Alcohol and Tobacco Tax and 

Trade Bureau

FY 2016 

President’s Budget

February 2, 2015
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Table of Contents

Section 1 – Purpose ....................................................................................................................... 3

1A – Mission Statement.............................................................................................................. 3

1.1 – Appropriations Detail Table .............................................................................................. 3

1B – Vision, Priorities and Context............................................................................................ 3

Section 2 – Budget Adjustments and Appropriation Language............................................. 10

2.1 – Budget Adjustments Table............................................................................................... 10

2A – Budget Increases and Decreases Description................................................................... 10

2.2 – Operating Levels Table.................................................................................................... 13

2B – Appropriations Language and Explanation of Changes................................................... 14

2C – Legislative Proposals........................................................................................................ 14

Section 3 – Budget and Performance Plan ............................................................................... 15

3A – Collect the Revenue ......................................................................................................... 15

3.1.1 – Collect the Revenue Budget and Performance Plan ..................................................... 19

3B – Protect the Public ............................................................................................................. 20

3.1.2 – Protect the Public Budget and Performance Plan ......................................................... 26

Section 4 – Supplemental Information...................................................................................... 27

4A – Summary of Capital Investments..................................................................................... 27
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Section 1 – Purpose

1A – Mission Statement

To collect the taxes on alcohol, tobacco, firearms and ammunition; protect the consumer by 

ensuring the integrity of alcohol products; and prevent unfair and unlawful market activity for 

alcohol and tobacco products.

1.1 – Appropriations Detail Table

Dollars in Thousands

Alcohol and Tobacco Tax and Trade 

Bureau FY 2014 FY 2015 FY 2016 FY 2015 to FY 2016

Appropriated Resources Enacted Enacted Request $ Change % Change

 FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Collect the Revenue 242 51,721 242 52,721 242 52,785 0 64 0.00% 0.12%

Protect the Public 231 47,279 231 47,279 232 48,654 1 1,375 0.43% 2.91%

Subtotal New Appropriated Resources 473 $99,000 473 $100,000 474 $101,439 1 $1,439 0.21% 1.44%

Other Resources:

Reimbursables 10 6,742 10 7,022 10 6,300 0 (722) 0.00% -10.28%

Transfers In/Out – Program Integrity Cap 

Adjustment 0 0 0 0 35 5,000 35 5,000 NA NA

Transfers In/Out – TEOAF Super Surplus 

Fund 0 900 0 0 0 0 0 0 NA NA

Subtotal Other Resources 10 $7,642 10 $7,022 45 $11,300 35 $4,278 350.00% 60.92%

Total Budgetary Resources 483 $106,642 483 $107,022 519 $112,739 36 $5,717 7.45% 5.34%

Note: The FY 2016 Request proposes a transfer of funds in the amount of $5 million from the Internal Revenue Service’s program 

integrity cap adjustment to TTB for tax enforcement and compliance.

1B – Vision, Priorities and Context

TTB is responsible for the administration and enforcement of those sections of the Internal 

Revenue Code of 1986 (IRC) associated with the collection of excise taxes on alcohol, tobacco, 

firearms, and ammunition, and the Federal Alcohol Administration (FAA) Act, which provides 

for the regulation of the alcohol beverage industry for the protection of U.S. consumers. The 

TTB mission is carried out according to two principal strategic goals that, briefly stated, are: 

collect the revenue and protect the public. TTB’s strategic goal to collect the revenue is to 

ensure that industry remits the proper federal tax on alcohol, tobacco, firearms, and ammunition 

products. This TTB goal supports the Treasury’s strategic goal to fairly and effectively reform 

and modernize federal financial management, accounting, and tax systems and the strategic 

objective to pursue tax reform and improve the execution of the tax code. TTB’s strategic goal 

to protect the public is to ensure that alcohol and tobacco industry operators meet federal permit 

qualification requirements and alcohol beverage products comply with federal production, 

labeling, and marketing requirements. This TTB goal supports the Treasury’s strategic goal to 

promote domestic economic growth and stability and the strategic objective to facilitate 

commerce by providing trusted and secure U.S. currency, products, and services for use by the 

public. Various strategies and activities under these two TTB strategic goals contribute to the 

Treasury’s strategic goal of creating a 21st-centry approach to government.

In Fiscal Year (FY) 2016, TTB will invest its resources in program activities that provide the 

greatest assurance that these industries are operating in compliance with tax and regulatory 
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requirements, in the interest of collecting the excise taxes due and ensuring fair and lawful 

market activity. Facilitating voluntary compliance remains a priority and, to this end, TTB will 

enhance its guidance related to federal alcohol, tobacco, firearms, and ammunition laws and 

regulations, and explore diversifying its delivery methods to better reach the business community 

it regulates. TTB will continue its efforts to verify compliant operations and proper tax payment 

through its audit and investigation programs, and will employ sophisticated risk modeling to 

target high-risk activity, for the most effective and efficient use of enforcement resources. 

Enforcing the tax code also requires that TTB address and deter the illicit activity present in the 

marketplace. Failure to address illicit trade not only deprives governments of revenue, but also 

gives non-compliant actors an unfair competitive advantage over their lawful counterparts. 

Specifically, in FY 2016, TTB will deploy joint forensic audit and investigation teams to detect 

and pursue tax evasion and other fraudulent activity in the alcohol and tobacco trade, with TTB 

agents initiating criminal investigations and referring cases for prosecution as appropriate. 

Under the proposed program integrity cap adjustment, TTB will expand its tax enforcement 

initiatives, addressing identified diversion schemes and using advanced analytics to detect 

concealed unlawful activity that might otherwise appear legitimate. 

TTB will also focus on enabling the electronic filing of all required submissions so that the 

bureau can improve its business results in the key service areas that facilitate compliant trade and 

more efficiently and effectively enforce tax and regulatory compliance. Strong growth in the 

number of alcohol producers has increased demand for TTB to timely qualify applicants for a 

federal permit and issue approvals for alcohol beverage formulas and labels. TTB is improving 

its e-Gov systems, streamlining its internal processes, and updating outmoded policies to avoid 

degradation to the level of service provided to these mainly small business entrepreneurs. In FY 

2016, to keep pace with changes in industry and technology, TTB will prepare to release the 

upgraded Permits Online filing solution and continue its efforts to modernize the federal alcohol 

beverage labeling program through updated regulations and policy guidance. The FY 2016 

Budget allows TTB to increase automation in its labeling program through a combination of 

technology enhancements and data-driven enforcement techniques to address the high volume of 

formula submissions and alcohol beverage label applications. TTB’s review of product 

information keeps American consumers safe and industry members operating on a level playing 

field; however, significant program changes are necessary to provide a long-term solution to 

current processing delays that may negatively impact businesses, which must have label approval 

prior to bottling or introducing their products into domestic commerce. 

FY 2016 Priorities

• Collect more than $22 billion in annual excise tax revenues due to the federal government;

• Complete audits and investigations of TTB taxpayers based upon risk and random selection to 

ensure lawful operations and tax compliance; 

• Detect and address criminal diversion activity related to alcohol and tobacco products to 

protect U.S. consumers, the federal revenue stream, and fair market activity;

• Pursue regulatory remedies to address enforcement challenges related to tax rate differentials 

on tobacco products, which have contributed to declining federal revenues;

• Reduce the burden of compliance by improving and promoting electronic filing options for 

industry members to file required permit, tax, and label submissions; 
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• Conduct marketplace sampling programs to determine compliance with federal regulations for 

alcohol beverages and use findings to tailor enforcement and voluntary compliance programs; 

• Enhance TTB product safety activities that focus on the integrity and safety of domestic and 

imported alcohol beverage products; 

• Promote U.S. exports by facilitating industry compliance with foreign requirements and by 

working with foreign regulators to reduce barriers to trade; and

• Strengthen global tax administration structures through work with trading partners and 

emerging markets to prevent tax loss from illicit trade and improve tax collection outcomes.

