Alcohol and Tobacco Tax and 

Trade Bureau

2014 President’s Budget
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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............................................... 9

2.1 – Budget Adjustments Table................................................................................................. 9

2A – Budget Increases and Decreases Description..................................................................... 9

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

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

2C – Additional Information..................................................................................................... 14

Section 3 – Budget and Performance Plan ............................................................................... 16

3A – Collect the Revenue ......................................................................................................... 16

3.1.1 – Collect the Revenue Budget and Performance Plan ..................................................... 22

3B – Protect the Public ............................................................................................................. 22

3.1.2 – Protect the Public Budget and Performance Plan ......................................................... 27

Section 4 – Supplemental Information...................................................................................... 28

4A – Summary of Capital Investments..................................................................................... 28
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Section 1 – Purpose

1A – Mission Statement

To collect the Federal excise taxes on alcohol, tobacco, firearms, and ammunition, and assure 

compliance with Federal tobacco permitting and alcohol permitting, labeling, and marketing 

requirements to protect consumers.

1.1 – Appropriations Detail Table

Dollars in Thousands

 FY 2012 FY 2013 FY 2014 FY 2012 to FY 2014

Alcohol and Tobacco Tax and Trade 

Bureau Enacted Annualized Request $ Change % Change

Resources 

 CR Rate 

 FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Collect the Revenue 248 50,939 243 52,254 246 49,317 (2) (1,622) -0.81% -3.18%

Protect the Public 248 48,939 233 48,235 227 46,894 (21) (2,045) -8.47% -4.18%

Subtotal New Appropriated Resources 496 $99,878 476 $100,489 473 $96,211 (23) ($3,667) -4.64% -3.67%

Other Resources:

Reimbursables 15 4,928 15 5,562 9 5,262 (6) 334 -40.00% 6.78%

Transfers In/Out 0 0 0 0 35 5,000 35 5,000 100.00% 100.00%

Subtotal Other Resources 15 $4,928 15 $5,562 44 $10,262 29 $5,334 193.33% 108.24%

Total Budgetary Resources 511 $104,806 491 $106,051 517 $106,473 6 $1,667 1.17% 1.59%

Note: The President's 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 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 and 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 Agency Priority Goal to increase voluntary tax 

compliance. TTB’s strategic goal to protect the public is to ensure that alcohol and tobacco 

industry operators meet permit qualifications, and alcohol beverage products comply with 

Federal production, labeling, and marketing requirements, and supports the Treasury strategic 

goal to enhance U.S. competitiveness and promote international financial stability and balanced 

global growth. Various activities under these two TTB strategic goals contribute to the 

Treasury’s priority goal of increasing paperless transactions with the public.

In Fiscal Year (FY) 2014, 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 will act to prevent compliance violations by enhancing the guidance 

offered to industry members on Federal alcohol, tobacco, firearms, and ammunition laws and 
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regulations. TTB will continue its efforts to verify compliant operations and proper tax payment 

through its audit program, and will employ sophisticated risk modeling to target high-risk 

activity for the most effective and efficient use of limited enforcement resources. Enforcing the 

tax code requires that TTB pay particular focus to tax evasion and the illicit trade in alcohol and 

tobacco products, which undermines the lawful business activity of taxpaying industry members. 

Specifically, in FY 2014, TTB will deploy joint forensic audit and investigation teams to detect 

and pursue fraudulent activity in the alcohol and tobacco trade. These forensics experts use the 

synergy of their members’ respective expertise to detect and address concealed unlawful activity 

that might otherwise appear legitimate.

TTB will also focus on improving its business results in two primary processing areas, permit 

and label applications, by enhancing the electronic filing capabilities available to industry for use 

in required submissions, and evaluating proposals to streamline TTB’s processing work without 

compromising the controls in place to effectively accomplish its mission. Applications for 

permits continue to rise and TTB is implementing e-Gov solutions to avoid degradation to the 

level of service provided to entrepreneurs applying for a TTB permit. Delays in issuing permits 

impedes small business growth. Technology enhancements alone will not entirely address the 

strain on TTB resources that the continued growth in alcohol beverage label applications 

presents. TTB is continuing its work with industry to assess and implement opportunities to 

resolve delays that the flood of label applications and scarce resources to process them presents. 

Such delays may negatively impact businesses, which must have label approval prior to bottling 

or introducing their products into domestic commerce. 

