Alcohol and Tobacco Tax and Trade Bureau

Program Summary by Budget Activity

Dollars in thousands

 FY 2012 FY 2013 FY 2014 FY 2012 TO FY 2014

 Enacted Annualized Request $ Change % Change

Budget Activity CR Rate 

Collect the Revenue $50,939 $52,254 $49,317 ($1,622) -3.18%

Protect the Public $48,939 $48,235 $46,894 ($2,045) -4.18%

Subtotal, Alcohol and Tobacco Tax and 

Trade Bureau $99,878 $100,489 $96,211 ($3,667) -3.67%

Offsetting Collections - Reimbursables $4,928 $5,562 $5,262 $334 6.78%

Appropriations Transferred from IRS Program 

Cap Adjustment $0 $0 $5,000 $5,000 100.00%

Total Program Operating Level $104,806 $106,051 $106,473 $1,667 1.59%

Direct FTE 496 476 473 (23) -4.64%

Reimbursable FTE 15 15 9 (6) -40.00%

Appropriations Transferred from IRS Program 

Cap Adjustment FTE 0 0 35 35 100.00%

Total FTE 511 491 517 6 1.17%

Summary

The Alcohol and Tobacco Tax and Trade 

Bureau (TTB) serves as the Nation’s primary 

Federal authority in the regulation of the 

alcohol and tobacco industries. TTB is 

responsible for the administration and 

enforcement of the Internal Revenue Code 

associated with the collection of excise taxes 

on alcohol, tobacco, firearms, and 

ammunition, and the Federal Alcohol 

Administration Act, which provides for the 

regulation of those engaged in the alcohol 

beverage industry and the protection of 

consumers of alcohol beverages.

In FY 2014, TTB will continue to focus its 

efforts on enforcing compliance with alcohol, 

tobacco, firearms, and ammunition laws and 

regulations, in the interest of collecting all 

appropriate excise taxes, and promoting a 

marketplace for alcohol beverages that 

complies fully with federal production, 

labeling, advertising, and marketing standards. 

The FY 2014 President’s Budget request 

enables TTB to continue its programs and 

activities necessary to meet the performance 

measures that support TTB’s strategic goals of 

collecting revenue and protecting the public.

Total resources required to support TTB 

activities for FY 2014 are $106,473,000, 

including $96,211,000 from direct 

appropriations, $5,262,000 from other 

offsetting collections and reimbursable 

programs, and $5,000,000 in appropriations 

transferred from the Internal Revenue Service 

(IRS).
TTB FY 2014 Budget Highlights

Dollars in Thousands

Alcohol and Tobacco Tax and Trade 

Bureau FTE Amount

FY 2012 Enacted 496 $99,878

FY 2013 Annualized CR Rate 476 $100,489

Changes to Base:

Adjustment to Request - ($3,703)

Efficiency Savings Proposed in FY 2013 - ($1,092)

Funding for Special Agents Provided in 

Cap Adjustment Transfer - ($2,000)

Non-Recur CR Increase - ($611)

Maintaining Current Levels (MCLs): - $1,148

Pay-Raise - $507

Non-Pay - $641

Efficiency Savings: (3) ($1,723)

Administrative Overhead & Travel 

Reduction - ($473)

Increase E Filing - ($250)

Service Contracts Reduction - ($220)

Infrastructure Cost Reduction - ($350)

Reduction of Brewer's Bond and 

Mandating Quarterly Filing for Small 

Brewers (2) ($300)

Revision to SDA/CDA Regulations (1) ($130)

Subtotal Changes to Base (3) ($4,278)

Total FY 2014 Base 473 $96,211

Program Changes:

Program Increases: 35 $5,000

Alcohol and Tobacco Enforcement 

Program 35 $5,000

Total FY 2014 Operating Level 508 $101,211

Program Cap Adjustment Included in 

IRS Budget Request - ($5,000)

Total FY 2014 Request 508 $96,211

FY 2014 Budget Adjustments

Adjustments to Request

Efficiency Savings Proposed in FY 2013 

-$1,092,000 / +0 FTE

The FY 2013 budget proposed Savings 

realized from staffing reduction enabled by 

efficiencies gained from the Permits Online 

electronic filing system and from the move of 

all IT equipment and TTB core business 

applications from commercial data centers to 

TTB facilities.

