Alcohol and Tobacco Tax and Trade Bureau

Program Summary by Budget Activity

Dollars in thousands

 FY 2014 FY 2015 FY 2016 FY 2015 TO FY 2016

Budget Activity Enacted Enacted Request $ Change % Change

Collect the Revenue $51,721 $52,721 $52,785 $64 0.12%

Protect the Public $47,279 $47,279 $48,654 $1,375 2.91%

Subtotal, Alcohol and Tobacco Tax and 

Trade Bureau $99,000 $100,000 $101,439 $1,439 1.44%

Offsetting Collections - Reimbursables $6,742 $7,022 $6,300 ($722) -10.28%

Appropriations Transferred from IRS Program 

Integrity Cap Adjustment $0 $0 $5,000 $5,000 NA

Transfers In/Out – TEOAF Super Surplus 

Fund $900 $0 $0 $0 NA

Total Program Operating Level $106,642 $107,022 $112,739 $5,717 5.34%

Direct FTE 473 473 474 1 0.21%

Reimbursable FTE 10 10 10 0 0.00%

Appropriations Transferred from IRS Program 

Integrity Cap Adjustment FTE 0 0 35 35 NA

Total FTE 483 483 519 36 7.45%

Summary

The Alcohol and Tobacco Tax and Trade 

Bureau (TTB) serves as the nation’s primary 

federal authority in the regulation of the 

alcohol and tobacco industries. TTB is 

responsible for the administration and 

enforcement of the Internal Revenue Code 

associated with the collection of excise taxes 

on alcohol, tobacco, firearms, and 

ammunition, and the Federal Alcohol 

Administration Act, which provides for the 

regulation of those engaged in the alcohol 

beverage industry and the protection of U.S. 

consumers by ensuring the integrity of alcohol 

beverage labels and products.

In FY 2016, TTB will continue to focus its 

efforts on enforcing compliance with alcohol, 

tobacco, firearms, and ammunition laws and 

regulations in the interest of collecting all 

appropriate excise taxes and promoting a 

marketplace for alcohol beverages that 

complies fully with federal production, 

labeling, advertising, and marketing standards. 

The FY 2016 President’s Budget request 

enables TTB to continue the programs and 

activities necessary to meet its strategic goals 

of collecting revenue and protecting the 

public.

Total resources required to support TTB 

activities for FY 2016 are $112,739,000, 

including $101,439,000 from direct 

appropriations, $6,300,000 from other 

offsetting collections and reimbursable 

programs, and $5,000,000 in appropriations 

transferred from other accounts.
TTB FY 2016 Budget Highlights

Dollars in Thousands

Alcohol and Tobacco Tax and Trade 

Bureau FTE Amount

FY 2015 Enacted 473 $100,000

Changes to Base:

Maintaining Current Levels (MCLs): - $1,687

Pay-Raise - $580

Pay Annualization - $148

FERS Contribution Increase - $205

Non-Pay - $754

Efficiency Savings: - ($248)

Reduce Infrastructure Footprint - ($44)

IT Open Source Project - ($60)

Travel and Other Operating Reductions - ($144)

Subtotal Changes to Base - $1,439

Total FY 2016 Base 473 $101,439

Program Changes:

Program Decreases: - ($1,000)

Criminal Enforcement Program - ($1,000)

Program Increases: 36 $6,000

Improvements to Core Business 

Applications/Data Analytics 1 $1,000

Alcohol and Tobacco Enforcement 

Program 35 $5,000

Total FY 2016 Operating Level 509 $106,439

Program Integrity Cap Adjustment 

Included in IRS Budget Request - ($5,000)

Total FY 2016 Net Appropriation Request 509 $101,439

FY 2016 Budget Adjustments

Adjustments to Request

Maintaining Current Level (MCLs)

Pay-Raise +$580,000 / +0 FTE

Funds are requested for the proposed January 

2016 pay-raise.

Pay Annualization +$148,000 / +0 FTE

Funds are requested for annualization of the 

January 2015 pay-raise.

FERS Contribution Increase +$205,000 /

+0 FTE

Funds are requested for increases in agency 

contributions to the Federal Employees 

Retirement System (FERS) based on updated 

actuarial estimates.

Non-Pay +$754,000 / +0 FTE

Funds are requested for inflation adjustments 

in non-labor costs such as travel, contracts, 

rent, supplies, and equipment.

Efficiency Savings

Reduce Infrastructure Footprint -$44,000 / 

+0 FTE

During the past few years, TTB has launched 

an aggressive telework program. This has 

enabled TTB to close half of its field offices, 

with the remaining field offices being vital to 

TTB’s mission. TTB has also reconfigured

and reduced the amount of office space needed 

to operate its headquarters in Washington, 

D.C., and the National Revenue Center in 

Cincinnati. In an ongoing effort to improve 

space utilization, TTB has identified additional 

opportunities to reduce leased space, resulting 

in additional savings of $44,000.

IT Open Source Project -$60,000 / +0 FTE

TTB has launched a project to move its custom 

IT applications infrastructure from proprietary 

hardware and software to Open Source 

software. This initiative will lower the cost of 

both hardware refresh and maintenance and 

software licensing and maintenance.

