Alcohol and Tobacco Tax and 

Trade Bureau

FY 2017

President’s Budget

February 9, 2016
TTB - 2

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............................................... 7

2.1 – Budget Adjustments Table................................................................................................. 7

2A – Budget Increases and Decreases Description..................................................................... 7

2.2 – Operating Levels Table...................................................................................................... 9

2B – Appropriations Language and Explanation of Changes................................................... 10

2C – Legislative Proposals........................................................................................................ 10

Section 3 – Budget and Performance Plan ............................................................................... 11

3A – Collect the Revenue ......................................................................................................... 11

3.1.1 – Collect the Revenue Budget and Performance Plan ..................................................... 14

3B – Protect the Public ............................................................................................................. 15

3.1.2 – Protect the Public Budget and Performance Plan ......................................................... 19

Section 4 – Supplemental Information...................................................................................... 20

4A – Summary of Capital Investments..................................................................................... 20
TTB - 3

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 2015 FY 2016 FY 2017 FY 2016 to FY 2017

Appropriated Resources Enacted Enacted Request $ Change % Change

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Collect the Revenue 242 52,721 242 52,785 242 53,560 0 775 0.00% 1.47%

Protect the Public 231 47,279 252 53,654 252 52,879 0 (775) 0.00% -1.44%

Subtotal New Appropriated Resources 473 $100,000 494 $106,439 494 $106,439 0 $0 0.00% 0.00%

Other Resources:

Reimbursables 10 7,022 10 6,992 10 6,912 0 (80) 0.00% -1.14%

Transfer In/Out 0 0 0 0 35 5,000 35 5,000 NA NA

Subtotal Other Resources 10 $7,022 10 $6,992 45 $11,912 35 $4,920 350.00% 70.37%

Total Budgetary Resources 483 $107,022 504 $113,431 539 $118,351 35 $4,920 6.94% 4.34%

Note: The FY 2017 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 the 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-century approach to Government.

FY 2017 Priorities and Challenges

In Fiscal Year (FY) 2017, TTB will invest its resources in program activities that provide the 

greatest assurance that these industries are operating in compliance with tax and regulatory 

requirements, in the interest of collecting the excise taxes due and ensuring fair and lawful 

market activity.
TTB - 4

Collect the Revenue

Increase Tax Collection Efficiencies and Voluntary Compliance

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

Customs and Border Protection (CBP). In FY 2015, TTB collected $22.3 billion in excise taxes 

and other revenues from nearly 11,7001 taxpayers in the alcohol, tobacco, firearms, and 

ammunition industries. The return on investment for TTB’s tax collection activities was 437:1

for FY 2015. As the most efficient means of tax administration, 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. Further, efforts to streamline 

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

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

The bureau has developed and employed increasingly sophisticated risk modeling to complete 

targeted audits and revenue investigations into non-compliance. In FY 2015, these enforcement 

efforts resulted in a total of more than $57 million in identified additional tax liabilities.

TTB collections are influenced by multiple factors:

• Alcohol Tax Collections: In FY 2015, TTB collected approximately $8 billion in revenue 

from U.S. wineries, breweries, and distilleries, a nearly 1 percent increase over the prior year.

Although economic forecasts predict continued modest growth in the U.S. alcohol industry as 

a whole, excise tax collections will likely remain relatively constant due to a number of 

variables, including increasing volumes in imports, for which CBP collects the tax; 

increasing volumes of exports, on which no tax is due; and declining sales by volume from 

the country’s largest brewers, who account for over 90 percent of the beer sold in the U.S.

The rapid expansion of small wineries, breweries, and distilleries will not entirely offset the 

declines in sales and tax payments by the large companies as small beer and wine producers 

are eligible for reduced tax rates or tax credits based on their production volume. This trend 

is expected to continue through FY 2017. 

