[Federal Register Volume 87, Number 184 (Friday, September 23, 2022)]
[Proposed Rules]
[Pages 58043-58045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20413]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 26 and 27

[Docket No. TTB-2022-0009; Notice No. 215; Re: T.D. TTB-186]
RIN 1513-AC89


Implementation of Refund Procedures for Craft Beverage 
Modernization Act Federal Excise Tax Benefits Applicable to Imported 
Alcohol

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

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: Elsewhere in this issue of the Federal Register, by means of a 
temporary rule, the Alcohol and Tobacco Tax and Trade Bureau (TTB) is 
implementing certain changes made to the Internal Revenue Code by the 
Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Tax Relief Act 
of 2020), which amended the Craft Beverage Modernization Act (CBMA) 
provisions of the Tax Cuts and Jobs Act of 2017. The temporary rule 
establishes procedures for taking advantage of quantity-limited reduced 
tax rates and tax credits applicable to imported alcohol products. The 
text of the regulations in that temporary rule serves as the text of 
the proposed regulations. This document also proposes to amend the 
regulations to clarify that a foreign producer may not assign CBMA tax 
benefits on distilled spirits, wine, or beer unless it produces the 
product. In this document, TTB is soliciting comments on the regulatory 
amendments adopted in the temporary rule and on the amendment proposed 
in this notice of proposed rulemaking.

DATES: Comments must be received on or before November 22, 2022.

ADDRESSES: You may electronically submit comments to TTB on this 
proposal and view copies of this document, its supporting materials, 
and any comments TTB receives on it within Docket No. TTB-2022-0009 as 
posted at https://www.regulations.gov. A direct link to that docket is 
available on the TTB website at https://www.ttb.gov/laws-and-regulations/all-rulemaking under Notice No. 186. Alternatively, you may 
submit comments via postal mail to the Director, Regulations and Ruling 
Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, 
Box 12, Washington, DC 20005. Please see the Public Participation 
section of this document for further information on the comments 
requested regarding this proposal and on the submission, 
confidentiality, and public disclosure of comments.

FOR FURTHER INFORMATION CONTACT: Jesse Longbrake, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street NW, Box 12, Washington, DC 20005; telephone (202) 453-1039, ext. 
066.

SUPPLEMENTARY INFORMATION:

Background

    On December 22, 2017, the President signed into law the Tax Cuts 
and Jobs Act, which among other things amended provisions of the 
Internal Revenue Code (IRC) related to excise taxes on beer, wine, and 
distilled spirits; the section of the Tax Cuts and Jobs Act containing 
these provisions is referred to as the Craft Beverage Modernization Act 
(CBMA). Beginning in 2018, CBMA made quantity-limited tax benefits 
(CBMA tax benefits) available to all producers of distilled spirits, 
wine, and beer, domestic and foreign. The CBMA tax benefits were 
initially limited to calendar years 2018 and 2019 but were subsequently 
extended and then made permanent by the Taxpayer Certainty and Disaster 
Tax Relief Act of 2020 (Tax Relief Act of 2020).\1\
---------------------------------------------------------------------------

    \1\ See Public Law 115-97, sections 13801-13808 (CBMA provisions 
of the law commonly known as the Tax Cuts and Jobs Act); Public Law 
116-94, section 144 (Further Consolidated Appropriations Act, 2020 
extending and amending CBMA provisions); Public Law 116-260, 
Division EE, sections 106-110 (Tax Relief Act of 2020 making CBMA 
provisions permanent with amendments).
---------------------------------------------------------------------------

    The Tax Relief Act of 2020 also transferred responsibility for 
administering the CBMA tax benefits for imported alcohol from the 
Department of Homeland Security's U.S. Customs and Border Protection 
(CBP) to the Department of the Treasury (Treasury). Specifically, for 
alcohol entered for consumption in the United States after December 31, 
2022,\2\ importers will no longer be eligible for CBMA tax benefits 
when paying tax to CBP. Rather, importers will be required to pay the 
full tax rate to CBP and submit refund claims to Treasury to receive 
the lower rates. Importers will submit refund claims to TTB for the 
difference between the tax paid at the full rate and the amount that 
would have been paid if tax liability had been calculated using the tax 
benefits assigned to them by foreign producers.
---------------------------------------------------------------------------