Funding for Special Agents Provided in Cap 

Adjustment Transfer -$2,000,000 / +0 FTE

The FY 2013 CR continued the funding 

provided to TTB by Congress in FY 2012 for 

the costs of special law enforcement agents to 

target tobacco smuggling and other criminal 

diversion activities, which TTB is executing 

by reimbursing IRS for the use of its special 

agents. In FY 2014, the Administration 

proposes to achieve this purpose by including 

a request in the IRS budget for a program 

integrity cap adjustment for both TTB and IRS 

to cover tax enforcement and compliance, with 

a transfer of funds to be made from the IRS to 

TTB to cover these activities.

Non-Recur CR Increase -$611,000 / +0 FTE

The across-the-board 0.612 percent increase 

provided in the CR through March 27, 2013 is 

non-recurred.

Maintaining Current Level (MCLs)

Pay-Raise +$507,000 / +0 FTE

The President's Budget proposes a 1 percent 

pay-raise for Federal employees in 2014.

Non-Pay +$641,000 / +0 FTE

Funds are requested for inflation adjustments 

in non-labor expenses such as GSA rent 

adjustments, postage, supplies, and equipment.

Efficiency Savings

Administrative Overhead & Travel Reduction 

-$473,000 / +0 FTE

Savings realized from reducing administrative 

overhead and travel costs.

Increase E Filing -$250,000 / +0 FTE

Savings realized from increasing the customer 

e-filing rate in TTB’s automated systems.

Service Contracts Reduction -$220,000 / +0 

FTE

TTB will review its procurement spending in 

its service contracts, identifying approximately

$220 thousand in savings.

Infrastructure Cost Reduction -$350,000 / +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 now intends to pursue a 
reduction of its headquarters office space in 

Washington, D.C., which will result in savings 

from reduced rent, utilities, and security costs.

Reduction of Brewer's Bond and Mandating 

Quarterly Filing for Small Brewers -$300,000 

/ -2 FTE

The FY 2013 President’s Budget included a 

proposal for a statutory change to the Internal 

Revenue Code to mandate quarterly excise tax 

filing and payment for certain beverage 

alcohol industry members (i.e., distillers, 

wineries, bonded wine cellars, and brewers)

and repeal the bond requirement for such 

taxpayers. To date, there has been no 

legislative action on this proposal. In the 

interim, given the scope of the statutory bond 

provisions for brewers, and to encourage more 

small brewers to file quarterly and thereby 

reduce the volume of tax filings it receives 

annually, TTB used its regulatory authority to 

publish a temporary rule to amend its beer 

regulations (27 CFR Part 25) to provide that 

for a period of three years, the penal sum of 

the required bond is $1,000 for small brewers 

filing excise tax returns and remitting taxes 

quarterly. (Under the rulemaking, a brewer is 

considered “small” if a taxpayer’s annual 

liability is not expected to be more than 

$50,000 and it was not liable for more than 

$50,000 in taxes in the preceding calendar 

year.) TTB concurrently published a notice of 

proposed rulemaking proposing amendments 

to the regulations to make these provisions 

permanent. (Note: TTB cannot make an 

equivalent change in the regulatory 

requirements for distillers and wine makers; 

modifying the bond requirements for those 

industries would require a legislative change to 

the current law.)

Revision to SDA/CDA Regulations -$130,000 / 

-1 FTE

TTB intends to propose changes to the 

regulations for specially denatured alcohol 

(SDA) and completely denatured alcohol 

(CDA) that would result in cost savings for 

both TTB and regulated industry members. 

Under the authority of the Internal Revenue 

Code, TTB regulates denatured alcohol that is 

unfit for beverage use, which may be removed 

from a regulated distilled spirits plant without 

payment of tax. TTB intends to propose to 

reclassify certain SDA formulas as CDA and 

to issue new general-use formulas for articles 

made with SDA so that industry members 

would less frequently need to seek formula 

approval from TTB, which would decrease the 

dedication of TTB resources to formula 

review.