Recent Accomplishments

In FY 2014, TTB collected $22.2 billion in excise taxes and other revenues from over 10,5001

taxpayers in the alcohol, tobacco, firearms, and ammunition industries. The return on 

investment for TTB’s tax collection activities was 457:1 for FY 2014. Efforts to streamline 

regulations to reduce the compliance burden, enhance electronic filing systems, and address 

inefficiencies in internal processes should contribute to continued positive returns on the 

investment in TTB. The bureau also developed and employed increasingly sophisticated risk 

modeling to complete targeted audits and revenue investigations into non-compliance. In 

FY 2014, these civil enforcement efforts resulted in a total of approximately $62 million in 

identified tax liabilities. These investigations as well as specific intelligence leads resulted in 

referrals to TTB’s criminal enforcement program, which have resulted in 30 active criminal

investigations that represent more than $269 million in evaded tax liabilities. TTB maintains a 

100 percent conviction rate in all completed cases. 

In support of the nation’s continued economic growth, TTB processed more than 8,100 original 

permits, most of which are issued to small businesses. A TTB permit is required before a 

business can operate in the alcohol and tobacco industries. In addition, TTB processed over 

142,400 Certificate of Label Approval (COLA) applications and approximately 14,000 formula

approvals. In FY 2014, TTB achieved a 79 percent electronic filing rate for permit applications 

and 94 percent electronic filing rate for COLA applications. Federal law prohibits the import or 

domestic bottling of an alcohol beverage without an approved COLA, making this TTB activity 

a condition of lawful U.S. business operations. TTB also advanced several initiatives to update 

its labeling program guidance, publishing a ruling to eliminate the formula requirement for 

certain malt beverage products and making progress on its labeling regulations modernization 

project to simplify and clarify requirements for industry members. TTB also initiated 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.

Challenges in FY 2016

Alcohol and Tobacco Diversion

TTB is the sole agency with jurisdiction over federal excise tax evasion in relation to domestic 

alcohol and tobacco products. The diversion of these products outside of legitimate commercial 

channels without the payment of taxes due threatens federal revenues, undermines fair 

competition, and provides a well-established source of funding for criminal enterprises. 

 1 Of the 17,558 TTB permittees whose business operations are subject to federal excise taxes, approximately 10,500 (60 

percent) have activity that required them to file a tax return and pay excise tax in FY 2014.
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Diversion schemes vary widely and change in response to targeted enforcement 

efforts. Schemes include the illicit manufacture of taxable product, diversion of non-taxpaid 

product, and misclassification of imported product to evade tax. The breadth and variety of tax 

evasion schemes are outlined by the Government Accountability Office (GAO) in its March 

2011 report entitled “Illicit Tobacco Various Schemes Are Used to Evade Taxes and Fees” 

(GAO-11-313).

While our experience and intelligence demonstrates a significant illicit trade in alcohol and 

tobacco products, accurately measuring the loss in federal tax receipts from alcohol and tobacco 

diversion is difficult because of the clandestine nature of the activity.2

 However, in any case 

where the intrinsic value of a product is dwarfed by its tax value, there is incentive to evade the 

tax to gain an illegal profit. An increased tobacco tax rate of roughly 150 percent for cigarettes 

under the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) has 

served to enhance the potential for illegal gains. Since the inception of TTB’s criminal 

enforcement program in FY 2011, TTB’s agents have initiated 72 investigations, with a total 

estimated tax liability of approximately $345 million. TTB has also realized an almost 100 

percent acceptance rate for cases presented to U.S. Attorneys for investigation, demonstrating 

both the strength and magnitude of these cases. Enforcement experience also indicates that there

is criminal activity in the alcohol trade, with non-taxpaid product removals, illegal imports, and 

fraudulent labeling just a few of the schemes used to evade taxes, defraud American consumers, 

and undermine the legitimate alcohol trade.

In FY 2014, TTB had $2 million in designated funding to continue its criminal enforcement 

program. The program utilizes the services of criminal enforcement agents on a reimbursable 

basis from the Internal Revenue Service Criminal Investigation (IRS CI) division. Alcohol and 

tobacco diversion are long-term tax enforcement challenges, given the high profits to be gained 

from illegal activity, the relative ease of diversion, and the substantial revenue loss that it 

represents. This $2 million is included in the FY 2016 base budget request. In FY 2016, TTB

proposes a transfer of $5 million in appropriated funds from the IRS’s program integrity cap 

adjustment for increased TTB tax enforcement and compliance programs to narrow the tax gap 

in the tobacco and alcohol industries and reduce the deficit through increased revenue 

collections. 

Operating Environment

TTB Tax Collections and the Regulated Industries

TTB is the third largest tax collection agency in the U.S. government, after the IRS and U.S. 

Customs and Border Protection (CBP). Annual revenues from the alcohol, tobacco, firearms,

and ammunition industries are approximately $22.2 billion. 

 2 In February 2010, the Department of the Treasury issued a report to Congress (“Report to Congress on Federal Tax 

Receipts Lost Due to Illicit Trade and Recommendations for Increased Enforcement”), which included an effort to 

estimate the amount of federal tax receipts lost as a result of cigarette diversion. The study emphasized the substantial 

uncertainty surrounding the magnitude of the federal tax receipts lost due to cigarette diversion.
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Alcohol Tax Collections

The alcohol beverage industry in the United States accounts for approximately 35 percent of the 

excise tax revenue that TTB collects. In FY 2014, TTB collected over $7.9 billion in revenue 

from U.S. wineries, breweries, and distilleries, the same amount collected in the prior year. 

Industry trade association reports state that the alcohol beverage industry contributes directly or 

indirectly to the U.S. economy by providing nearly 4 million jobs and roughly $400 – $500 

billion in economic activity. While economic forecasts predict continued modest growth in the 

U.S. alcohol industry as a whole, excise tax collections will likely remain relatively flat due to a 

number of variables, including increasing volumes in imports and exports, for which CBP 

collects the tax, and declining sales by volume from the country’s largest breweries, who account 

for over 90 percent of the beer sold in the U.S. The rapid expansion of new small alcohol 

beverage producers, including small wineries, breweries, and distilleries, will not entirely offset 

the declines in sales and tax payments by the large companies because these producers have 

lower production volumes, and small beer and wine producers are eligible for reduced tax rates 

based on their production volume. This trend is expected to continue throughout the period of 

FY 2015 – FY 2016. 

Tobacco Tax Collections

In FY 2014, TTB collected nearly $13.6 billion in tobacco tax revenue, a decrease of 

approximately 6 percent compared to FY 2013 collections. In forecasting tobacco revenue, the 

Congressional Budget Office predicted that federal collections would decline after peaking in 

FY 2010 due to the significantly increased tax rates on cigarettes and other tobacco products 

enacted by CHIPRA. This is consistent with TTB’s actual experience over the last several years. 