Travel and Other Operating Reductions

-$144,000 / +0 FTE

TTB will further reduce its operational costs 

through savings in administrative overhead 

and program operations.

Program Decreases

Criminal Enforcement Program -$1,000,000 / 

+0 FTE

TTB will reduce its Criminal Enforcement 

Program to the 2014 funding level. The 

program remains critical to the bureau’s ability 

to effectively curtail illicit operations and deter 

others from engaging in diversion activity. 

This level will enable TTB to continue 

pursuing and conducting criminal 

investigations while allowing the bureau to 

address other crucial investments to maintain a

competitive and compliant marketplace for the 

alcohol beverage industry and facilitate trade 

in this growing sector of the economy.
Program Increases

Improvements to Core Business Applications/

Data Analytics +$1,000,000 / +1 FTE

TTB is requesting $1 million to invest in its 

priority project to modernize the alcohol 

beverage labeling program by streamlining

and simplifying the Certificate of Label 

Approval (COLA) submission and approval 

process. Given TTB’s limited resources and 

the increased demand for its services from a 

growing business sector, TTB’s current 

business model is unsustainable. TTB intends

to address these challenges by working 

towards an automated solution to facilitate 

compliant label applications so that products 

may proceed to market more quickly. The 

requested investment would support: 1) system 

enhancements to COLAs Online to improve 

system checks and automate certain review 

and approval functions, 2) enhanced 

functionality of COLAs Online and Formulas 

Online to improve the availability and utility 

of data for analytics purposes, and 3) advanced 

risk modeling to support market-based 

enforcement. The initial investment will allow 

TTB to complete a comprehensive 

requirements analysis and begin implementing 

the business system enhancements for the 

labeling modernization priority project.

Alcohol and Tobacco Enforcement Program 

+$5,000,000 / +35 FTE

The FY 2016 President’s Budget includes a 

proposal to amend section 251 of the Balanced 

Budget and Emergency Deficit Control Act of 

1985, as amended, to provide a program 

integrity cap adjustment of $5 million for 

TTB’s tax enforcement and compliance 

program to narrow the tax gap in the tobacco 

and alcohol industries and reduce the deficit 

through increased revenue collections. This 

specific funding request is included under the 

IRS budget, which includes the tax 

enforcement and compliance program integrity 

cap adjustment for both the IRS and TTB. 

Under the TTB budget, this item is being 

reported as “Appropriations Transferred from 

IRS Program Integrity Cap Adjustment.”

The proposed cap adjustment for TTB tax 

enforcement and compliance activities 

includes $5 million in new revenue-producing 

tax compliance initiatives in FY 2016 and $5 

million in additional new initiatives each fiscal 

year from 2017 through 2020. TTB will target 

known points in the supply chain that are 

susceptible to diversion activity and prioritize 

forensic audits and investigations of high-risk 

activity and entities in the alcohol and tobacco 

trade. Because these enforcement initiatives

must be sustained over time in order to 

maximize their potential taxpayer returns, the 

total above-base cap adjustment including 

inflation is $193 million over the 10-year 

period. Over this same time period, these 

additional investments will generate an 

estimated $338 million in additional tax 

revenue over the 10-year period. The net 

savings from these investments is $145

million.

Program Integrity Cap Adjustment Included 

in IRS Budget Request -$5,000,000 / +0 FTE

This adjustment ensures that the program 

increase for TTB’s Alcohol and Tobacco 

Enforcement Program is reflected only once in 

the 2016 President’s Budget as part of the 

IRS’s program integrity cap adjustment.

Explanation of Budget Activities

Collect the Revenue ($52,785,000 from direct 

appropriations, $3,276,000 from reimbursable 

resources, and a transfer of $5,000,000)

This budget activity includes all tax 

processing, verification, enforcement, and 

outreach efforts related to administering the 

federal excise tax on alcohol, tobacco, 

firearms, and ammunition products. TTB 

regulates and collects taxes from distilleries, 

breweries, bonded wineries, bonded wine 

cellars, manufacturers of cigarette papers and 

tubes, manufacturers of tobacco products, and 

manufacturers and importers of firearms and 
ammunition. In ensuring a level playing field 

for all those engaged in the trade of these 

strictly regulated commodities, TTB also takes 

appropriate enforcement action to detect and 

address diversion activity and ensure all 

products sold in the marketplace are properly 

taxpaid. In FY 2014, excise tax collections 

reached nearly $13.6 billion for tobacco 

products, over $7.9 billion for alcohol 

beverage products, and $769 million for 

firearms and ammunition. This budget activity 

supports the TTB strategic goal of ensuring 

that industry remits the proper federal tax on 

these products and the Treasury strategic 

objective to improve the execution of the tax 

code.