• Tobacco Tax Collections: In FY 2015, TTB collected $13.6 billion in tobacco tax revenue, 

with collections remaining relatively constant compared to FY 2014. As forecasted, tobacco 

revenues have generally declined since FY 2010, the first full year of collections following 

the 2009 Federal tobacco tax rate increase. 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 2009. The 2009 tax rate change 

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. The growing popularity of electronic nicotine products, such as 

e-cigarettes, which are not subject to Federal excise tax unless they contain tobacco, could 

contribute to declining tobacco revenue in the future. TTB will continue to exercise its 

jurisdiction to support tax compliance and deter illicit trade.

• Firearms and Ammunition Excise Tax (FAET) Collections: FAET taxes are remitted to the 

Fish and Wildlife Restoration Fund for wildlife restoration, research, and hunter education 

 1 Of the approximately 20,000 TTB permittees whose business operations are subject to Federal excise taxes, 

approximately 11,700 (58 percent) have activity that requires them to file a tax return and pay excise tax in FY 2015.
TTB - 5

programs. In the past decade, collections have increased from $250 million in FY 2006 to 

$638 million in FY 2015, an increase of $388 million, or a 155 percent growth in tax 

revenue. Historically, increases in reported FAET revenue can be attributed to growth in

sales due to external factors as well as TTB’s enforcement presence, which increases 

collections and promotes voluntary compliance.

Address and Deter Alcohol and Tobacco Diversion

Enforcing the tax code also requires that TTB address and deter 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. Since 

the inception of TTB’s criminal enforcement program in FY 2011, TTB’s agents have opened a 

total of 91 cases, with identified liabilities of over $551 million in evaded alcohol, tobacco, 

firearms, and ammunition excise taxes. 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 criminal activity is not 

limited to the tobacco 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 2017, TTB will continue to identify and address high-risk activity and players in the 

tobacco and alcohol trades and, with continued program funding, to effectively deploy criminal

agents to deter and interdict illicit trade. TTB’s enforcement program utilizes the services of 

criminal enforcement agents on a reimbursable basis from the Internal Revenue Service Criminal 

Investigation division. Alcohol and tobacco diversion remain 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. The FY 2017 request includes $2 million in the 

base budget for criminal enforcement and proposes a transfer of $5 million from the IRS’s 

requested program integrity cap adjustment for increased TTB enforcement and compliance 

programs to narrow the alcohol and tobacco tax gap and reduce the deficit through increased 

revenue collections.

Protect the Public

Improve Permitting Process

Industry growth in the number of alcohol beverage producers, driven by a boom in small 

breweries, distilleries, and wineries, has contributed to delays in permit processing times. TTB is 

meeting this challenge through its priority project to improve its business qualification process, 

including through enhancements to its electronic filing and processing environment. TTB 

achieved a significant milestone in FY 2015 by deploying a new release of Permits Online in 

February 2015, which added new system help features to improve submission compliance and

addressed a bottleneck in the permit processing workflow. Early data indicated reduced 

processing times for new permits following the release, decreasing from a high of 95 days in 

January to 68 days in July, though these gains were not enough for TTB to achieve its annual 

performance target of 75 days in FY 2015. At year end, only 47 percent of permit applications 

met the 75-day service standard.

In FY 2016, TTB plans to improve service delivery through additional workflow and system 

enhancements to streamline both the filing and processing of permit applications. TTB continues 
TTB - 6

to make steady progress in the development of a new version of Permits Online. The new design 

will enhance usability for industry members and improve the compliance rate of submissions, 

reducing resubmitted applications and the overall workload volume that are contributing to 

delays. The redesigned system will also facilitate the electronic filing of permit amendments, a 

high volume activity that remains largely paper-based, which should further decrease processing 

times. With these efforts, TTB will be positioned to achieve sustained performance 

improvements by the end of FY 2017.