The CHIPRA legislation provided for a tax increase on all tobacco products (except large 

cigars), cigarette papers, and cigarette tubes, effective April 1, 2009. Higher prices on tobacco 

products have historically resulted in decreased consumption and increased illicit trade, which 

indicates that tobacco revenue will continue to decline. Further, recent analysis of tobacco 

collections has shown significant market shifts for tobacco products since the passage of 

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2009 2010 2011 2012 2013 2014

Dollars in Millions

Tax Collections by Commodity

Tobacco Alcohol Firearms
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CHIPRA. The law introduced large federal excise tax disparities among tobacco products, 

which created opportunities for tax avoidance and led manufacturers and price sensitive 

consumers to shift toward lower-taxed products that are interchangeable with their higher taxed 

counterparts from a consumer consumption perspective. The growing popularity of untaxed 

products, such as e-cigarettes, may further contribute to declining tobacco revenue. In FY 2016, 

in response to the dramatic market shifts in pipe and roll-your-own tobacco as reported to TTB 

by domestic manufacturers, which shifted toward the lower taxed pipe tobacco based on the tax 

differential and not market forces, TTB will continue its efforts to set forth objective, sciencebased standards through rulemaking to differentiate these two tobacco products for tax purposes. 

Further, TTB will continue to act to address the revenue threat posed by the diversion of alcohol 

and tobacco products by exercising both its civil and criminal tax jurisdiction to support 

voluntary tax compliance and deter illicit trade. 

Firearms and Ammunition Excise Tax (FAET) Collections

TTB also collects the federal excise taxes on firearms and ammunition. These taxes are remitted 

to the Fish and Wildlife Restoration Fund. This trust fund was established by statute and is 

overseen by the U.S. Fish and Wildlife Service, which apportions the money to state 

governments for wildlife restoration and research and hunter education programs. In the past 

decade, collections have increased from $226 million in FY 2005 to $769 million in FY 2014, an 

increase of $543 million over the past decade, or a 240 percent growth in tax revenue. 

Significant revenue shifts occurred between fiscal years 2011 and 2013, with collections 

increasing nearly 50 percent year-to-year. Historically, the increase in reported tax revenue can 

be attributed to external factors, such as increased sales, as well as TTB’s enforcement presence, 

which increases collections and promotes voluntary compliance.

 

Expansion of U.S. Exports 

TTB is actively engaged with the Office of the U.S. Trade Representative (USTR) in facilitating 

fair and open trade in alcohol beverages to support new opportunities for U.S. businesses in 

overseas markets. Overseas demand for the products TTB regulates continues to grow, with U.S. 

exports of all alcohol beverages totaling $3.5 billion in 2013, the most recent full year of data 

available. In line with increases in overall export volume, U.S. exports of distilled spirits totaled 

more than $1.4 billion, which represents a 3 percent increase from 2012. Over the same period, 

U.S. exports of wine increased by 16 percent, to $1.5 billion. Meanwhile, U.S. exports of beer 

also increased by 16 percent, to $518 million. TTB has undertaken a variety of efforts to directly 

influence that trend through its partnership with USTR. These include facilitating the reduction 

of export certification requirements imposed by foreign countries, negotiating trade agreements 

that facilitate trade and suspend trade barriers, and educating industry on U.S. import and export 

requirements.

As the U.S. tax and regulatory authority for alcohol beverages, TTB issues certificates for U.S. 

producers in order for the producers to be able to export their products to many foreign countries. 

In FY 2014, TTB issued more than 13,000 export certificates for beer, wine, and distilled spirits. 

Without these certificates, which are only issued by TTB, U.S. producers of alcohol beverages 

cannot sell their products in certain major markets abroad. In order to facilitate and expedite the 

issuance of certificates, TTB implemented an enhancement to its Permits Online system to 

enable the electronic submission of certificate requests. Through its international outreach, TTB 
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has arranged for the elimination or reduction of certification requirements when able to do so for 

wine exported to various countries. In FY 2014, for example, TTB launched the one-page 

consolidated export certificate for wine exports to China, reducing a significant barrier to wine 

export trade.

In supporting domestic economic growth and stability, TTB works to open burgeoning markets 

to U.S producers, including member economies of the Asia-Pacific Economic Cooperation 

forum. Emerging markets commonly issue technical trade barriers, and educating their 

regulators about the U.S. system will help prevent those countries from issuing technical barriers 

that impede U.S. exports. TTB also continues to engage with regulators from Canada, China, the 

European Union, France, Italy, and Mexico, and the new world wine producers of the World 

Wine Trade Group—all of which offer important export markets for U.S. producers—through its 

international agreements. These agreements ensure that markets remain open for U.S. businesses 

and illegal activity in international trade is addressed cooperatively and promptly.

Human Capital Management – Federal Employee Viewpoint Survey 

Employee satisfaction is critical to a productive workplace. Each year, the Office of Personnel 

Management administers the Federal Employee Viewpoint Survey to measure the satisfaction of 

the federal workforce. Based on this survey data, the Partnership for Public Service determines 

rankings for the Best Places to Work in the Federal Government; in FY 2014, TTB ranked 18th

out of 315 sub-component agencies, an improvement compared to the prior year. TTB continues 

to strive for the highest levels of employee satisfaction, and will use the survey results to develop 

an action plan to address opportunities for improvement. In the current environment, it is even 

more critical that TTB recognize outstanding employee performance and provide opportunities 

for professional development to ensure employee satisfaction and retention. Notably, within the 

next five years, approximately 46 percent of TTB’s workforce will be eligible to retire;

emphasizing the importance of succession planning and training to ensure its workforce has the 

skills and abilities to meet the mission.
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Section 2 – Budget Adjustments and Appropriation Language

2.1 – Budget Adjustments Table

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

2A – Budget Increases and Decreases Description

Maintaining Current Levels (MCLs) ......................................................+$1,687,000 / +0 FTE

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 .........................................................................................-$248,000 / +0 FTE

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 
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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 operating costs through savings in administrative overhead and its 

program operations.

Program Decreases ....................................................................................-$1,000,000 / +0 FTE

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 ..................................................................................+$6,000,000 / +36 FTE

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 to streamline and simplify the label 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 will 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. This project is one of TTB’s 

Bureau Priority Goals identified as part of its Balanced Scorecard strategic plan that cut across 

TTB’s tax enforcement and consumer protection functions, and the annual investment will 

provide the resources necessary to initiate and sustain the modernization efforts in each of these 

areas.

Alcohol and Tobacco Enforcement Program +$5,000,000 / +35 FTE 

The FY 2016 President’s Budget includes a proposal to modify 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.
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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. 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, then remaining at a steady state through 

FY 2025. TTB will target known points in the supply chain that are susceptible to diversion 

activity and prioritize forensic audits and investigations of high-risk entities and activity in the 

alcohol and tobacco industries. Because these new initiatives, as well as current enforcement 

activities, must be sustained over time in order to maximize their potential taxpayer returns, the 

total above-base adjustment funding 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 amount of revenue generated is driven primarily by an 

ROI computation that is based on a three-year rolling average from activities specific to TTB 

enforcement cases. The net savings from these investments is $145 million. In addition to the 

direct revenue impact from its enforcement efforts, an increased TTB enforcement presence also 

creates a deterrent effect in the marketplace that ensures tax compliance.

TTB Excise Tax Enforcement and Compliance Funding Summary

(in millions of dollars)

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.