Program Increases

Alcohol and Tobacco Enforcement Program 

+$5,000,000 / +35 FTE

The Administration proposes to amend section 

251 of the Balanced Budget and Emergency

Deficit Control Act (BBEDCA) of 1985, as 

amended, to provide a program integrity cap 

adjustment of $5 million (of which $2 million 

will be used for agent support) 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. These funds 

will support the heightened enforcement of tax 

laws including, but not limited to, alcohol and 

tobacco diversion. This specific funding 

request has been included under the IRS 

budget, which will include the tax enforcement 

and compliance program integrity cap 

adjustment for both the IRS and TTB. Under 

the TTB budget, this item is being reported as 

“Appropriations Transferred from IRS 

Program Cap Adjustment.”

The proposed cap adjustment for TTB tax 

enforcement and compliance activities 

includes $5 million in new, revenue-producing 

tax compliance initiatives in 2014 and $5 

million in additional new initiatives each year 

from 2015 through 2018 and continued 

through 2023. TTB will target known points 
in the supply chain that are susceptible to 

diversion activity and prioritize forensic audits 

and investigations of targeted entities 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 cap adjustment including 

inflation is $202 million over the 10-year 

period. Over this same time period, these 

additional investments will generate an 

estimated $406 million in additional tax 

revenue over the 10-year period. The net 

savings from these investments is $204 

million.

Program Decreases

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 2014 President’s Budget as part of the 

IRS’s program integrity cap adjustment.

Explanation of Budget Activities

Collect the Revenue ($49,317,000 from direct 

appropriations, $2,684,000 from reimbursable 

resources, and $5,000,000 from 

appropriations transferred from the IRS)

This budget activity includes all tax 

processing, verification, enforcement, and 

outreach efforts related to administering the 

federal excise tax on alcohol, tobacco, 

firearms, and ammunition products. TTB 

regulates and collects taxes from distilleries, 

breweries, bonded wineries, bonded wine 

cellars, manufacturers of cigarette papers and 

tubes, manufacturers of tobacco products, and 

manufacturers and importers of firearms and 

ammunition. In ensuring a level playing field 

for all those engaged in the trade of these 

strictly regulated commodities, TTB also takes 

appropriate enforcement action to detect and 

address diversion activity and ensure all 

products sold in the marketplace are properly 

taxpaid. In FY 2012, excise tax collections 

reached $15 billion for tobacco products, $8 

billion for alcohol beverage products, and 

$515 million for firearms and ammunition. 

This budget activity supports the TTB strategic 

goal of ensuring that industry remits the proper 

Federal tax on these products.

Protect the Public ($46,894,000 from direct 

appropriations, $2,578,000 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 61,700 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. This budget 

activity supports the TTB strategic goal of 

assuring that alcohol and tobacco industry 

operators meet permit qualifications, and 

alcohol beverage products comply with federal 

production, labeling, and marketing 

requirements.

Additional Information

Discontinue Pay Demonstration Project

Congress granted authority to establish a 

personnel management demonstration project 

to the Secretary of the Treasury under the 

Omnibus Consolidated and Emergency 

Supplemental Appropriations Act for FY 1999 

(Pub. L. 105-277, 122 Stat. 2681) to enhance 

Treasury’s ability to effectively recruit and 

retain employees in designated critical, 

technical positions. The Homeland Security 

Act of 2002, (Pub. L. 107-296) abolished the 

Bureau of Alcohol, Tobacco and Firearms 

(ATF), and dual authority for the Pay Demo 

project was transferred in 2003 to two new 

agencies formed to carry out the tax, trade, and 

law enforcement functions of the former ATF. 

The new Bureau of Alcohol, Tobacco, 
Firearms, and Explosives was established 

under the Department of Justice (DOJ) and 

TTB was placed in the Department of the 

Treasury. TTB has received authorization to 

extend its alternative compensation program 

annually since FY 2004. 