Modernize the Alcohol Beverage Labeling Program

The increase in the number of new alcohol beverage producers also influences the timely 

processing of label and formula applications. New producers often require extensive assistance 

during the label approval process and frequently submit applications that require correction, both 

of which add to processing times. The performance challenges caused by explosive industry 

growth and product innovation during a period of constrained TTB resources has spurred the 

bureau’s priority project to modernize the Federal alcohol beverage labeling program. Through 

updates to Federal labeling regulations, the removal of requirements for label and formula 

approvals for certain low-risk products, and the implementation of system enhancements, TTB 

expects to eliminate current barriers to compliant trade caused by processing delays while 

maintaining adequate regulatory controls to ensure revenue collection and consumer protection.

Efforts to remove label approval requirements to date had been successful in temporarily 

reducing the volume of submissions; however, these reductions were offset in FY 2015 by 

increased filings that reached nearly 154,000 applications, an 8 percent increase over the prior 

year and well above the historic high reached in FY 2012. Similar efforts in the formula area 

were implemented in FY 2014, with a published ruling resulting in a more than 30 percent 

reduction in malt beverage formula submissions. However, as increases in formula submissions 

from the spirits and wine industries have since offset these reductions, TTB plans to proceed 

with guidance and rulemaking beginning in FY 2016 and continuing through FY 2017 to further 

reduce formula submissions across the alcohol beverage commodities. Additionally, as noncompliant applications are essentially doubling processing workloads, TTB will issue 

rulemaking to consolidate and clarify Federal labeling regulations to improve understanding and 

compliance with these complex regulations. TTB also is using the findings of its FY 2015 

analyses of the reasons that applications are returned to industry for correction to implement 

system-based compliance checks that will improve the compliance of label and formula 

applications. At the proposed funding level, TTB would defer planned updates to the label and 

formula application systems in FY 2017.

In addition to these intervention strategies, TTB will significantly reduce label and formula 

application turnaround times through the addition of label specialists, formula specialists, and 

chemists who directly impact service times through their review of applications and product 

samples. The combination of staffing, improved guidance, and enhanced systems are necessary 

to provide a long-term solution to current processing delays that may limit potential revenue and 

negatively impact businesses.
TTB - 7

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 2016 Enacted 494 $106,439

Changes to Base:

Maintaining Current Levels (MCLs): - $1,562

Pay-Raise - $598

Pay Annualization $199

Non-Pay - $765

Other Adjustments: - ($1,562)

IT Investments in Application Systems - ($1,562)

Subtotal Changes to Base - $0

Total FY 2017 Base 494 $106,439

Program Changes:

 Program Increase: 35 $5,000

 Alcohol and Tobacco Enforcement Program 35 $5,000

Total FY 2017 Operating Level 529 $111,439

Program Integrity Cap Adjustment Included in IRS Budget Request - ($5,000)

Total FY 2017 Net Appropriation Request 529 $106,439

2A – Budget Increases and Decreases Description

Maintaining Current Levels (MCLs) .......................................................+$1,562,000 / +0 FTE

Pay-Raise +$598,000 / +0 FTE

Funds are requested for the proposed January 2017 pay-raise.

Pay Annualization +$199,000 / +0 FTE

Funds are requested for the annualization of the 2016 pay raise.

Non-Pay +$765,000 / +0 FTE

Funds are requested for inflation adjustments in non-labor expenses such as GSA rent 

adjustments, contracts, postage, supplies, and equipment.

Other Adjustments .......................................................................................-$1,562,000 / -0 FTE

IT Investments in Application Systems -$1,562,000 / -0 FTE

TTB will defer additional IT enhancements for its labeling program modernization effort while 

continuing to retain the additional label specialists, formula specialists, and chemists hired to 

improve processing times of labels and formulas.