2016 2017 2018 2019 2020 2016-2025

Cap Adjustment, Proposed BBEDCA

(Discretionary Budget Authority) 5 9 14 18 24 193

Change from Prior Year 4 5 4 6

Revenue (3) (8) (16) (25) (35) (338)

Change from Prior Year (5) (8) (9) (10)

Net 10-Year Savings (145)
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2.2 – Operating Levels Table

Dollars in Thousands

Alcohol and Tobacco Tax and Trade Bureau FY 2014 FY 2015 FY 2016 Transfer Total 

 From Discretionary

Object Classification Actual Enacted Request IRS Appropriation

11.1 - Full-time permanent 44,545 45,936 46,589 1,527 48,116

11.5 - Other personnel compensation 580 719 619 50 669

11.9 - Personnel Compensation (Total) 45,125 46,655 47,208 1,577 48,785

12.0 - Personnel benefits 13,161 13,574 13,944 336 14,280

13.0 - Benefits for former personnel 30 0 0 0 0

Total Personnel and Compensation Benefits $58,316 $60,229 $61,152 $1,913 $63,065

21.0 - Travel and transportation of persons 1,688 1,979 1,976 280 2,256

22.0 - Transportation of things 27 49 50 35 85

23.1 - Rental payments to GSA 4,512 4,566 4,500 0 4,500

23.3 - Communication, utilities, and misc charges 1,059 1,441 1,467 35 1,502

24.0 - Printing and reproduction 159 257 262 0 262

25.2 - Other services 21,627 20,782 21,890 1,000 22,890

25.3 - Other purchases of goods & serv frm Govt 

accounts 6,156 8,126 7,552 1,462 9,014

26.0 - Supplies and materials 400 478 490 35 525

31.0 - Equipment 3,777 2,093 2,100 240 2,340

32.0 - Land and structures 895 0 0 0 0

Total Non-Personnel 40,300 39,771 40,287 3,087 43,374

Subtotal New Appropriated Resources $98,616 $100,000 $101,439 $5,000 $106,439

Budget Activities:

Collect the Revenue 52,810 56,372 56,061 5,000 61,061

Protect the Public 52,730 50,650 51,678 0 51,678

Total Budgetary Resources $105,540 $107,022 $107,739 5,000 $112,739

FTE 470 483 484 35 519
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2B – Appropriations Language and Explanation of Changes

Appropriations Language Explanation of 

Changes

DEPARTMENT OF THE TREASURY

ALCOHOL AND TOBACCO TAX AND TRADE BUREAU

Federal Funds

SALARIES AND EXPENSES

For necessary expenses of carrying out section 1111 of the 

Homeland Security Act of 2002, including hire of passenger 

motor vehicles, [$100,000,000] $101,439,000; of which not to 

exceed $6,000 for official reception and representation 

expenses; not to exceed $50,000 for cooperative research and 

development programs for laboratory services; and provision 

of laboratory assistance to State and local agencies with or 

without reimbursement: Provided, That of the amount 

appropriated under this heading, [$3,000,000 shall be for the 

costs of criminal enforcement activities and special law 

enforcement agents for targeting tobacco smuggling and other 

criminal diversion activities.] such sums as are necessary 

shall be available to fully support tax enforcement and 

compliance activities including tax compliance to address the 

Federal tax gap, as specified for purposes of Section 

251(b)(2) of the Balanced Budget and Emergency Deficit 

Control Act of 1985, as amended. (Department of the 

Treasury Appropriations Act, 2015.)

While the Budget 

proposes to remove the 

earmark for agents, $2 

million remains in the 

base for this program.

2C – Legislative Proposals

TTB does not have any legislative proposals.
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Section 3 – Budget and Performance Plan

3A – 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 taxes due on alcohol and tobacco products, and 

firearms and ammunition, and supports the Treasury objective to pursue tax reform and improve 

the execution of the tax code. TTB collects approximately $22 billion in federal tax revenue 

annually from roughly 10,500 businesses, making TTB the third largest tax collection agency in 

the federal government. Members of the regulated industries that are subject to excise taxes are 

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. TTB uses an interagency approach in applying its enforcement strategies, which 

involves cooperation with local, state, federal, and foreign government counterpart agencies to 

maximize the deterrent impact of enforcement actions. 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 to ensure all products sold in the 

marketplace are properly taxpaid. 

Other Resources (Offsetting Collections/Reimbursables).................................... $3,276,000

The offsetting collections include reimbursement for the operating costs of the TTB Puerto Rico 

field office, which are offset against the roughly $400 million in taxes collected on the alcohol 

beverage products that are manufactured in Puerto Rico and brought into the United States 

(cover-over payments); reimbursement by the Community Development Financial Institutions 

Fund (CDFI) for TTB’s IT services; and a nominal reimbursement from the Bureau of Alcohol, 

Tobacco, Firearms, and Explosives for laboratory services.

Other Resources (Transfer)............................................................................. $5,000,000

The FY 2016 Budget proposes a transfer of funds in the amount of $5 million from the Internal 

Revenue Service’s program integrity cap adjustment to TTB for its tax enforcement and 

compliance program to narrow the tax gap in the tobacco and alcohol industries and reduce the 

deficit through increased revenue collections.

Description of Performance – Collect the Revenue:

In FY 2014, TTB met one of its two annual targets for the performance measures in the Collect 

the Revenue budget activity. Taken together, TTB’s measures of the Amount of Revenue 

Collected per Program Dollar and the Percent of Voluntary Compliance from Large Taxpayers in 

Filing Payments Timely demonstrate the effectiveness and efficiency with which TTB operates 

its revenue collection function. These measures also serve as key indicators for Treasury’s goals 

and objectives to fairly and effectively reform and modernize tax systems and administer the tax 

code. Achieving positive results for both measures will be supported by the strategic application 

of technology to streamline internal and external processes and an effective tax enforcement 

presence that leverages data from a variety of government and commercial sources and 

interagency partnerships with counterpart enforcement agencies.
TTB - 16

Improve Efficiency of Tax Collection 

The Amount of Revenue Collected per Program Dollar measure uses annual collections figures 

and the actual expenditures and obligations for collection activities to quantify the efficiency of 

the TTB tax collection program. In FY 2014, TTB achieved a return on investment of $457 for 

every program dollar spent on collection activities, which exceeded its annual performance target 

of $400. TTB maintained the result achieved in FY 2013 despite decreased collections in FY 

2014 through sound fiscal management to reduce spending in both program and operating 

expenses. Effective enforcement combined with process improvements and streamlining efforts 

should contribute to continued positive returns on the investment in TTB.

In setting its FY 2016 performance target, TTB examined historical collections trends across 

each of its regulated commodities, as well as other predictors that influence consumer behaviors. 

Specifically, significant shifts in consumption patterns, product manufacturing, and trade will 

continue to impact federal revenues in the years ahead. The CHIPRA tobacco tax changes have 

resulted in increased tax collections by TTB since their enactment, although the amount of the 

increase has decreased steadily since FY 2010, the first full fiscal year following CHIPRA. In 

accounting for these types of marketplace shifts, TTB used Congressional Budget Office revenue 

projections for tobacco excise tax collections to determine the targeted performance level of 

400:1 for fiscal years 2015 – 2016.

In FY 2016, to meet its performance target of $400, TTB will continue to improve efficiencies 

and results in its tax enforcement program by improving its tax verification systems and 

processes. On the front end, TTB will continue to evaluate and develop options to increase 

automation in the detection, notification, assessment, and collection of excise taxes due, which 

will allow TTB to focus its resources on substantive tax analysis. In FY 2016, TTB also intends 

to complete its review of all operational reports and tax returns required of the businesses it 

regulates as part of its ongoing effort to streamline its information collections. This initiative has 

the dual purpose of ensuring that TTB has the information required for effective tax and 

regulatory enforcement and eliminating unnecessary reporting burdens for U.S. companies. 

