I

104TH CONGRESS

1ST SESSION H. R. 2333

To amend the Internal Revenue Code of 1986 to simplify the method of

payment of taxes on distilled spirits.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 14, 1995

Mr. ENSIGN (for himself and Mr. MATSUI) introduced the following bill; which

was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to simplify

the method of payment of taxes on distilled spirits.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Distilled Spirits Tax Payment Simplification Act of

6 1995’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever an amendment or repeal

9 is expressed in terms of an amendment to, or repeal of,

10 a section or other provision, the reference shall be consid-
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1 ered to be made to a section or other provision of the In2 ternal Revenue Code of 1986.

3 SEC. 2. TRANSFER OF DISTILLED SPIRITS BETWEEN BOND4 ED PREMISES.

5 (a) Section 5212 is amended to read as follows:

6 ‘‘SEC. 5212. TRANSFER OF DISTILLED SPIRITS BETWEEN

7 BONDED PREMISES.

8 ‘‘Distilled spirits on which the internal revenue tax

9 has not been paid as authorized by law may, under such

10 regulations as the Secretary shall prescribe, be transferred

11 in bond between bonded premises in any approved con12 tainer. For the purposes of this chapter, except in the case

13 of any transfer from a premise of a bonded dealer, the

14 removal of distilled spirits for transfer in bond between

15 bonded premises shall not be construed to be a withdrawal

16 from bonded premises.’’

17 (b) The first sentence of section 5232 is amended to

18 read as follows:

19 ‘‘Distilled spirits imported or brought into the United

20 States, under such regulations as the Secretary shall pre21 scribe, may be withdrawn from customs custody and

22 transferred to the bonded premises of a distilled spirits

23 plant without payment of the internal revenue tax imposed

24 on such distilled spirits.’’
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1 SEC. 3. ESTABLISHMENT OF DISTILLED SPIRITS PLANT.

2 Section 5171 is amended by—

3 (1) striking from subsection (a) the phrase ‘‘or

4 processor’’ and inserting therein ‘‘processor, or

5 bonded dealer;’’ and

6 (2) deleting from subsection (b) the ‘‘or both.’’

7 and inserting thereafter ‘‘as a bonded dealer, or as

8 any combination thereof.’’

9 SEC. 4. DISTILLED SPIRITS PLANTS.

10 Section 5178(a) is amended by adding the following

11 new paragraph after paragraph (4) to read as follows:

12 ‘‘(5) BONDED DEALER OPERATIONS.—Any per13 son establishing a distilled spirits plant to conduct

14 operations as a bonded dealer may, as described in

15 the application for registration—

16 ‘‘(A) store distilled spirits in any approved

17 container on the bonded premises of such plant,

18 and

19 ‘‘(B) under such regulations as the Sec20 retary shall prescribe, store taxpaid distilled

21 spirits, beer and wine and such other beverages

22 and items (products) not subject to tax or regu23 lation under this title on such bonded prem24 ises.’’
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1 SEC. 5. BONDED DEALERS.

2 (a) Section 5002(a) is amended by inserting after

3 subsection (a)(15) the following new paragraphs:

4 ‘‘(16) BONDED DEALER.—The term ‘bonded dealer’

5 means any person who has elected under section 5011 to

6 be treated as a bonded dealer.

7 ‘‘(17) CONTROL STATE ENTITY.—The term ‘control

8 State entity’ means a State or a political subdivision of

9 a State in which only the State or a political subdivision

10 thereof is allowed under applicable law to perform distilled

11 spirit operations, or any instrumentality of such a State

12 or political subdivision.’’