Program Increase .....................................................................................+$5,000,000 / +35 FTE

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

The FY 2017 request 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. TTB’s funding request is captured in the program integrity cap adjustment proposed 

in the IRS budget for both the IRS and TTB. 
TTB - 8

The proposed cap adjustment for TTB tax enforcement and compliance activities includes $5 

million in new, revenue-producing tax compliance initiatives in FY 2017 and $5 million in 

additional new initiatives each fiscal year from 2018 through 2021, then remaining at a steady 

state through FY 2026. With this funding, 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 $189 million over the 10-

year period. Over this same time period, these additional investments will generate an estimated 

$338 million in additional tax revenue. The net savings from these investments is $149 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 further contributes to

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 tax enforcement program is reflected 

only once in the 2017 request as part of the IRS’s program integrity cap adjustment proposal.

2017 2018 2019 2020 2021 2017-2026

Cap Adjustment, Proposed BBEDCA

(Discretionary Budget Authority) 5 10 14 18 23 189

Change from Prior Year 5 4 4 5

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

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

Net 10-Year Savings (149)
TTB - 9

2.2 – Operating Levels Table

Dollars in Thousands

Alcohol and Tobacco Tax and Trade Bureau FY 2015 FY 2016 FY 2017 FY 2017 FY 2017

Object Classification Actual Enacted Request Transfer 

from IRS

Total 

Discretionary 

Appropriation

11.1 - Full-time permanent 44,739 47,789 48,427 1,697 50,124

11.5 - Other personnel compensation 704 619 619 50 669

11.9 - Personnel Compensation (Total) 45,443 48,408 49,046 1,747 50,793

12.0 - Personnel benefits 14,015 14,244 14,403 373 14,776

13.0 - Benefits for former personnel 30 0 0 0 0

Total Personnel and Compensation Benefits $59,488 $62,652 $63,449 $2,120 $65,569

21.0 - Travel and transportation of persons 1,751 1,976 1,976 204 2,180

22.0 - Transportation of things 20 50 50 35 85

23.1 - Rental payments to GSA 4,193 4,400 4,400 0 4,400

23.3 - Communication, utilities, and misc 

charges 1,434 1,567 1,594 35 1,629

24.0 - Printing and reproduction 194 262 267 0 267

25.2 - Other services 21,417 25,390 24,352 950 25,302

25.3 - Other purchases of goods & serv frm 

Govt accounts 6,458 7,552 7,715 1,446 9,161

26.0 - Supplies and materials 395 490 499 35 534

31.0 – Equipment 3,077 2,100 2,137 175 2,312

Total Non-Personnel 38,939 43,787 42,990 2,880 45,870

Subtotal New Appropriated Resources $98,427 $106,439 $106,439 $5,000 $111,439

Budget Activities:

Collect the Revenue 54,657 56,421 57,154 5,000 62,154

Protect the Public 49,902 57,010 56,197 0 56,197

Total Budgetary Resources $104,559 $113,431 $113,351 $5,000 $118,351

FTE 466 504 504 35 539
TTB - 10

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, $106,439,000; 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, [$5,000,000 shall be for 

the costs of accelerating the processing of formula and label 

applications] 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.

While the Budget 

proposes to 

remove the $5 

million earmark 

for accelerating 

the processing of 

formula and label 

applications, $3.4

million remains in 

the base for this 

program.

2C – Legislative Proposals

TTB has no legislative proposals.
TTB - 11

Section 3 – Budget and Performance Plan

3A – Collect the Revenue

($53,560,000 from direct appropriations, $3,594,000 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 tax code for alcohol, tobacco, firearms, and ammunition

products, 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 11,700 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 extends the reach of its enforcement resources through advanced analytics and 

risk-based audits and investigations. Further, as appropriate, TTB applies an interagency 

enforcement strategy through joint initiatives with local, state, Federal, and foreign Government

counterpart agencies to maximize the deterrent impact of enforcement actions. To ensure 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).................................... $3,594,000