Fiscal

Year Alcohol Tobacco FAET SOT FST Other Total

2005 $ 7,074,076 $ 7,409,608 $225,818 $ 10,190 $ 9 $ 141 $ 14,719,842

2006 7,182,940 7,350,058 249,578 2,895 638 146 14,786,255

2007 7,232,138 7,194,081 287,835 2,808 - 32 14,716,894

2008 7,420,576 6,851,705 312,622 448 - 634 14,585,985

2009 7,424,292 11,548,504 452,693 272 1,192,375 970 20,619,106

2010 7,476,789 15,913,479 360,813 300 8,558 180 23,760,119

2011 7,594,330 15,515,073 344,262 268 5,220 2,257 23,461,410

2012 7,856,391 15,002,616 514,622 249 5,942 61 23,379,881

2013 7,851,953 14,321,017 762,836 280 1,521 38 22,937,645

2014 7,924,951 13,552,711 768,927 332 465 2 22,247,388

Average $ 7,503,844 $ 11,465,885 $428,001 $ 1,804 $ 121,473 $ 446 $ 19,521,453

FAET - Firearms and Ammunition Excise Tax SOT - Special Occupational Tax FST - Floor Stock Tax Other - Suspense Account

Excise Tax and Other Collections by Fiscal Year

Dollars in Thousands
TTB - 17

On the back end, TTB will continue to develop and build risk models based on multiple data 

sources to identify high-risk activity or taxpayers for audit and investigation. Continuous 

refinements to these models and sound intelligence enable TTB to efficiently deploy its 

enforcement resources. A primary focus for TTB tax enforcement continues to be tobacco 

manufacturers and importers, including any person who for commercial purposes makes 

available for consumer use a cigarette-making machine and manufacturers and importers of 

processed tobacco. 

Cigarette-making machine operators are considered tobacco product manufacturers under federal 

law and, thus, must obtain a TTB permit and pay tax. TTB has partnered with States to identify 

establishments operating cigarette-making machines and has issued letters to retailers and private 

clubs informing them of their compliance obligations. However, the proliferation of these 

machines will continue to create enforcement challenges and strain TTB enforcement resources 

given the number of locations and the relative tax exposure involved in each case. In FY 2016, 

TTB will continue to engage its law enforcement partners and collect additional intelligence on 

locations with these machines to identify and collect unpaid tax liabilities from unpermitted 

manufacturers shirking their tax responsibilities.

TTB will also continue to refine its enforcement techniques to ensure compliant trade in 

processed tobacco. Transfers of this non-taxpaid tobacco product carry a high revenue risk

because the product may be diverted for the illicit manufacturing of cigarettes. In FY 2013, the 

last complete year of data examined, nearly a quarter of the roughly 831 million pounds of 

processed tobacco removals reported to TTB (excluding exports) were shipped to entities that do 

not hold a federal permit with TTB. Although some of these removals represent sales to brokers, 

who may ultimately sell processed tobacco to a TTB-permitted manufacturer of tobacco 

products, other removals may be ultimately destined for illicit production. TTB analyzes this 

information, in conjunction with other intelligence, to select and prioritize its audits and 

investigations. As a result of these enforcement efforts, TTB has identified through its 

investigations to date approximately $180 million in unpaid federal excise taxes; some of these 

cases have resulted in referrals for criminal investigation. TTB will continue these and other 

priority enforcement initiatives in FY 2016, successfully combining data analytics and advanced 

field investigative techniques to detect and address tax evasion. 

This measure will be affected should the program integrity cap adjustment requested in FY 2016 

receive approval. As TTB’s intelligence capabilities and risk modeling have become more 

sophisticated, the bureau needs additional enforcement resources to act on the leads that these 

tools generate. The requested cap adjustment would enable TTB to continue its current 

enforcement activities, and expand its enforcement initiatives to include other points in the 

supply chain that are at-risk for diversion activity. Exports pose a significant revenue threat 

because alcohol and tobacco products intended for export may be placed in a customs bonded 

warehouse, foreign trade zone, or tobacco export warehouse without payment of tax if they are 

destined for export and not for sale in the U.S. market. Some tax evasion schemes involve 

diversion of these products into domestic commerce to evade federal excise taxes. According to 

TTB data, non-taxpaid removals of alcohol and tobacco products from bonded premises for 

export have an annual excise tax exposure of about $380 million and $1 billion, respectively.
TTB - 18

Given additional resources, and in partnership with CBP, TTB could expand its proven 

intelligence and investigative techniques to make significant inroads into identifying tax evasion 

schemes that involve the diversion of non-taxpaid products intended for export. TTB anticipates 

a positive long-term return on investment at the FY 2016 request level; however, the anticipated 

increases in additional tax collections from the planned enforcement initiatives at the request 

level will not occur until year three, once new personnel reach full performance levels. 

Increase Voluntary Compliance from Taxpayers

Fostering voluntary compliance among excise taxpayers is a primary tax administration strategy 

for TTB. The Percent of Voluntary Compliance from Large Taxpayers in Filing Tax Payments 

Timely is a key performance metric that shows the rate of compliance by large taxpayers (i.e., 

those that pay more than $50,000 in annual taxes) in voluntarily filing their tax payments on or 

before the scheduled due date. In FY 2014, TTB did not meet its performance target of 91 

percent, but achieved a 90 percent rate of compliance from its large taxpayers. Again in 

FY 2014, performance data indicates that the voluntary compliance rate continues to be lower in 

the latter half of the year as efforts to enforce tax compliance earlier in the year result in the 

submission of additional late filings by TTB taxpayers. Improvements in the bureau’s ability to 

detect non-compliance due to the effective deployment of its automated tool for the identification 

of late, missing, and erroneous tax returns and operational reports have caused a temporary 

decrease in performance. As TTB continues to enhance the functionality of this automated tool, 

TTB expects that its reported compliance rate for timely filings may continue to decline before 

enforcement efforts lead to demonstrable improvements in industry compliance. 

By FY 2016, TTB expects to meet its performance target of a 94 percent voluntary compliance 

rate for its large taxpayers. During a period of economic recovery, TTB believes that this is an 

aggressive target for taxpayer compliance and will demonstrate the effectiveness of TTB’s 

strategies to improve industry understanding of and compliance with federal tax requirements. 

TTB will employ complementary strategies to meet this performance target that focus on 

enhancing electronic filing options to enable taxpayers to file complete, accurate, and timely tax 

returns and payments; improving online guidance, particularly for the large number of newly 

permitted industry members; and maintaining an enforcement presence to encourage voluntary 

compliance. Moving forward on all three fronts will ensure that TTB strikes the appropriate 

balance between supporting new businesses in setting up compliant operations while also 

focusing on detecting and curtailing high-risk activity that undermines lawful business activity. 

Beginning now and continuing in FY 2016, TTB will intensify its efforts to increase the 

electronic filing rate of its taxpayers. TTB expanded the e-filing program to allow all excise 

taxpayers to file required tax returns, reports, and payments online through the Pay.gov system, 

with approximately 24 percent of excise tax returns and 38 percent of operational reports 

submitted electronically through Pay.gov in FY 2014. As part of a comprehensive strategy to 

promote e-filing by TTB taxpayers, TTB plans to address through rulemaking a primary 

hindrance for industry members in using Pay.gov by allowing credit card payments. This 

enhancement would also address a timing issue that requires those who file electronically to 

remit tax payments early. TTB is partnering with the Bureau of the Fiscal Service in this effort, 

which will require both system changes and rulemaking to implement. 
TTB - 19

The FY 2016 request will also support online enhancements to improve guidance, transparency, 

and collaboration between TTB and industry. Given the increase in new industry members, TTB 

will provide online training to ensure that these taxpayers understand and are able to adhere to 

complex federal tax and regulatory requirements. These activities will promote compliance 

across the regulated industries and support TTB’s achievement of its performance target.