    \2\ TTB's temporary rule implements statutory tax refund 
provisions that apply to imported products ``removed'' after 
December 31, 2022. See 26 U.S.C. 5001(c)(4), 5041(c)(7), and 
5051(a)(6)). TTB regulations at 27 CFR 27.48 provide that any 
internal revenue taxes payable on imported distilled spirits, wines, 
and beer upon release from customs custody are collected, accounted 
for, and deposited as internal revenue collections by U.S. Customs 
and Border Protection (CBP) in accordance with CBP requirements. 
There are different types of entry under CBP regulations, and 
``entered for consumption'' refers to a type of customs entry filed 
to introduce the goods into the stream of U.S. commerce. Such 
entries are subject to applicable tax and duties. Accordingly, 
consistent with TTB regulations and CBP policies, TTB interprets the 
term ``removed'' as used in the CBMA tax refund statutory provisions 
for imported products to mean ``entered for consumption.'' For 
purposes of the temporary rule, ``entered for consumption'' includes 
withdrawal from a CBP bonded warehouse for consumption.
---------------------------------------------------------------------------

    Elsewhere in this issue of the Federal Register, TTB is publishing 
temporary regulations making amendments to parts 26 and 27 of the TTB 
regulations (27 CFR parts 26 and 27). The principal changes establish 
the procedures for taking advantage of the CBMA tax benefits applicable 
to imported alcohol products. The text of the temporary regulations 
serves as the text of these proposed regulations. The preamble to the 
temporary regulations explains the proposed regulations.

Clarification That Foreign Producers May Assign CBMA Tax Benefits Only 
for Products They Produce

    In this document, TTB is also proposing to amend the regulations to 
clarify that a foreign producer may not assign CBMA tax benefits to 
U.S. importers in cases where the foreign producer has not produced the 
product. As described in more detail in the temporary rule, foreign 
producers assign CBMA tax benefits to U.S. importers, who then elect to 
take them. See 26 U.S.C. 5001(c)(3), 5041(c)(6), and 5051(a)(4). 
However, the IRC does not define the term ``foreign producer.'' The

[[Page 58044]]

temporary rule defines the term ``foreign producer'' as ``a foreign 
distilled spirits operation, wine producer, or brewer.'' In the case of 
wine or beer produced outside the United States and imported into the 
United States, CBMA allows the person who produced the wine to assign 
the tax benefit, 26 U.S.C. 5041(c)(6)(A), and allows the brewer (i.e., 
the producer) to assign the tax benefit, 26 U.S.C 5051(a)(4)(A), 
5052(d) (definition of brewer).
    For distilled spirits produced outside the United States and 
imported into the United States, CBMA allows a distilled spirits 
operation to assign tax benefits. 26 U.S.C. 5001(c)(3). Although the 
definition of ``distilled spirits operation'' includes activities that 
do not constitute production, see 26 U.S.C. 5002(a)(2), 5171(a), CBMA 
also states that the assignment of tax benefits for distilled spirits 
cannot exceed quantities produced by such foreign distilled spirits 
operation. See 26 U.S.C. 5001(c)(3)(B)(i)(I). TTB interprets this 
limitation to mean that a foreign distilled spirits operation cannot 
assign tax benefits on distilled spirits unless such operation has 
produced the distilled spirits. This interpretation is consistent with 
the same limitations imposed on foreign producers of wine and beer. See 
26 U.S.C. 5041(c)(6)(A), (c)(6)(B)(i)(I) and 5051(a)(4)(A), 
(a)(4)(B)(i)(I).
    Therefore, in this document, TTB is proposing to update 27 CFR 
27.262 to include in paragraph (c)(1) the statement that a foreign 
producer may not assign CBMA tax benefits on distilled spirits, wine, 
or beer unless it produces the product. Paragraph (c), as set forth in 
the temporary rule, currently addresses limitations to assignments 
generally, including the limitations on the overall quantities of 
product that may be assigned and the controlled group limitations that 
apply to foreign and domestic producers under common ownership. TTB is 
soliciting comment on this proposal because it has not been previously 
addressed by regulation and because this proposal may differ from CBP's 
administration of the CBMA with regard to certain assignments involving 
distilled spirits.

Public Participation

Comments Invited

    TTB requests comments from interested members of the public on the 
proposed changes to our regulations in 27 CFR part 27, which are 
described in detail in the temporary rule issued in conjunction with 
this notice of proposed rulemaking and published elsewhere in this 
issue of the Federal Register and on the additional regulatory 
amendment discussed in this document. TTB is particularly interested in 
comments on whether TTB should propose a definition of ``distilled 
spirits operation'' consistent with the discussion of that term in this 
document.

Submitting Comments

    You may submit comments on this proposal as an individual or on 
behalf of a business or other organization via the Regulations.gov 
website or via postal mail, as described in the ADDRESSES section of 
this document. Your comment must reference Notice No. 215 and must be 
submitted or postmarked by the closing date shown in the DATES section 
of this document. You may upload or include attachments with your 
comment. You also may submit a comment requesting a public hearing on 
this proposal. The TTB Administrator reserves the right to determine 
whether to hold a public hearing. If TTB schedules a public hearing, it 
will publish a notification of the date, time, and place for the 
hearing in the Federal Register.