Other resources that fund this budget activity include reimbursement for the operating costs of 

the TTB Puerto Rico field office, which are offset against the roughly $350 million in taxes 

collected on the alcohol beverage products that are manufactured in Puerto Rico and imported to

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 2017 request also proposes a transfer of $5 million from the proposed IRS program 

integrity cap adjustment to TTB for tax enforcement and compliance initiatives 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 2015, TTB met one of its two annual targets for the performance measures under 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 the administration 

of the tax code. Achieving 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 intelligence data from a variety of Government and 

commercial sources as well as interagency partnerships with counterpart enforcement agencies.
TTB - 12

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 2015, TTB achieved a return on investment of $437 for

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

of $400. Effective enforcement combined with process improvements and streamlining efforts 

should contribute to continued positive returns on the investment in TTB, contributing to 

Treasury’s goal of a modern and effective tax system.

In setting its FY 2017 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. As illustrated by the below table, the 

2009 changes to the Federal tax rates have resulted in increased tobacco tax collections by TTB, 

although the amount of the increase has generally decreased since FY 2010, the first full fiscal 

year following the tax rate increases. In accounting for these types of marketplace shifts, TTB 

established a targeted performance level of 400:1 for fiscal years 2016 – 2017. 

In FY 2017, to meet its performance target of $400, TTB will continue to improve efficiencies 

and results in its tax enforcement program by improving its systems and processes related to tax 

verification. 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 to preserve 

staff time for substantive tax analysis. In FY 2017, TTB also intends to continue 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.

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 limited 

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

alcohol and tobacco products. Exports pose a significant revenue threat because alcohol and 

Excise Tax and Other Collections by Fiscal Year

Dollars in Thousands

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

2015 7,997,467 13,620,497 638,518 288 2,444 7 22,259,221

Average $ 7,596,183 $ 12,086,974 $ 469,271 $ 814 $ 121,716 $ 433 $ 20,275,390

FAET - Firearms and Ammunition Excise Tax; SOT - Special Occupational Tax; FST - Floor Stock Tax

Total

Fiscal

Year Alcohol Tobacco FAET SOT FST Other
TTB - 13

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, nontaxpaid removals of alcohol and tobacco products from bonded premises for export present an 

annual excise tax exposure of about $380 million and $1 billion, respectively. In FY 2015, in 

partnership with CBP and Immigration and Customs Enforcement, TTB expanded its 

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’s 

enforcement efforts related to tobacco export warehouses, which operate under permits issued by 

TTB, have identified $41 million in additional tax liabilities as well as criminal referrals.

This measure would be positively influenced if the proposed program integrity cap adjustment 

requested in FY 2017 is approved. 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, while expanding enforcement initiatives to include other points in 

the supply chain that are at risk for diversion activity. TTB anticipates a positive long-term return 

on investment at the FY 2017 request level; however, the anticipated increases in additional tax 

collections from the planned expanded enforcement initiatives will not occur until year three, 

after new personnel reach full performance levels.

Increase Voluntary Compliance from Taxpayers

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

TTB and supports the Treasury objective to improve the execution of the tax code. 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 2015, TTB achieved a compliance rate of 88 percent from its large 

taxpayers, which fell below the performance target of 92 percent. The declining compliance rate 

in recent years is due to improvements in TTB’s tax reconciliation and enforcement functions 

related to identifying late, missing, and erroneous tax returns and payments. These efforts often 

result in the late filing of tax returns that otherwise would have remained unfiled. The additional 

late-filed returns have the effect of reducing the reported voluntary compliance rate. TTB 

anticipates that taxpayers targeted by enforcement efforts will begin filing timely returns in 

future years, and that, over time, reported voluntary compliance rates will increase.