As an identifiable enforcement presence is a well-established driver of compliance rates, TTB 

expects to achieve higher rates of voluntary compliance in FY 2016, which provides funding for 

the continuation and expansion of the TTB criminal enforcement program. The FY 2016 request 

includes a $5 million transfer from the IRS program integrity cap adjustment to expand TTB 

enforcement initiatives through additional auditors, investigators, special agents, and data 

scientists, which together comprise a complete tax enforcement program. 

3.1.1 – Collect the Revenue Budget and Performance Plan

Dollars in Thousands

Collect the Revenue Budget Activity

Resource Level FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Actuals Actuals Actuals Actuals Actuals Enacted Enacted Request

 Appropriated Resources $50,524 $53,000 $50,399 $50,939 $48,927 $51,721 $52,721 $52,785

 Reimbursable Resources $1,898 $2,117 $1,979 $2,464 $3,277 $3,506 $3,651 $3,276

 Appropriations Transferred from 

IRS Program Integrity Cap 

Adjustment

$0 $0 $0 $0 $0 $0 $0 $5,000

 Transfer from TEOAF-Super 

Surplus Fund

$0 $0 $0 $0 $0 $468 $0 $0

Budget Activity Total $52,422 $55,117 $52,378 $53,403 $52,204 $55,695 $56,372 $61,061

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Actual Actual Actual Actual Actual Actual Target Target

Amount of Revenue Collected 

Per Program Dollar

427.0 478.0 468.0 449.0 457.0 457.0 400.0 400.0

Percent of Voluntary 

Compliance from Large 

Taxpayers in Filing Tax 

Payments Timely (In Terms of 

Revenue)

94.0 94.0 95.0 92.0 92.0 90.0 92.0 94.0

Key: DISC - Discontinued and B - Baseline
TTB - 20

3B – Protect the Public

($48,654,000 from direct appropriations, and $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; promote compliance with federal laws and regulations by the 

nearly 72,000 businesses that TTB regulates; facilitate fair and lawful commercial trade in the 

alcohol and tobacco commodities; and provide full and accurate alcohol beverage product 

information to the public as a means to prevent consumer deception. These activities support 

Treasury’s goal of domestic economic growth and stability and the objective to facilitate 

commerce by providing trusted and secure U.S. currency, products, and services for use by the 

public. 

Other Resources (Offsetting Collections/Reimbursables).................................... $3,024,000

The offsetting collections include reimbursement for the operating costs of the TTB Puerto Rico 

field office, which are offset against the roughly $400 million in taxes collected on the alcohol 

beverage products that are manufactured in Puerto Rico and brought into the United States 

(cover-over payments); reimbursement by the Community Development Financial Institutions 

Fund (CDFI) for TTB’s IT services; and a nominal reimbursement from the Bureau of Alcohol, 

Tobacco, Firearms, and Explosives for laboratory services.

Description of Performance – Protect the Public:

In FY 2014, TTB met one of its three annual targets for the current performance measures under 

its Protect the Public mission. TTB reports on its success in meeting the Department’s objective 

to facilitate lawful commerce and TTB’s goal to ensure consumer protection through three 

principal performance measures, which indicate how timely the bureau is in issuing permits to 

qualified alcohol and tobacco businesses; how effective TTB is in deterring the illicit importation 

of tobacco products by non-permitted entities, and the efficiency of the bureau’s alcohol 

beverage label application processing activity. Taken together, these measures and their 

associated activities reflect the priorities of a service-oriented organization that applies 

technology to the greatest extent to perform its consumer protection role and to ensure that 

commerce is fair, lawful, and open. 

In FY 2015 and FY 2016, TTB is revising the performance measures for this core mission area to 

increase their utility as management tools and reflect a renewed focus on “voice of the customer” 

feedback. The new measures will help TTB to monitor the degree to which it is meeting the 

service standards it establishes for permit, label, and formula applications, the impact that 

electronic filing initiatives are having on improved service delivery, and the level of satisfaction 

that new industry members have with TTB’s permitting process. TTB’s strategies to achieve its 

performance targets for these measures include a combination of streamlining its internal 

procedures, implementing enhancements to its online filing systems, and publishing clear 

guidance to industry members. 

Improve Efficiency and Effectiveness of Permitting Process

TTB protects consumers by screening permit applicants to ensure only qualified persons engage 

in operations in the alcohol, tobacco, firearms, and ammunition industries. For this purpose, in 

FY 2014, TTB processed approximately 8,100 original and 17,000 amended permits, using risk 

analysis to perform investigations into high-risk applicants to meet TTB’s business integrity 
TTB - 21

objective. TTB also monitors its timeliness in processing permit applications through its 

measure of the Average Number of Days to Process an Original Permit Application for a New 

Alcohol or Tobacco Business. Undue delays in permit application processing impede domestic 

economic growth, primarily in the small business sector, as taxable commodities, such as wine, 

beer, or spirits products, cannot be lawfully produced without a federal permit from TTB. TTB 

targeted a 75-day turnaround time for original permit applications in FY 2014. TTB’s average 

processing time was 84 days in FY 2014, with the shortfall attributable in part to lengthy 

processing times of more than 100 days in the first quarter due to the lapse in appropriations. 

In FY 2014, TTB will discontinue this measure and replace it with a measure of the Percentage 

of Permit Applications Processed within Service Standards. Rather than reporting an average 

processing time that may or may not represent the typical customer experience, TTB will instead 

monitor how many of its customers are receiving service levels that fall within the 

communicated standards. As businesses rely on accurate information related to TTB service 

delivery in their operational planning, this measure will provide important data related to a key 

outcome for TTB and its stakeholders. For this measure, TTB will continue to establish an 

annual service standard based on anticipated workload volume and resources, and will calculate 

the percentage of applications that TTB processes within this service standard. In FY 2014, TTB 

met its 75-day service standard for original permits 58 percent of the time, an improvement 

compared to the prior year when TTB met its 65-day service standard just 50 percent of the time. 

This positive performance trend is largely attributable to the adjusted service standard in FY 

2014, as the workload challenges and resource constraints that began under sequestration remain. 

Using the same service standard of 75 days, TTB intends to meet its FY 2016 performance target 

of 85 percent for timely processed permit applications through a combination of industry 

outreach to promote electronic filing, streamlining its internal procedures, and ongoing system 

enhancements. 

Electronic filing enables TTB to more efficiently process applications. According to its measure 

of the Percent of Electronically Filed Permit Applications, which tracks the e-filing rate for new 

business applications, TTB has made substantial progress in a short time, with 79 percent of 

permit applications received via Permits Online in FY 2014. To meet its FY 2016 target of 85 

percent, TTB will continue to promote use of Permits Online by all permit applicants, including 

through webinars and online training modules. 

Even as e-filing rates increase, however, TTB has not experienced a commensurate reduction in 

processing times for permits due, in part, to the high volume of applications. Over the past 

several years, the number of new permit applications has increased in line with rapid industry 

growth, making it difficult to maintain service within current resources. Between 2010 and 

2014, the number of original permit applications received has increased nearly 30 percent, 

primarily due to growth in the small beverage alcohol producers and alcohol wholesalers 

segments. 