FY 2014 Priorities

 Collect roughly $23 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 reporting and payment compliance; 

 Detect and address criminal diversion activity, including counterfeit alcohol and tobacco 

products, to protect the Federal revenue stream, U.S. consumers, and fair market activity;

 Reduce the burden of compliance by promoting electronic filing options for industry 

members, including the online system that allows industry members to apply for an original 

permit to start a new alcohol or tobacco business; 

 Conduct statistically valid marketplace sampling programs to determine industry-wide 

compliance with Federal regulations for alcohol beverages, and tailor enforcement and 

education programs based on these findings to ensure products sold to U.S. consumers meet 

Federal alcohol beverage production, labeling, and marketing requirements; 

 Refine 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.
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Recent 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 TTB’s Collect the Revenue program is 449:1. 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, examinations, and revenue investigations. These enforcement actions contributed to the 

identification of additional tax revenue, penalties and interest of more than $47 million, and act 

as a deterrent to fraud. In enforcing its criminal jurisdiction, TTB also used a combination of 

risk modeling and intelligence to conduct 48 active criminal investigations involving diversion of 

alcohol and tobacco products having an estimated tax liability of more than $336 million in the 

last two years. In support of the nation’s continued economic growth, TTB processed over 7,900 

original permits, most of which were issued to small businesses. With some exceptions, a TTB 

permit is required before a business can operate in the alcohol and tobacco industries. In 

addition, TTB processed 152,700 Certificate of Label Approval (COLA) applications, of which 

91 percent were filed electronically. 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 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 2014

Alcohol and Tobacco Diversion

TTB is the sole agency with jurisdiction over Federal excise tax evasion in relation to 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. 

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).

Accurately measuring the loss in Federal tax receipts from alcohol and tobacco diversion is 

difficult because of the clandestine nature of the activity. 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; 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. The recent tobacco 

tax rate increase, roughly 150 percent for cigarettes, serves to enhance the potential for illegal 

gains. With regard to alcohol, recent TTB investigations indicate multiple schemes in the 

wholesaler and importer points in the alcohol distribution system. 
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To address the illicit trade in these commodities, in FY 2012, TTB was provided $2 million to 

continue a law enforcement program initiated in FY 2011. TTB entered into an interagency 

agreement for the services of law enforcement agents on a reimbursable basis from the Internal 

Revenue Service Criminal Investigation (IRS CI) division. The funding expired on September 

30, 2012; however, the FY 2013 continuing resolution (CR) allowed for the program to continue. 

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. In FY 2014, the Administration proposes a transfer of $5 million in appropriated 

funds from the IRS’s program integrity cap adjustment for 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. Of this $5 million, TTB will use $2 million to continue 

funding its interagency agreement with IRS CI for agent support. These funds will support the 

heightened enforcement of tax compliance including, but not limited to, alcohol and tobacco 

diversion. 

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. Annual revenues from the alcohol, tobacco, firearms and 

ammunition industries are approximately $23 billion, with trends in the volume of permit 

applications submitted to TTB, a leading indicator of tax collections, demonstrating the 

continued expansion and robust business activity in these trades.

Alcohol Tax Collections

The alcohol beverage industry in the United States pays $7.9 billion in Federal excise taxes each 

year and also provides a source of tax revenue for state and local governments. 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. Economic forecasts predict continued modest growth in the alcohol industry, 

and taxes collected on alcohol beverages are expected to continue to rise throughout the period 
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of FY 2013 – FY 2014. TTB expects that the increase in new alcohol businesses will be most 

prominent in the number of wineries, craft breweries, and craft distilleries.

Tobacco Tax Collections

In FY 2012, TTB collected $15 billion in tobacco excise tax collections, a decrease of 3 percent 

compared to the prior year. In forecasting tobacco revenues, the Congressional Budget Office 

(CBO) predicted that Federal collections would decline after peaking in FY 2010 following the 

enactment of the increased tax rate under the Children’s Health Insurance Program 

Reauthorization Act of 2009 (CHIPRA). This 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 combined would indicate declining tax revenues in the out 

years. Further, recent analysis of tobacco collections has shown significant market shifts for 

tobacco products since the passage of 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. From April 

2009 through FY 2011, GAO estimated that Federal revenue losses due to market shifts from 

roll-your-own (RYO) to pipe tobacco and from small to large cigars range from about $615 

million to $1.1 billion for the same period. GAO recommended that Congress consider 

equalizing tax rates on RYO and pipe tobacco and, in consultation with the Department of the 

Treasury, consider options for reducing tax avoidance due to tax differentials between small and 

large cigars. GAO also recognized that TTB has taken steps to respond to these market shifts, 

including its efforts to differentiate between RYO and pipe tobacco for tax collection purposes, 

but noted that TTB has limited options.

Firearms and Ammunition Excise Tax (FAET) Collections

Firearms and ammunition excise taxes are remitted to the Fish and Wildlife Restoration Fund 

under provisions of the Pittman-Robertson Act of 1937. The U.S. Fish and Wildlife Service, 

which oversees the fund, apportions the money to state governments for wildlife restoration and 

research, and hunter education programs. Federal excise tax collections on firearms and 

ammunition have increased from $193 million in FY 2003 to $515 million in FY 2012, an 

increase of $322 million over the past nine years, or a 167 percent growth in Federal FAET 

revenues. The increase in reported tax revenue can be attributed, in part, to industry growth, 

effective outreach and collection initiatives at the bureau, and the field presence of TTB’s 

auditors, which continues to promote voluntary taxpayer compliance.