By FY 2017, TTB expects to meet its established performance target of a 94 percent voluntary 

compliance rate for its large taxpayers through complementary strategies 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 establishing compliant operations while ensuring adequate 

coverage of the high-risk activity that undermines lawful business activity. 
TTB - 14

Beginning now and continuing in FY 2017, TTB will also intensify its efforts to increase the 

electronic filing rate of its taxpayers. TTB taxpayers may electronically file required tax returns, 

reports, and payments through the Pay.gov system, with 26 percent of excise tax returns and 43

percent of operational reports submitted electronically through Pay.gov in FY 2015. TTB intends

to address a potential hindrance to using Pay.gov by allowing industry members to make tax 

payments with credit/debit cards. This enhancement would 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.

The FY 2017 request will also support online enhancements to improve guidance, transparency, 

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

completed an online “Business Central” resource to ensure that these taxpayers understand and 

are able to adhere to complex Federal tax and regulatory requirements. Continued expansion and 

improvement of this guidance will help to ensure that new businesses start and maintain 

compliant operations, supporting TTB’s achievement of its performance target.

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

also expects to achieve higher rates of voluntary compliance at the FY 2017 request level

through the continuation and expansion of TTB’s criminal enforcement program. The FY 2017

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

TTB tax enforcement and compliance 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

Resource Level FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Actuals Actuals Actuals Actuals Actuals Enacted Enacted Request

Appropriated Resources $53,000 $50,399 $50,939 $48,927 $51,721 $52,721 $52,785 $53,560

Reimbursable Resources $2,117 $1,979 $2,464 $3,277 $3,506 $3,651 $3,636 $3,594

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 $468 $0 $0 $0

Budget Activity Total $55,117 $52,378 $53,403 $52,204 $55,695 $56,372 $56,421 $62,154

Measure FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2015 FY 2016 FY 2017

Actual Actual Actual Actual Actual Actual Target Target Target

Amount of Revenue Collected Per 

Program Dollar

478.0 468.0 449.0 457.0 457.0 437.0 400.0 400.0 400.0

Percent of Voluntary Compliance 

from Large Taxpayers in Filing Tax 

Payments Timely and Accurately (In 

Terms of Revenue)

94.0 95.0 92.0 92.0 90.0 88.0 92.0 92.0 94.0
TTB - 15

3B – Protect the Public

($52,879,000 from direct appropriations, and $3,318,000 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 

approximately 76,000 businesses that TTB regulates; facilitate fair and lawful domestic and 

international 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).................................... $3,318,000

Other resources that support this budget activity include reimbursement for the operating costs of 

the TTB Puerto Rico field office, which are offset against the roughly $350 million in taxes 

collected on the alcohol beverage products that are manufactured in Puerto Rico and imported

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 2015, TTB met two of its five annual targets for the performance measures under the 

Protect the Public budget activity. TTB reports on its success in meeting the Department’s 

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

five principal performance measures, revised in FY 2015 to increase their utility as management 

tools and reflect a renewed focus on customer experience in receiving required services from 

TTB. 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 

prospective industry members have with TTB’s permitting process. TTB’s strategies to achieve 

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

procedures, implementing enhancements to 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 the alcohol, tobacco, firearms, and ammunition industries. For this purpose, in FY 2015, TTB 

processed approximately 7,300 original and 19,500 amended permits, performing investigations 

into high-risk applicants to meet TTB’s business integrity objective. TTB monitors its timeliness 

in processing permit applications through its measure of the Percentage of Permit Applications 

Processed within Service Standards. This measure indicates how many customers are receiving 

service levels that fall within the communicated standards, rather than reporting an average 

processing time that may not represent the typical customer experience. As businesses rely on 

accurate information related to TTB service delivery in their operational planning, this measure 

provides important data related to a key outcome for TTB and its stakeholders. For this measure, 

TTB establishes an annual service standard based on anticipated workload volume and resources.

In FY 2015, TTB met its 75-day service standard for 47 percent of original permit applications.
TTB - 16

The increased volume in the most complex application types, in addition to backlogs at the 

approval stage due to resource constraints, caused processing times to increase. TTB intends to 

make substantial progress toward its FY 2017 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.

