[Federal Register Volume 77, Number 236 (Friday, December 7, 2012)]
[Rules and Regulations]
[Pages 72939-72941]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29488]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Part 25
[Docket No. TTB-2012-0006; T.D. TTB-109; Re: Notice No. 131]
RIN 1513-AB94
Small Brewers Bond Reduction
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Temporary rule; Treasury decision.
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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) amends its
regulation that sets forth the penal sum for a brewer's bond where the
excise tax liability of the brewer is reasonably expected to be not
more than $50,000 in the current calendar year and the brewer was
liable for not more than $50,000 in such taxes in the preceding
calendar year. For a period of three years, the penal sum of the
required bond will be $1,000 for such brewers who file excise tax
returns and remit taxes quarterly. In a related proposed rule published
elsewhere in this issue of the Federal Register, TTB is soliciting
comments from all interested parties on this amended regulatory text,
on whether TTB should permanently adopt this change, and on other
proposed regulatory changes.
DATES: Effective Dates: This temporary rule is effective from December
7, 2012 through December 7, 2015.
FOR FURTHER INFORMATION CONTACT: For questions concerning this
document, contact Ramona Hupp, 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. 110; or by email at
BeerRegs@ttb.gov.
For questions concerning tax payment procedures and quarterly
filing procedures, contact the National Revenue Center, Alcohol and
Tobacco Tax and Trade Bureau, 550 Main Street, Suite 8002, Cincinnati,
OH 45202-5215; telephone toll free 1-877-882-3277; or by email at
ttbquestions@ttb.treas.gov.
SUPPLEMENTARY INFORMATION:
Background
TTB Authority
Chapter 51 of the Internal Revenue Code of 1986 (IRC), pertains to
the taxation of distilled spirits, wines, and beer (see title 26 of the
United State Code (U.S.C.), chapter 51 (26 U.S.C. chapter 51)). With
regard to beer, IRC section 5051 (26 U.S.C. 5051) imposes a Federal
excise tax on all beer brewed or produced for consumption or sale
within the United States or imported into the United States. The rate
of the Federal excise tax on beer is $18 for every barrel containing
not more than 31 gallons, and a like rate for any other quantity or for
fractional parts of a barrel, with an exception that the rate of tax is
$7 a barrel for the first 60,000 barrels of beer for a domestic brewer
that does not produce more than 2 million barrels in a calendar year.
Section 5054 (26 U.S.C. 5054) provides that, in general, the tax
imposed on beer under section 5051 shall be determined at the time the
beer is removed for consumption or sale, and shall be paid by the
brewer in accordance with section 5061 (26 U.S.C. 5061).
IRC section 5061 pertains to the time and method for filing tax
returns and payment of the applicable excise taxes. Section 5061 states
that Federal excise taxes on distilled spirits, wines, and beer shall
be collected on the basis of a return, and that the Secretary of the
Treasury (the Secretary) shall by regulation prescribe the period or
event for which such return shall be filed.
Section 5061(d)(1) generally requires that the taxes owed on
alcohol beverages, including beer, withdrawn under bond, be paid no
later than the 14th day after the last day of the semimonthly period
during which the withdrawal occurs. Under a special rule, September has
three return periods (Section 5061(d)(5)), resulting in a total of 25
returns due each year. Section 5061(d)(4) provides an exception to the
semimonthly rule for taxpayers who reasonably expect to be liable for
not more than $50,000 in taxes with respect to beer imposed by 26
U.S.C. 5051 and 7652 in a given calendar year and who had an excise tax
liability of not more than $50,000 the previous calendar year. Under
this provision, such taxpayers may pay the excise taxes on alcohol
beverages withdrawn under bond on a quarterly basis.
Throughout this preamble, TTB may refer to brewers who are eligible
to file excise tax returns on a quarterly basis as ``small brewers.''
While there is no specific statutory or regulatory definition as to who
is a ``small brewer,'' TTB believes that section 5061(d)(4) of the IRC,
which provides an exception to the semimonthly rule for taxpayers whose
annual alcohol excise tax liability is not expected to be more than
$50,000, and who were liable for not more than $50,000 in such taxes in
the preceding calendar year, provides a reasonable standard for
determining when a brewer may be considered ``small''.
Section 5401(b) of the IRC (26 U.S.C. 5401(b)) provides that all
brewers shall obtain a bond to insure the payment of any taxes owed.
The amount of such bond shall be ``in such reasonable penal sum'' as
prescribed by the Secretary in regulations ``as necessary to protect
and insure collection of the revenue.''
The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers
chapter 51 of the IRC and its 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 (Revised), dated January 21, 2003, to
the TTB Administrator to perform the functions and duties in
administration and enforcement of these laws. The TTB regulations that
implement the provisions of sections 5051, 5054, 5061, and 5401, of the
IRC as they relate to beer, are set forth in part 25 of title 27 of the
Code of Federal Regulations (CFR).