Protect the Public ($48,654,000 from direct 

appropriations, $3,024,000 from reimbursable 

resources)

This budget activity funds the programs that 

ensure the integrity of the products and 

industry members in the marketplace by 

promoting compliance with federal alcohol 

and tobacco laws and regulations by the nearly 

72,000 businesses that hold a TTB permit or 

registration. This budget activity also supports 

the TTB and Treasury objectives to facilitate 

fair and lawful commercial trade in the alcohol 

and tobacco commodities. This budget 

activity supports the TTB strategic goal of 

assuring that alcohol and tobacco industry 

operators meet permit qualifications, and 

alcohol beverage products comply with federal 

production, labeling, and marketing 

requirements.

Legislative Proposals

TTB has no legislative proposals.

TTB Performance by Budget Activity

Budget Activity Performance Measure FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Actual Actual Actual Target Target

Collect the Revenue Amount of Revenue Collected Per Program 

Dollar

449.0 457.0 457.0 400.0 400.0

Collect the Revenue Percent of Voluntary Compliance from 

Large Taxpayers in Filing Tax Payments 

Timely (In Terms of Revenue)

92.0 92.0 90.0 92.0 94.0

Protect the Public Percent of Electronically Filed Permit 

Applications (NEW)

62.0 70.0 79.0 82.0 85.0

Protect the Public Percentage of Permit Applications 

Processed with Service Standards (NEW)

61.0 50.0 58.0 85.0 85.0

Protect the Public Average Number of Days to Process an 

Original Permit Application for a New 

Alcohol or Tobacco Business

69.0 81.0 84.0 DISC DISC

Protect the Public Customer Satisfaction Rate with TTB 

Permitting Process (NEW)

N/A N/A B 80.0 80.0

Protect the Public Percent of Electronically Filed Label and 

Formula Applications (NEW)

88.0 90.0 93.0 94.0 95.0

Protect the Public Percentage of Alcohol Beverage Label and 

Formula Applications Processed within 

Service Standards (NEW)

83.0 49.0 67.0 85.0 85.0

Protect the Public Percent of Electronically Filed Certificate of 

Label Approval Applications

91.0 92.0 94.0 DISC DISC

Protect the Public Percentage of Importers Identified by TTB 

as Operating without a Federal Permit

13.0 11.0 15.0 DISC DISC

Key: DISC - Discontinued and B - Baseline
Description of Performance

The bureau continues to collect the federal 

excise taxes due on its regulated commodities 

in a highly efficient manner, and continues to 

enforce compliance with alcohol and tobacco 

laws and regulations. During FY 2014, TTB 

met two out of five of its targeted performance 

goals, and made substantial progress in its 

initiatives intended to improve performance in 

all other performance metrics. The bureau 

plans to continue to monitor its performance, 

and will use performance information to 

improve the effectiveness of its programs.

The investments in the Collect the Revenue 

activity resulted in the following performance 

highlights and accomplishments during 

FY 2014:

• TTB collected $22.2 billion in excise taxes 

and other revenues from over 10,500 

taxpayers in the alcohol, tobacco, firearms, 

and ammunition industries. The return on 

investment for the Collect the Revenue 

program was $457 for every $1 expended 

on collection activities.

• In three years of operating, TTB opened 72 

criminal cases involving the diversion of 

alcohol and tobacco products. These cases 

represent approximately $345 million in 

tax evasion and, in FY 2014, the total 

amount of tax loss at issue in prosecuted 

cases exceeded $149 million. TTB’s 

enforcement efforts also resulted in an 

additional $117 million in seizures and 

forfeitures.

• TTB completed more than 400 audits, 

examinations, and revenue investigations, 

which contributed to the identification of 

additional tax revenue of approximately

$62 million.

• TTB processed $312 million in cover-over 

payments to Puerto Rico and the U.S. 

Virgin Islands. Federal excise taxes 

collected on rum produced in Puerto Rico 

and the Virgin Islands that are 

subsequently imported into the United 

States are “covered-over,” or paid into the 

treasuries of Puerto Rico and the U.S. 

Virgin Islands.

• TTB processed $316 million in drawback 

claims. Under current law, persons who 

use nonbeverage alcohol in the 

manufacture of medicines, food products, 

flavors, extracts, or perfume and other nonpotable products may be eligible to claim 

drawback of excise taxes paid on distilled 

spirits used in their products.

The investments in Protect the Public activity 

resulted in the following performance 

highlights and accomplishments during

FY 2014:

• TTB issued over 125,000 COLAs to 

ensure compliance with the FAA Act 

provisions that prevent consumer 

deception. TTB also achieved a 94 percent 

electronic filing rate for alcohol beverage 

label applications. Federal law prohibits 

the import or domestic bottling of an 

alcohol beverage without an approved 

COLA, making this TTB service integral 

to U.S. business operations. 

• TTB issued more than 6,100 federal 

permits. A TTB permit or registration is 

required before a business can lawfully 

operate in the alcohol and tobacco 

industries. TTB ensures a fair and lawful 

marketplace and protects consumers by 

screening permit applicants to ensure only 

qualified persons engage in operations in 

the alcohol and tobacco industries. 

• TTB completed more than 600 field 

investigations of industry members in the 

areas of permit qualification, consumer 

complaints, trade practice violations, and 

product integrity verifications, all of which 

serve the bureau’s dual mission of revenue 

collection and consumer protection.