To realize improvements to service delivery, TTB is engaged in a priority project to facilitate 

electronic filing for all industry members. In FY 2014, as part of this multi-year endeavor, TTB 

focused on improvements to the Permits Online system and the internal processes in its business 

qualification program. In FY 2014, TTB began to update the business rules and customer 
TTB - 22

support features embedded in the system to help prospective industry members submit complete 

and accurate information on their permit application the first time; these updates will continue in 

FY 2015. Initial data collected in FY 2014 indicates that as few as 30 percent of applicants filing 

for a permit correctly complete the application without TTB assistance. By receiving more 

correct and complete applications, TTB can reduce the time spent in returning applications to 

customers for correction and reviewing corrected submissions, thus improving the time from 

application to permit issuance. 

TTB is also taking steps to speed its transition to an entirely online processing environment. 

System enhancements that will begin in FY 2015 will improve the ease of amendment filing for 

existing Permits Online users and enable approximately 60,000 TTB permittees who originally 

filed a paper permit application to file for amendments to their permit (e.g., change in control or 

change in address) electronically through Permits Online. As TTB receives between 15,000 –

20,000 permit amendments annually, this project will result in efficiencies for both TTB and the 

businesses it serves. These enhancements are necessary to increase the rate of electronic filing 

by industry and improve processing times.

In addition to the workflow improvements associated with the above system changes, TTB will 

continue to update its procedures used to screen permit applicants, adding new financial data 

sources to its risk models and improving its risk criteria to vet applicants for suitability to hold a 

federal permit in the alcohol and tobacco industries. Increased focus on risk modeling and 

statistical sampling will help TTB maintain its assurance that it is permitting only qualified 

applicants, while also managing workloads. With these changes, TTB anticipates achieving 

sustained reductions to its permit application turnaround time late in FY 2015 following various 

additional system enhancements that are scheduled for implementation in January 2015. 

Increase Customer Satisfaction with TTB Service Delivery 

TTB also measures its performance in its permit processing function by surveying the businesses 

that apply for a TTB permit. TTB monitors the Customer Satisfaction Rate with TTB’s 

Permitting Process by using an e-mail survey to assess how satisfied businesses are when 

applying for a permit through Permits Online. This new survey replaces the telephonic survey 

previously used to gauge customer satisfaction with various services provided by the National 

Revenue Center, TTB’s service center for permit applicants and taxpayers. In FY 2016, to 

achieve its performance target of 80 percent, TTB will implement system enhancements and 

process improvements to improve the customer experience with the system and improve the 

online guidance available to permit applicants. TTB will also seek to improve the level of 

service provided to customers seeking live assistance with the permit application process via 

TTB’s call center.

Ensure Compliance with Importer Permit Requirement 

Maintaining lawful operations in the trade of alcohol and tobacco commodities is a principal 

TTB objective and also supports the Treasury objective to facilitate commerce by ensuring all 

businesses operate on a level playing field. TTB continues its enforcement of federal permit 

requirements, targeting entities identified as importing cigarettes and other tobacco products 

without a TTB permit. Through its measure of Percentage of Importers Identified by TTB as 

Operating without a Federal Permit, TTB monitors international trade data supplied by CBP to 
TTB - 23

ensure active importers have a permit on file with TTB. This enforcement activity enables the 

bureau to identify and take action against those entities engaging in unlawful operations (i.e., 

those importing in quantities that are indicative of commercial activity). In FY 2014, 

approximately 15 percent of entities reporting importations of tobacco products had done so 

without a permit, falling short of its performance target of 12 percent due to the number of 

personal use importations. TTB has found that the vast majority of unpermitted importers 

consist of individuals purchasing tobacco products from overseas via the Internet and only a 

fraction of these entities are importing product at levels that may indicate illegal activity. TTB’s 

issuance of cease and desist letters to these entities, and appropriate follow up activities, ensured 

that the responsible parties ended operations or obtained a permit. 

TTB discontinued this measure for FY 2015 as it has embedded this effective enforcement 

approach into its operations and achieved the intended deterrent effect. As tobacco products are 

often smuggled into the U.S., however, TTB must continue to supplement these data mining 

efforts and to monitor importer activity through audits, investigations, and other intelligence 

efforts to detect undeclared importations and address the substantial potential tax losses that they 

represent. TTB also will continue to focus its enforcement efforts on the importation of 

processed tobacco to ensure that importers comply with federal law. Processed tobacco remains 

the subject of TTB enforcement scrutiny, as it is not subject to tax and may be diverted for illegal 

manufacturing purposes. 

Improve Efficiency and Effectiveness of Alcohol Beverage Label Processing

TTB protects U.S. consumers by ensuring that the alcohol beverage products offered at retail 

outlets are properly labeled and comply with federal production standards. This activity also 

facilitates compliant commerce, a critical Treasury objective, as a TTB label approval is required

before an industry member can introduce their products into interstate commerce. TTB expects 

to meet both objectives through the regulatory enforcement activities under its alcohol beverage 

labeling program, which include the review of label applications and associated formula 

submissions to ensure product labels are truthful and accurate and products are formulated and 

produced with ingredients and processes that do not pose a health risk to U.S. consumers. 

In FY 2014, TTB received approximately 142,400 label applications and 14,000 formula 

applications. The rapid expansion of the alcohol beverage industry combined with market trends 

toward formulated products have contributed to the high volume of applications. Between 2008 

and 2012, the number of applications increased by 14 percent. TTB has implemented policy 

changes each year since FY 2012 to expand the number and type of changes that industry may 

make to an alcohol beverage label without submitting a new label application. These changes 

reduced the volume of submissions by 7 percent between FY 2012 and FY 2014 without 

compromising TTB’s consumer protection role. Although these labeling program changes were 

successful in temporarily bending the curve for label applications, annual industry growth is 

already causing label applications to increase again. Additionally, the volume of formula 

applications continues to increase, with submissions increasing 11 percent over last year. 

These workload challenges have prevented progress in improving service delivery in this area. 

Lengthy processing times continue to disrupt the business operations of U.S. beer, wine, and 

spirits producers and importers, posing a potential barrier to commerce. TTB has made minimal 
TTB - 24

gains in reducing processing times as TTB spent much of the first half of FY 2014 working to 

recover from the lapse in appropriations in the face of high demand. Given the importance of 

timely TTB approvals and the negative impact that delays may have on U.S. businesses, TTB is 

introducing a new measure of the Percentage of Alcohol Beverage Label and Formula 

Applications Processed within Service Standards. This measure parallels the new measure of 

TTB’s permitting process, described previously. TTB combines label and formula applications 

in this measure given the interdependent nature of these approvals, as a formula approval is often 

required prior to label approval to substantiate label claims. Heading into FY 2014, TTB met its 

service standards of 30 days for a COLA and 45 days for a formula approximately 50 percent of 

the time, with new businesses waiting nearly three months on average from the time they filed 

for a formula approval to their first release of a new product. As illustrated by the chart below, 

this represents a significant departure from prior year performance. In FY 2014, TTB has made 

progress in its label approvals as the impact of the policy updates have taken effect, but 

performance in timely processing formula approvals has declined, with TTB meeting the 45-day 

service standard just 15 percent of the time. In June 2014, TTB issued a ruling to eliminate the 

formula requirement for certain malt beverage products, which should help stem the number of 

applications from this expanding and highly innovative industry and enable TTB to focus on 

products that may pose a risk to consumers or federal revenues. 

In FY 2016, under the same service standards, TTB maintained a target of 85 percent for the 

percentage of label and formula applications that meet the established service standards. To 

meet the performance target, TTB will continue to focus efforts on revising and updating its 

policies and industry guidance given current performance challenges. In the same vein as the 

beer formula ruling issued in FY 2014, TTB will examine potential revisions to its formula 

policies for spirits and wine products, some of which will require rulemaking to implement. 

TTB also intends to proceed with its regulations modernization project, which will update and 

streamline the labeling regulations to reflect current TTB policy and modern industry practices. 