Penal Sum of the Brewer's Bond
Penal sum amounts of the brewer's bond are set forth in 27 CFR
25.93. For brewers filing tax returns and paying tax semimonthly, the
penal sum of the bond must be equal to 10 percent of the maximum amount
of tax that the brewer will become liable to pay during the calendar
year. For brewers filing tax returns and paying tax quarterly, the
penal sum of the bond must be equal to 29 percent of the maximum amount
of tax which the brewer will become liable to pay during the calendar
year. Under Sec. 25.93(c), the minimum bond amount is set at $1,000
and the maximum bond amount is $500,000.
TTB explained the rationale for the bond amount for quarterly
taxpayers in a temporary rule, T.D. TTB-41, published in the Federal
Register on February 2, 2006 (71 FR 5598), which implemented the
quarterly tax payment procedures of section 5061(d)(4) of the
[[Page 72940]]
IRC. TTB permanently added the temporary rule to the regulations in
T.D. TTB-94, published on August 24, 2011 (76 FR 52862). In T.D. TTB-
41, TTB stated that due to the longer deferral period between the
accrual of the tax liability and the actual payment of tax, the 10
percent bond coverage provided for semimonthly filers would be
inadequate for small brewers who were eligible and opted to pay taxes
quarterly.
Brewer's Bond Amount and Its Effect on Quarterly Filing
In recent meetings, beer industry groups and individual brewers
have informed TTB that, for small brewers, the increase of the penal
sum amount to 29 percent of the brewer's expected maximum tax liability
for the year has deterred such brewers from filing returns on a
quarterly basis. A review of TTB's records provides data that support
this conclusion. At the end of 2011, 2,026 brewers submitted tax
returns to TTB, and 1,846 of those brewers paid less than $50,000 in
excise tax annually and were eligible to file returns quarterly.
Further, the majority of those 1,846 brewers paid much less than
$50,000 in excise tax, given that 1,616 of those brewers (87.5 percent)
paid annual taxes of $7,000 or less. TTB's records also show that of
these 1,616 brewers, 841 (52 percent) filed semimonthly rather than
quarterly tax returns.
The effect of Sec. 25.93 is that a brewer who files returns
quarterly instead of semimonthly may have to increase its bond
coverage. For example, a small brewer with an annual Federal excise tax
liability of $40,000 per year who files returns semimonthly must obtain
bond coverage of $4,000 (10 percent of $40,000). If the same small
brewer opts to file its tax returns quarterly rather than semimonthly,
the brewer must increase its bond coverage to 29 percent of its maximum
annual tax liability, which would result in a bond amount of $11,600.
The effect of Sec. 25.93 also may mean that small brewers who want
to file quarterly would be more than likely ineligible to obtain the
minimum bond coverage under Sec. 25.93(c). For example, a small brewer
with an annual Federal excise tax liability of $7,000 would have a
semimonthly tax liability of less than $300 and would need to obtain
only the minimum bond coverage of $1,000. If the same brewer opted to
file returns quarterly rather than semimonthly, the quarterly tax
liability would be $1,750, making the brewer ineligible for the minimum
bond. Instead, the brewer must increase its bond coverage to 29 percent
of its maximum annual tax liability, which would be $2,030.
In the case of brewers who are eligible to file quarterly returns,
TTB has revisited the issue of whether requiring a penal sum of at
least 29 percent of a small brewer's maximum annual tax liability is
necessary to establish a ``reasonable penal sum'' that adequately
protects and insures collection of the revenue. TTB's tax return
statistics reveal that the total sum of Federal excise tax collected
from brewers who are liable for not more than $50,000 in taxes annually
represents a small amount of the total sum of excise tax collected on
beer each year. Small brewers paid approximately $11.5 million, or just
over six percent, of the $177.8 million in Federal excise tax on beer
collected in 2011. Similar collections occurred in 2010, with small
brewers paying approximately $10.15 million, or 5.6 percent, of the
$180.6 million in excise tax collected that year.
The Proposed Regulatory Amendment
After discussions with beer industry members and a review of excise
tax return data, TTB believes that given the relatively low risk to the
revenue, a penal sum of $1,000 for bonds obtained by small brewers is
reasonably sufficient to protect and insure collection of the revenue.
TTB also believes that amending the regulatory requirements regarding
the penal sum of brewers bonds may result in an increase in quarterly
filings and tax payments. In addition, TTB believes an increase in
quarterly filings and tax payments will lessen costs and increase
efficiencies for both TTB and industry members.