13 (b) Subpart A of part I of subchapter A of chapter

14 51 (relating to distilled spirits) is amended by adding at

15 the end thereof the following new section:

16 ‘‘SEC. 5011. ELECTION TO BE TREATED AS BONDED

17 DEALER.

18 ‘‘(a) ELECTION.—Any wholesale dealer, or any con19 trol State entity, may elect, at such time and in such man20 ner as the Secretary shall prescribe, to be treated as a

21 bonded dealer if such wholesale dealer or entity sells bot22 tled distilled spirits exclusively to a wholesale dealer in liq23 uor, to an independent retail dealer subject to the limita24 tion set forth in subsection (b), or to another bonded

25 dealer.
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1 ‘‘(b) SPECIAL RULES.—(1) Any person, other than

2 a control State entity, who is a bonded dealer shall not

3 be considered as selling to an independent retail dealer

4 if the bonded dealer has a greater than 10 percent owner5 ship interest in, or control of the retail dealer; the retail

6 dealer has a greater than 10 percent ownership interest

7 in, or control of the bonded dealer; or where any person

8 has a greater than 10 percent ownership interest in, or

9 control of both the bonded and retail dealer. For purposes

10 of this subparagraph, ownership interest, not limited to

11 stock ownership, shall be attributed to other persons in

12 the manner prescribed by section 318.

13 ‘‘(2) In the case of any control State entity, sub14 section (a) shall be applied without regard to the word

15 ‘independent’ ’’.

16 ‘‘(c) INVENTORY OWNED AT TIME OF ELECTION.—

17 Any bottled distilled spirits in the inventory of any person

18 electing under section 5011 to be treated as a bonded deal19 er shall, to the extent that the Federal excise tax pre20 viously has been determined and paid at the time the elec21 tion becomes effective, not be subject to additional Federal

22 excise tax on such spirits as a result of the election being

23 in effect.

24 ‘‘(d) REVOCATION OF ELECTION.—The election made

25 under this section may be revoked by the bonded dealer
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1 at any time, but once revoked shall not be made again

2 without the consent of the Secretary. When the election

3 is revoked, the bonded dealer shall immediately withdraw

4 the distilled spirits on determination of tax in accordance

5 with a tax payment procedure established by the Sec6 retary.

7 ‘‘(e) EQUITABLE TREATMENT OF BONDED DEALERS

8 USING LIFO INVENTORY.—The Secretary shall provide

9 such rules as may be necessary to assure that taxpayers

10 using the last-in first-out method of inventory valuation

11 do not suffer a recapture of their LIFO reserve by reason

12 of making the election under section 5011 or by reason

13 of operating a bonded wine cellar as permitted by section

14 5351.

15 ‘‘(f) APPROVAL OF APPLICATION.—Any person sub16 mitting an application under section 5171(c) and electing

17 under this section to be treated as a bonded dealer shall

18 be entitled to approval of such application to the same ex19 tent they would be entitled to approval of an application

20 for a basic permit under section 204(a)(2) of title 27 of

21 the United States Code (the Federal Alcohol Administra22 tion Act) and shall be accorded notice and hearing as de23 scribed in section 204(b) of such title 27.’’

24 (c) CONFORMING AMENDMENT.—The tables of sec25 tions of subpart A of part I of subchapter A of chapter
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1 51 and the table of contents of subtitle E are amended

2 by adding at the appropriate places:

‘‘Sec. 5011. Election To Be Treated As Bonded Dealer.’’

3 SEC. 6. DETERMINATION OF TAX.

4 Section 5006 is amended by amending the first sen5 tence of subsection (a)(1) to read as follows: ‘‘Except as

6 otherwise provided in this section, the tax on distilled spir7 its shall be determined when the spirits are transferred

8 from a distilled spirits plant to a bonded dealer or are

9 withdrawn from bond.’’

10 SEC. 7. LOSS OR DESTRUCTION OF DISTILLED SPIRITS.

11 (a) Subsections (a)(1)(A) and (a)(2) of section 5008

12 are amended by adding ‘‘bonded dealer,’’ immediately

13 after ‘‘distilled spirits plant’’.

14 (b) Subsection (c)(1) of section 5008 is amended by

15 striking the words ‘‘of a distilled spirits plant’’.

16 (c) Subsection (c)(2) of section 5008 is amended by

17 striking the words ‘‘distilled spirits plant’’ and inserting

18 in lieu thereof the words ‘‘bonded premises’’.

