U.S.C. 5001, 5007, 5008, 5010, 
5041, 5051, 5061, 5111-5114, 5121, 5122-5124, 5131-5132, 5207, 5232, 
5271, 5275, 5301, 5314, 5555, 6001, 6109, 6301, 6302, 6804, 7101, 
7102, 7651, 7652, 7805; 27 U.S.C. 203, 205; 31 U.S.C. 9301, 9303, 
9304, 9306.


Sec.  26.200  [Amended]

0
4. Section 26.200 is amended in paragraph (e) by removing the words 
``from internal revenue bonded premises'' and adding in their place the 
words ``from, respectively, a distilled spirits plant, bonded wine 
cellar, or brewery''.


Sec.  26.300  [Amended]

0
5. Section 26.300 is amended:
0
a. In paragraph (a), by removing the words ``internal revenue bond'' 
and adding in their place the words ``a distilled spirits plant'';
0
b. In paragraph (b), by removing the words ``cellar's internal revenue 
bond'' and adding in their place the word ``cellar'';
0
c. In paragraph (c), by removing the word ``bonded'' each place it 
appears; and
0
d. In paragraph (c), by removing the words ``brewery's internal revenue 
bond'' and adding in their place the word ``brewery''.

PART 27--IMPORTATION OF DISTILLED SPIRITS, WINES, AND BEER

0
6. The authority citation for part 27 continues to read as follows:

    Authority: 5 U.S.C. 552(a), 19 U.S.C. 81c, 1202; 26 U.S.C. 5001, 
5007, 5008, 5010, 5041, 5051, 5054, 5061, 5121, 5122-5124, 5201, 
5205, 5207, 5232, 5273, 5301, 5313, 5555, 6109, 6302, 7805.


0
7. Section 27.48 is amended by revising the paragraph (b) subject 
heading to read as follows:


Sec.  27.48  Imported distilled spirits, wines, and beer.

* * * * *
    (b) Distilled spirits, natural wines, and beer transferred without 
payment of tax to distilled spirits plants, bonded wine cellars, and 
breweries. * * *
* * * * *

Subpart L--Transfer of Distilled Spirits, Natural Wines, and Beer 
Without Payment of Tax, From Customs Custody to Distilled Spirits 
Plants, Bonded Wine Cellars, and Breweries

0
8. The heading of subpart L is revised to read as set forth above.


Sec.  27.171  [Amended]

0
9. Section 27.171 is amended:
0
a. In paragraph (b), by removing the words ``cellar's the bonded 
premises of a distilled spirits plant'' and adding in their place the 
word ``cellar'';
0
b. In paragraph (c), by removing the words ``brewery's the bonded 
premises of a distilled spirits plant'' and adding in their place the 
word ``brewery'';
0
c. In paragraph (c), by removing the word ``bonded'' in every other 
place it appears; and
0
d. In paragraph (c), by removing the phrase ``by the proprietor of'' 
and adding in its place the phrase ``by the proprietor of a''.

PART 70--PROCEDURE AND ADMINISTRATION

0
10. The authority citation for part 70 continues to read as follows:

    Authority:  5 U.S.C. 301 and 552; 26 U.S.C. 4181, 4182, 5123, 
5203, 5207, 5275, 5367, 5415, 5504, 5555, 5684(a), 5741, 5761(b), 
5802, 6020, 6021, 6064, 6102, 6155, 6159, 6201, 6203, 6204, 6301, 
6303, 6311, 6313, 6314, 6321, 6323, 6325, 6326, 6331-6343, 6401-
6404, 6407, 6416, 6423, 6501-6503, 6511, 6513, 6514, 6532, 6601, 
6602, 6611, 6621, 6622, 6651, 6653, 6656-6658, 6665, 6671, 6672, 
6701, 6723, 6801, 6862, 6863, 6901, 7011, 7101, 7102, 7121, 7122, 
7207, 7209, 7214, 7304, 7401, 7403, 7406, 7423, 7424, 7425, 7426, 
7429, 7430, 7432, 7502, 7503, 7505, 7506, 7513, 7601-7606, 7608-
7610, 7622, 7623, 7653, 7805.


Sec.  70.411  [Amended]

0
11. Section 70.411 is amended in paragraph (c)(26) by removing the 
words ``internal revenue bond'' and adding in their place the words 
``distilled spirits plants''.

0
12. In Sec.  70.412, the second sentence of paragraph (a) is revised to 
read as follows:


Sec.  70.412  Excise taxes.

    (a) * * * Depending on the circumstances, the person responsible

[[Page 33543]]

for paying the taxes may be eligible to file semimonthly, quarterly, or 
annual returns, with proper remittances, to cover the taxes incurred on 
distilled spirits, wines, and beer during the semimonthly, quarterly, 
or annual period. * * *
* * * * *


Sec.  70.414  [Amended]

0
13. Section 70.414 is amended in paragraph (b) by removing the word 
``bonded''.

    Signed: December 13, 2019.
Mary G. Ryan,
Acting Administrator.

    Approved: May 7, 2020.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade and Tariff Policy).
[FR Doc. 2020-10709 Filed 6-1-20; 8:45 am]
 BILLING CODE 4810-31-P