To encourage a greater number of eligible small brewers to file
excise tax returns and pay taxes quarterly rather than semimonthly,
this temporary rule amends 27 CFR 25.93(a) to add a three-year
exception to the current penal sum of the brewer's bond. During this
three-year period, for brewers who are eligible to and choose to file
their tax returns quarterly, the penal sum of the brewer's bond will be
a flat $1,000. The temporary rule's three-year period will allow TTB to
determine if the adjustment to the bond amount results in increased
quarterly tax filing and payment by eligible brewers, and also will
allow TTB to confirm the presumption that a $1,000 penal sum of the
bond is sufficient to protect and insure collection of the revenue.
This temporary rule does not prohibit brewers who are eligible to file
quarterly from filing semimonthly or maintaining their current bond
amounts.
Public Participation
To submit comments on these regulations, please refer to Notice No.
131, the notice of proposed rulemaking on this subject published in the
Proposed Rules section of this issue of the Federal Register.
Regulatory Flexibility Act
Because this regulation does not impose a collection of information
on small entities, the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.) do not apply. Pursuant to section 7805(f) of the
Internal Revenue Code, TTB will submit this temporary rule to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on the impact of the temporary regulations.
Executive Order 12866
It has been determined that this temporary rule is not a
significant regulatory action as defined in E.O. 12866. Therefore, a
regulatory assessment is not necessary.
Paperwork Reduction Act
There is no new collection of information imposed by this Treasury
decision. There is no change in the reporting or recordkeeping burden
resulting from a reduced penal sum for certain small taxpayers.
Inapplicability of Prior Notice and Comment and Delayed Effective Date
Procedures
TTB is issuing this temporary final rule without prior notice and
comment pursuant to authority under section 4(a) of the Administrative
Procedure Act (5 U.S.C. 553(b)). This provision authorizes an agency to
issue a rule without prior notice and comment when the agency for good
cause finds that those procedures are ``impracticable, unnecessary, or
contrary to the public interest.'' We believe prior notice and comment
is unnecessary because we expect the affected public will benefit
immediately from a reduced bond amount and be encouraged to lessen
their reporting burdens. TTB does not believe there will be any
objection to this rule since it is optional and reduces regulatory
burdens.
Pursuant to the provisions of 5 U.S.C. 553(d)(1) and (d)(3), TTB is
issuing this regulatory amendment without a delayed effective date. As
provided for in section 553(d)(1), this amendment lowers the bond
requirement for small brewers, thereby relieving a restriction which
may have prevented such brewers from choosing to pay their taxes
quarterly. TTB also has determined that good cause exists to provide
industry
[[Page 72941]]
members with immediate relief from the penal sum requirements under the
existing regulations, in accordance with section 553(d)(3).
Drafting Information
Gerald M. Isenberg and Ramona Hupp of the Regulations and Rulings
Division, Alcohol and Tobacco Tax and Trade Bureau, drafted this
document.
List of Subjects in 27 CFR Part 25
Beer, Excise taxes, Reporting and recordkeeping requirements,
Surety bonds.
Amendments to the Regulations
Accordingly, for the reasons set forth in the preamble, TTB amends
27 CFR, chapter I, part 25 as set forth below.
PART 25--BEER
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1. The authority citation for part 25 continues to read as follows:
Authority: 19 U.S.C. 81c; 26 U.S.C. 5002, 5051-5054, 5056,
5061, 5121, 5122-5124, 5222, 5401-5403, 5411-5417, 5551, 5552, 5555,
5556, 5671, 5673, 5684, 6011, 6061, 6065, 6091, 6109, 6151, 6301,
6302, 6311, 6313, 6402, 6651, 6656, 6676, 6806, 7342, 7606, 7805; 31
U.S.C. 9301, 9303-9308.
0
2. Amend Sec. 25.93 by:
0
a. Amending paragraph (a)(2) by removing the word ``For'' in the first
sentence after the heading and replacing it with the words ``Except as
provided in paragraph (a)(3) of this section, for''; and
0
b. Adding a new paragraph (a)(3) to read as follows:
Sec. 25.93 Penal sum of bond.
(a) * * *
(3) Exception. For a period of three years beginning December 7,
2012 for brewers filing tax returns and remitting taxes quarterly under
Sec. 25.164(c)(2), the penal sum of the brewer's bond is $1,000 on
beer:
(i) Removed for transfer to the brewery from other breweries owned
by the same brewer;
(ii) Removed without payment of tax for export or for use as
supplies on vessels and aircraft;
(iii) Removed without payment of tax for use in research,
development, or testing; and
(iv) Removed for consumption or sale.
* * * * *
Signed: September 18, 2012.
John J. Manfreda,
Administrator.
Approved: September 28, 2012.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. 2012-29488 Filed 12-6-12; 8:45 am]
BILLING CODE 4810-31-P