19 SEC. 8. TIME FOR COLLECTING TAX ON DISTILLED SPIRITS.

20 (a) In section 5061(d) redesignate paragraph (5) as

21 paragraph (6) and insert after paragraph (4) the following

22 new paragraph:

23 ‘‘(5) ADVANCED PAYMENT OF DISTILLED SPIR24 ITS TAX.—Notwithstanding the preceding provisions

25 of this subsection, in the case of any tax imposed by
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1 section 5001 with respect to a bonded dealer who

2 has an election in effect on September 20 of any

3 year, any payment of which would, but for this para4 graph, be due in October or November of that year,

5 shall be made on such September 20. No penalty or

6 interest shall be imposed for the period from such

7 September 20 until the due date determined without

8 regard to this paragraph to the extent that tax due

9 exceeds the tax which would have been due with re10 spect to distilled spirits in the preceding October and

11 November had the election under section 5011 been

12 in effect.’’

13 (b) Section 5061(e) is amended by inserting in para14 graph (1) the words ‘‘or any bonded dealer,’’ immediately

15 after ‘‘respectively,’’.

16 SEC. 9. EXEMPTION FROM OCCUPATIONAL TAX NOT APPLI17 CABLE.

18 Section 5113(a) is amended by adding immediately

19 after the last sentence the following new sentence to read

20 as follows: ‘‘This exemption shall not apply to a proprietor

21 of a distilled spirits plant whose premises are used for op22 erations of a bonded dealer.’’

23 SEC. 10. TECHNICAL, CONFORMING AND CLERICAL AMEND24 MENTS.

25 (a) TECHNICAL AND CONFORMING AMENDMENTS.—
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1 (1) Section 5003(3) is amended to delete the

2 term ‘‘certain’’ from the sentence.

3 (2) Section 5214 is amended by redesignating

4 subsection (b) as (c) and inserting a new subsection

5 (b) to read as follows:

6 ‘‘(b) EXCEPTION.—Subsections (a) (1), (2), (3), (5),

7 (10), (11), and (12) of this section shall not apply to dis8 tilled spirits withdrawn from premises used for operations

9 as a bonded dealer.’’

10 (3) Section 5215(a) is amended by inserting a

11 period after the word ‘‘plant’’ and striking the words

12 ‘‘but only for destruction, denaturation,

13 redistillation, reconditioning, or rebottling:’’.

14 (4) Section 5362(b)(5) is amended by adding

15 the following sentence to read as follows: ‘‘This term

16 will not apply to premises used for operations as a

17 bonded dealer.’’.

18 (5) Section 5551(a) is amended by inserting

19 after the term ‘‘processor’’ at each place it appears

20 the phrase ‘‘bonded dealer,’’.

21 (6) Section 5601(a) (2), (3), (4), (5), and (b)

22 are amended by inserting ‘‘, bonded dealer’’ imme23 diately before the word ‘‘processor’’ at each place it

24 appears.
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1 (7) Section 5602 is amended by inserting ‘‘,

2 warehouseman, processor, or bonded dealer’’ imme3 diately after the word ‘‘distiller’’.

4 (8) Section 5115, 5180, and 5681 are repealed.

5 (b) CLERICAL AMENDMENTS.—

6 (1) The table of sections for part II of sub7 chapter A of chapter 51 is amended by striking out

8 the item relating to section 5115.

9 (2) The table of sections for subchapter B of

10 chapter 51 is amended by striking out the item re11 lating to section 5180.

12 (3) The table of sections for part IV of sub13 chapter J of chapter 51 is amended by striking out

14 the item relating to section 5681.

15 SEC. 11. EFFECTIVE DATE.

16 (a) Except as provided in subsection (b) the provi17 sions of this Act shall take effect one hundred and twenty

18 days following enactment.

19 (b)(1) The amendments made by section 3 of this Act

20 shall take effect on the date of enactment of this Act, and

21 (2) Each wholesale dealer who is required to file an

22 application for registration under section 5171(c) whose

23 operations are required to be covered by a basic permit

24 under the Federal Alcohol Administration Act (27 U.S.C.

25 203 and 204) and who has received such basic permits
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1 as an importer, wholesaler, or as both, and has obtained

2 a bond required under this subchapter before the close of

3 the fourth month following enactment of this Act, shall

4 be qualified to operate bonded premises until such time

5 as the Secretary takes final action on the application. Any

6 control State entity that has obtained a bond required

7 under this subchapter shall be qualified to operate bonded

8 premises until such time as the Secretary takes final ac9 tion on the application for registration under section

10 5171(c).

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