As this program did not originate as a pilot 

pay-for-performance system under the Office 

of Personnel Management (OPM), and as such 

has not been subject to the direct oversight of 

OPM, the Administration does not support the 

permanence of the program for Treasury or 

DOJ. However, the Administration would 

allow TTB to petition OPM for authorization 

for a new demonstration project and to use the 

results of the five-year pilot program to 

determine whether such a program should be 

permanent. This will allow TTB to leverage 

best-practices found in other OPM pay 

demonstration projects and provide uniformity 

and integrity within the program. Section 114 

of the Treasury administrative provisions 

proposes to grandfather current pay 

demonstration project employees at their 

current salaries.

TTB Performance by Budget Activity

Budget Activity Performance Measure FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Actual Actual Actual Target Target

Collect the Revenue Amount of Revenue Collected Per 

Program Dollar 

478.0 468.0 449.0 400.0 400.0

Collect the Revenue Percent of Voluntary Compliance 

from Large Taxpayers in Filing 

Tax Payments Timely and 

Accurately (In Terms of Revenue) 

94.0 95.0 92.0 90.0 91.0

Protect the Public Average Number of Days to 

Process an Original Permit 

Application at the National 

Revenue Center 

65.0 74.0 67.0 65.0 63.0

Protect the Public Percent of Electronically Filed 

Certificate of Label Approval 

Applications 

79.0 88.0 91.0 92.0 92.0

Protect the Public Percentage of Importers Identified 

by TTB as Illegally Operating 

without a Federal Permit (%) 

15.0 14.0 13.0 14.0 13.0

Key: DISC - Discontinued and B - Baseline

Description of Performance

The bureau continues to collect the Federal 

excise taxes due on its regulated commodities 

in a highly efficient manner, and continues to 

enforce compliance with alcohol and tobacco 

laws and regulations. During FY 2012, TTB 

met four out of six of its targeted performance 

goals, while showing continued improvements 

in all other performance metrics. The bureau 

plans to continue to monitor its performance, 

and will use performance information to both 

measure and improve the effectiveness of its 

programs.

The investments in the Collect the Revenue 

activity resulted in the following performance 

highlights and accomplishments during FY 

2012:

 TTB collected over $23 billion in 

excise taxes and other revenues from 

8,500 taxpayers in the alcohol, tobacco, 

firearms, and ammunition industries. 
The return on investment for the 

Collect the Revenue program was $449 

for every $1 expended on collection 

activities.

 TTB conducted 48 active criminal 

investigations involving diversion of 

alcohol and tobacco products having an 

estimated tax liability of more than 

$336 million.

 TTB completed audits, examinations, 

and revenue investigations, which 

contributed to the identification of 

additional tax revenue of more than 

$47 million.

 TTB processed $386 million in coverover payments to Puerto Rico and the 

U.S. Virgin Islands. Federal excise 

taxes collected on rum produced in 

Puerto Rico and the Virgin Islands that 

are subsequently imported into the 

United States are “covered-over,” or 

paid into the treasuries of Puerto Rico 

and the U.S. Virgin Islands.

 TTB processed $289 million in 

drawback claims. Under current law, 

persons who use nonbeverage alcohol 

in the manufacture of medicines, food 

products, flavors, extracts, or perfume 

and other non-potable products may be 

eligible to claim drawback of excise 

taxes paid on distilled spirits used in 

their products.

The investments in Protect the Public 

activity resulted in the following 

performance highlights and 

accomplishments during FY 2012:

 TTB processed 152,700 Certificate of 

Label Approval (COLA) applications, 

91 percent of which were filed through 

the bureau’s COLAs Online system for 

electronic filing of label applications. 

Federal law prohibits the import or 

domestic bottling of an alcohol 

beverage without an approved COLA, 

making this TTB service integral to 

U.S. business operations.

 TTB processed over 7,900 original 

permits and 19,400 amended permits. 

A TTB permit is required before a 

business can operate in the alcohol and 

tobacco industries.

 TTB completed more than 600 field 

investigations of industry members in 

the areas of permit qualification, 

consumer complaints, trade practice 

violations, and product integrity 

verifications, all of which serve the 

bureau’s dual mission of revenue 

collection and consumer protection.