To achieve its FY 2016 performance target, TTB must also consider how the current industry

profile impacts service delivery, as new producers often require extensive assistance during the 

application process and frequently submit applications that require correction, both of which add 

to processing times. Available data for formula and label processing indicates that this year

83%

48%

71%

91%

61%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY 2012 FY 2013 FY 2014

Percent of Label and Formula Applications Processed 

within Service Standards

 COLA Applications Formula Applications
TTB - 25

approximately 40 percent of label applications and 30 percent of formula applications required 

correction, thus adding to the processing burden as each resubmitted application requires 

additional review. In FY 2015 and FY 2016, TTB will evaluate upgrades to COLAs Online and 

Formulas Online to increase system checks to ensure applications are complete and accurate to 

reduce the number that require correction. 

TTB will also continue to employ its strategy to increase electronic filing to manage workloads 

and drive down processing times, as electronic applications are often more complete and 

accurate than paper submissions. In FY 2014, TTB achieved an electronic filing rate of 94 

percent for label applications, exceeding its targeted performance level of 93 percent. The 

ongoing rise in electronic filing is due to TTB outreach to industry members and system 

improvements made in response to customer feedback that simplify the filing process for 

industry members. 

TTB proposes to discontinue this measure in FY 2016, and replace it with a new measure of the 

Percent of Electronically Filed Label and Formula Applications. As TTB seeks to modernize its 

labeling program, it will focus on both the label and formula approval processes, which both are 

pre-conditions to market entry for alcohol beverage products. In FY 2016, TTB is targeting a 95 

percent electronic filing rate for this new measure, reflecting TTB’s expectation that e-filing 

rates will remain relatively constant going forward without more significant program changes. 

TTB recognizes that, even with high rates of electronic filing, the volume of label applications 

necessitates consideration of broader efforts to streamline the alcohol beverage label application 

process. In FY 2016, TTB will invest $1 million in its labeling modernization priority project to 

streamline the process for reviewing label applications and improve service delivery times. This 

multi-year effort will involve the introduction of automated system checks and the use of 

advanced risk models to target non-compliance. With this initial investment in TTB's labeling 

modernization priority project, TTB does not anticipate significant performance impacts, as this 

would mark the formal requirements gathering stage for IT system enhancements and the 

development of the risk models needed for improved market-based enforcement. Still, the 

planned system improvements to both COLAs Online and Formulas Online and ongoing industry 

outreach should help TTB achieve its FY 2016 performance targets for its measures related to efiling rates and service delivery, which are 95 percent and 85 percent, respectively.
TTB - 26

3.1.2 – Protect the Public Budget and Performance Plan

Dollars in Thousands

Protect the Public Budget Activity

Resource Level FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Actuals Actuals Actuals Actuals Actuals Enacted Enacted Request

 Appropriated Resources $48,541 $50,000 $50,399 $48,939 $45,727 $47,279 $47,279 $48,654

 Reimbursable Resources $1,898 $2,117 $1,979 $2,464 $2,670 $3,236 $3,371 $3,024

 Transfer from TEOAF-Super 

Surplus Fund

$0 $0 $0 $0 $0 $432 $0 $0

Budget Activity Total $50,439 $52,117 $52,378 $51,403 $48,397 $50,947 $50,650 $51,678

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Actual Actual Actual Actual Actual Actual Target Target

Percent of Electronically Filed 

Permit Applications (NEW)

N/A N/A N/A 62.0 70.0 79.0 82.0 85.0

Percent of Permit Applications 

Processed within Service 

Standards (NEW)

N/A N/A N/A 61.0 50.0 58.0 85.0 85.0

Average Number of Days to 

Process an Original Permit 

Application for a New Alcohol 

or Tobacco Business

64.0 65.0 77.0 69.0 81.0 84.0 DISC DISC

Customer Satisfaction Rate 

with TTB Permitting Process 

(NEW)

N/A N/A N/A N/A N/A B 80.0 80.0

Percent of Electronically Filed 

Label and Formula 

Applications (NEW)

N/A N/A 84.0 88.0 90.0 93.0 94.0 95.0

Percentage of Alcohol 

Beverage Label and Formula 

Applications Processed within 

Service Standards (NEW)

N/A N/A N/A 83.0 49.0 67.0 85.0 85.0

Percent of Electronically Filed 

Certificate of Label Approval 

Applications

74.0 79.0 88.0 91.0 92.0 94.0 DISC DISC

Percentage of Importers 

Identified by TTB as Operating 

without a Federal Permit

15.0 15.0 14.0 13.0 11.0 15.0 DISC DISC

Key: DISC - Discontinued and B - Baseline
TTB - 27

Section 4 – Supplemental Information

4A – Summary of Capital Investments

Information Technology

TTB’s Strategic Plan establishes the vision and objectives for the bureau in the business context. 

TTB’s Information Technology (IT) Strategic Plan is a five-year plan based on the business 

strategy, which includes the bureau’s mission, vision, goals, and objectives from the IT 

perspective. This plan charts the course the bureau will follow in the coming years to develop 

and implement IT solutions that are aimed at streamlining the collection of data, leveraging web 

technologies, and making the Internet the method of choice for the reporting and exchanging of 

information. By aligning business and technical strategy, TTB is able to leverage technology to 

enable the bureau to meet its objectives in the most efficient and cost-effective manner while 

identifying ways to minimize system redundancy. 

TTB has no major IT investments based on the OMB and the Department of Treasury criteria. 

Several non-major investments, however, directly support the mission, strategy, and day-to-day 

operations of the bureau. These include:

TTB Tax System: This investment consists of several component applications that ensure fair 

and proper collection of revenue from the industry members for alcohol, tobacco, firearms, and 

ammunition excise taxes and to ensure compliance with the excise tax regulations.

TTB Regulatory System: This investment includes applications that streamline the beverage 

and nonbeverage alcohol formula approval process and COLA issuance for tax and regulatory 

compliance.

TTB General Support Services: This investment provides TTB users with the infrastructure 

applications necessary to conduct daily business.

TTB Enterprise Architecture: This investment supports strategic management of IT operations 

(e.g., business process redesign efforts not part of an individual investment, enterprise 

architecture development, capital planning and investment control processes, procurement 

management, and IT policy development and implementation) and costs for Chief Information 

Officer functions.

In addition to leveraging IT to support the mission, strategy, and day-to-day operations of the 

bureau, TTB supports and maintains strategy alignment with OMB and Treasury through 

enterprise-wide IT initiatives. These include: Cyber Security; IT Infrastructure; Electronic 

Identity and Access Management (HSPD-12); Enterprise-wide Contracts and Services; and 

Program Metrics and Milestones.

Scientific Equipment for Laboratories

This investment will enable chemists to provide accurate and reproducible scientific data and 

laboratory results to support regulatory compliance, tax enforcement, tax classification, 

rulemaking, and investigations for both the alcohol and tobacco commodities. Laboratory 

instruments require periodic replacement, as they have finite lifecycles due to use and as 
TTB - 28

scientific advances continue to evolve. Technologies applied at these laboratories eventually 

become obsolete and the instruments are not serviceable as vendors stop carrying parts and 

software. Periodic replacement of the existing technologies is essential for TTB laboratories to 

remain state-of-the-art and effective to support the bureau’s mission, strategy, and day-to-day 

operations.

A summary of capital investment resources, including major information technology and nontechnology investments, can be viewed/downloaded at:

http://www.treasury.gov/about/budget-performance/Pages/summary-of-capital-investments.aspx.

This website also contains a digital copy of this document.