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 84 percent of permit applications received via Permits Online. To meet its FY 2017

target of 89 percent, TTB will continue to promote use of Permits Online by all permit 

applicants, including through online guidance and training. Even as e-filing rates increase, 

however, TTB has not achieved a commensurate reduction in processing times for permits due, 

in part, to the high volume of applications. In recent years, the number of new permit 

applications has increased in line with rapid industry growth, making it difficult to maintain 

service levels. Between 2011 and 2015, the number of original permit applications received has 

increased 25 percent, primarily due to growth in the small alcohol beverage producer and alcohol 

wholesaler segments.

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

electronic filing for all industry members. In FY 2015, as part of this multi-year endeavor, TTB 

focused on both system improvements to Permits Online as well as the internal processes in its 

business qualification program. Combined, these efforts should reduce processing times while 

continuing to ensure that TTB issues permits to only qualified applicants. In FY 2015, TTB 

began to update the system’s business rules and customer support features to help prospective 

industry members submit complete and accurate information on their original permit application; 

these updates will continue through FY 2017. Based on a recent analysis, TTB has found that as 

few as 23 percent of applicants filing for a permit correctly complete the application without 

TTB assistance. By receiving correct and complete applications on the first filing attempt, TTB 

can reduce the time required to return applications for correction and review corrected 

submissions, thus reducing the time from application submission to permit issuance.

Further, system enhancements that began 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 amendments to their permit through Permits 

Online. As TTB receives approximately 20,000 permit amendments annually, this project will 

result in efficiencies for both TTB and the businesses it serves through increasing the rate of 

electronic filing by industry and improving 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 the risk criteria used 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 to ensure that TTB is permitting only qualified applicants, while 

also managing workloads and improving service delivery. With these changes, TTB anticipates 

achieving sustained reductions to its permit application turnaround time and more consistent 

service by the fourth quarter of FY 2017.
TTB - 17

Increase Customer Satisfaction with TTB Service Delivery 

TTB also measures its performance in its permitting 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. Satisfaction rates in FY 2015 were slightly below the annual 

target of 80 percent, with 76 percent of applicants filing for an original permit satisfied with the 

application process, including the level of service received and timeliness of TTB’s response.

The system enhancements rolled out in FY 2015 should result in improved satisfaction rates. In 

addition to enhanced help features, these upgrades also addressed bottlenecks in the permit 

approval process, which should decrease processing times and increase satisfaction rates. In 

FY 2017, to achieve its performance target of 80 percent, TTB will continue to 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.

Improve Efficiency and Effectiveness of Alcohol Beverage Label Processing

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

are properly labeled and comply with Federal production standards. In FY 2015, TTB received

nearly 154,000 label applications and more than 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 label and formula applications. Recent policy 

changes intended to reduce applications without compromising TTB’s consumer protection role 

successfully reduced the volume of original label and formula submissions in the short-term; 

however, industry trends have resulted in increased submissions that have offset these 

reductions. Low compliance rates for original submissions are also essentially doubling TTB’s 

processing workload, as applications returned to industry for correction require additional 

review.

These workload challenges have prevented TTB from making sustained 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. Given the importance of timely TTB approvals and the negative impact that delays 

have on U.S. businesses, TTB is monitoring its ability to provide timely and consistent service 

through its measure of the Percentage of Alcohol Beverage Label and Formula Applications 

Processed within Service Standards. TTB combines label and formula applications in this 

measure given the interdependent nature of these approvals. In FY 2015, approximately 75 

percent of label and formula applications met the service standards of 30 days for a label 

approval and 45 days for a formula approval. The result was that new businesses waited three 

months on average from the time they filed for a formula approval to being able to bottle and 

distribute a new product. This timeline increases to over 100 days for products that also require 

laboratory analysis prior to approval. In FY 2015, TTB made progress in meeting its service 

standard for label approvals, with 80 percent of label approvals meeting the 30-day service 

standard; however, performance in timely processing formula approvals remains a challenge, 

with TTB meeting the 45-day service standard just 15 percent of the time.
TTB - 18