Confidentiality and Disclosure of Comments

    All submitted comments and attachments are part of the rulemaking 
record and are subject to public disclosure. Do not enclose any 
material in your comments that you consider confidential or that is 
inappropriate for disclosure.
    TTB will post, and you may view, copies of this document, its 
supporting materials, and any comments TTB receives about this proposal 
within the related Regulations.gov docket. In general, TTB will post 
comments as submitted, and it will not redact any identifying or 
contact information from the body of a comment or attachment.
    Please contact TTB's Regulations and Rulings division by email 
using the web form available at https://www.ttb.gov/contact-rrd, or by 
telephone at 202-453-2265, if you have any questions regarding how to 
comment on this proposal or to request copies of this document, its 
supporting materials, or the comments received in response.

Regulatory Flexibility Act, Paperwork Reduction Act, and Executive 
Order 12866

    Since the regulatory text proposed in this notice of proposed 
rulemaking is identical (with one exception) to that contained in the 
companion temporary rule published elsewhere in this issue of the 
Federal Register, the analyses contained in the preamble of the 
temporary rule concerning the Regulatory Flexibility Act, the Paperwork 
Reduction Act, and Executive Order 12866 also apply to this proposed 
rule.

List of Subjects

27 CFR Part 26

    Alcohol and alcoholic beverages, Beer, Excise taxes, Imports, 
Liquors, Notice requirements, Reporting and recordkeeping requirements, 
Wine.

27 CFR Part 27

    Alcohol and alcoholic beverages, Beer, Excise taxes, Imports, 
Liquors, Notice requirements, Reporting and recordkeeping requirements, 
Wine.

Proposed Amendments to the Regulations

    For the reasons discussed in the preamble, TTB proposes to amend 27 
CFR chapter I, parts 26 and 27 as follows:

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

0
1. The authority citation for part 26 is revised 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, 6038E, 6065, 6109, 6301, 6302, 
6804, 7101, 7102, 7651, 7652, 7805; 27 U.S.C. 203, 205; 31 U.S.C. 
9301, 9303, 9304, 9306.

0
2. Add Sec.  26.208 to read as follows:


Sec.  26.208   Craft Beverage Modernization Act Tax benefits.

    [The text of proposed Sec.  26.208 is the same as the text of Sec.  
26.208 in the temporary rule published elsewhere in this issue of the 
Federal Register.]

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

0
3. The authority citation for part 27 is revised 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, 5382, 5555, 6038E, 6065, 
6109, 6302, 7805.


Sec.  27.221   [Amended]

0
4. [The amendment of proposed Sec.  27.221 is the same as the amendment 
of Sec.  26.208 in the temporary rule published elsewhere in this issue 
of the Federal Register.]


Sec.  Sec.  27.223  through 27.249 [Reserved]

0
5. [The proposed reservation of Sec. Sec.  27.223 through 27.249 is the 
same as

[[Page 58045]]

the reservation of Sec. Sec.  27.223 through 27.249 in the temporary 
rule published elsewhere in this issue of the Federal Register.]
0
6. Add subpart P, consisting of Sec. Sec.  27.250 through 27.268, to 
read as follows:

Subpart P--Craft Beverage Modernization Act Import Refund Claims

    [The text of proposed subpart P, consisting of Sec. Sec.  27.250 
through 27.268, is the same as the text of subpart P, consisting of 
Sec. Sec.  27.250 through 27.268, in the temporary rule published 
elsewhere in this issue of the Federal Register.]
0
7. Section 27.262, as added in the temporary rule published elsewhere 
in this issue of the Federal Register, is further amended by revising 
paragraph (c)(1) to read as follows:


Sec.  27.262   Foreign producer's assignment of CBMA tax benefits.

* * * * *
    (c) * * *
    (1) General. A foreign producer may not assign CBMA tax benefits on 
distilled spirits, wine, or beer unless it produced the product. The 
foreign producer may assign quantities that are limited to the number 
of proof gallons, wine gallons, and beer barrels in paragraph (b)(4) of 
this section, and also cannot exceed the quantities of the foreign 
producer's distilled spirits, wine, and beer that are expected to be 
imported into the United States during the specified calendar year by 
the importer receiving the assignment.
* * * * *

    Signed: September 14, 2022.
Mary G. Ryan,
Administrator.

    Approved: September 14, 2022.
Thomas C. West, Jr.,
Deputy Assistant Secretary (Tax Policy).
[FR Doc. 2022-20413 Filed 9-22-22; 8:45 am]
BILLING CODE 4810-31-P