At the enacted FY 2016 and proposed FY 2017 funding levels, TTB will invest in staffing and 

technology enhancements to achieve dramatic improvement in service standards for label and 

formula review times. Through this combination, TTB expects to reduce total review times from 

over 100 days to 30 days or less (including those submissions that require lab analyses) for 85 

percent of applications. At this funding level, TTB will increase its staff of label specialists, 

formula specialists, and chemists, all of whom directly impact service times through their review 

of applications and product samples. TTB is also implementing system improvements to both 

COLAs (Certificate of Label Approval) Online and Formulas Online to address the high volume 

of label and formula submissions, including increased system-based compliance checks to reduce 

reprocessing work related to errors on initial applications. Certain planned enhancements to 

TTB’s application systems would be deferred at the FY 2017 funding level. Once new hires 

reach full productivity and system updates currently in development take effect in the fourth 

quarter of FY 2017, TTB expects to achieve its performance target of processing label and 

formula applications within 30 days for 85 percent of applications.

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

policies and improving industry guidance to facilitate the compliance of initial applications and 

reduce overall submission volume. TTB intends to proceed with its labeling modernization

project, which will update and streamline the labeling regulations to reflect current TTB policy 

and modern industry practices. TTB will also pursue revisions to the formula requirements for 

spirits and wine products to achieve reductions similar to those already realized for malt 

beverage formulas, which may require rulemaking to fully implement.

Further, TTB will continue to employ its strategy to increase electronic filing to manage 

workloads and reduce processing times. These efforts include improving online guidance as well 

as enhancing the help features in TTB’s online systems. In FY 2015, TTB achieved a combined 

electronic filing rate of 94 percent, as tracked by its measure of Percent of Electronically Filed 

Label and Formula Applications. The planned guidance and system improvement efforts will 

help TTB achieve its electronic filing target of 95 percent in fiscal years 2016 and 2017.
TTB - 19

3.1.2 – Protect the Public Budget and Performance Plan

Dollars in Thousands

Protect the Public Budget Activity

Resource Level FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Actuals Actuals Actuals Actuals Actuals Enacted Enacted Request

Appropriated Resources $50,000 $50,399 $48,939 $45,727 $47,279 $47,279 $53,654 $52,879

Reimbursable Resources $2,117 $1,979 $2,464 $2,670 $3,236 $3,371 $3,356 $3,318

Transfer from TEOAF-Super 

Surplus Fund

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

Budget Activity Total $52,117 $52,378 $51,403 $48,397 $50,947 $50,650 $57,010 $56,197

Measure FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2015 FY 2016 FY 2017

Actual Actual Actual Actual Actual Actual Target Target Target

Percent of 

Electronically Filed 

Permit Applications

N/A N/A 62.0 70.0 79.0 84.0 82.0 87.0 89.0

Percent of Permit

Applications 

Processed within 

Service Standards

N/A N/A 61.0 50.0 58.0 47.0 85.0 85.0 85.0

Customer 

Satisfaction Rate 

with TTB Permitting 

Process

N/A N/A N/A N/A B 76.0 80.0 80.0 80.0

Percent of 

Electronically Filed 

Label and Formula

Applications

N/A 84.0 88.0 90.0 93.0 94.0 94.0 95.0 95.0

Percentage of 

Alcohol Beverage 

Label and Formula 

Applications 

Processed within 

Service Standards

N/A N/A 83.0 49.0 67.0 75.0 85.0 85.0 85.0

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

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 its 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 
TTB - 21

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

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 and downloaded 

at http://www.treasury.gov/about/budget-performance/Pages/summary-of-capitalinvestments.aspx

This website also contains a digital copy of this document.