Expansion of U.S. Exports 

TTB’s program work to promote fair and open trade with U.S. trading partners supports the 

nation’s economic recovery. Overseas demand for the products TTB regulates continues to 

grow, with U.S. exports of all alcohol beverages totaling $3.2 billion in 2012. In line with 

increases in overall export volume, alcohol beverage exports increased 10 percent compared to 

the prior calendar year. The majority of these exports are spirits and wine products. Examining 

just the wine sector, approximately 80 percent of world wine consumption is outside of the U.S., 

indicating that these industries may contribute significantly to the U.S. trade policy goal of 

doubling all exports in 5 years, as stated in the President’s National Export Initiative.
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As the recognized technical expert in these commodities, TTB seeks to promote U.S. exports by 

facilitating industry compliance with foreign requirements and by working with foreign 

regulators to address barriers that block market access for U.S. products. In FY 2012, TTB 

issued more than 10,000 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 many 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 has 

arranged for the elimination or reduction of burdensome requirements and routine certifications. 

In supporting the nation’s economic recovery, TTB works to open burgeoning markets to U.S 

producers, including member countries of the Asia-Pacific Economic Cooperation forum. 

Emerging markets commonly issue unnecessarily restrictive technical trade barriers; educating 

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

barriers that impede U.S. exports.

Human Capital Management – Federal Employee Viewpoint Survey 

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

Management (OPM) administers the Federal Employee Viewpoint Survey (FEVS) to measure 

the satisfaction of the Federal workforce. The TTB FEVS average score for FY 2012 trended up 

to a 77.1 percent positive response rate from employees. Based on this survey data, the 

Partnership for Public Service determines rankings for Federal agencies. TTB ranked 15th out of 

292 sub-component agencies on the FY 2012 Best Places to Work in the Federal Government 

rankings, an increase from its FY 2011 ranking of 34 out of 240. In response to the scores TTB 

received on this Government-wide survey, TTB will develop an FY 2013 FEVS Action Plan to 

address opportunities for improvement.
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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 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 Net Appropriation Request 508 $96,211

2A – Budget Increases and Decreases Description

Adjustment to Request ..............................................................................-$3,703,000 / +0 FTE

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 that Congress provided to TTB 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 nonrecurred.
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Maintaining Current Levels (MCLs) ......................................................+$1,148,000 / +0 FTE

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 .......................................................................................-$1,723,000 / -3 FTE

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 IRC 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.)
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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 IRC, 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 ..................................................................................+$5,000,000 / +35 FTE

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 compliance 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.
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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 2014 President’s Budget as part of the IRS’s program 

integrity cap adjustment.

2014 2015 2016 2017 2018 2014-2023

Cap Adjustment, Proposed BBEDCA 

(Discretionary Budget Authority)

 5 10 14 20 25 202

Change from Prior Year 5 4 6 6

Revenue (4) (9) (19) (30) (42) (406)

Change from Prior Year (5) (10) (11) (12)

Net 10-Year Savings (204)
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2.2 – Operating Levels Table

Dollars in Thousands

Alcohol and Tobacco Tax and Trade Bureau FY 2012 FY 2013 FY 2014 FY 2014 FY 2014

 Actual Annualized Request Transfer Total

Object Classification CR Rate From IRS Discretionary

Appropriation

11.1 - Full-time permanent 45,785 47,867 47,038 2,230 49,268

11.5 - Other personnel compensation 744 761 752 27 779

11.9 - Personnel Compensation (Total) 46,529 48,628 47,790 2,257 50,047

12.0 - Personnel benefits 13,057 13,287 13,305 442 13,747

Total Personnel and Compensation Benefits $59,586 $61,915 $61,095 $2,699 $63,794

21.0 - Travel and transportation of persons 2,330 2,169 2,214 220 2,434

22.0 - Transportation of things 36 51 51 0 51

23.1 - Rental payments to GSA 4,938 5,125 4,851 0 4,851

23.3 - Communication, utilities, and misc charges 1,419 1,666 1,466 0 1,466

24.0 - Printing and reproduction 168 253 253 0 253

25.2 - Other services 25,876 25,263 24,486 41 24,527

25.3 - Other purchases of goods & serv frm Govt accounts 7,807 7,694 5,442 2,000 7,442

26.0 - Supplies and materials 575 621 621 8 629

31.0 - Equipment 3,923 1,294 994 32 1,026

Total Non-Personnel 47,072 44,136 40,378 2,301 42,679

Total Budgetary Resources $106,658 $106,051 $101,473 $5,000 $106,473

Budget Activities:

Collect the Revenue 55,769 55,147 51,751 5,000 56,751

Protect the Public 50,889 50,904 49,722 0 49,722

Total Budgetary Resources $106,658 $106,051 $101,473 $5,000 $106,473

FTE 481 491 482 35 517

This table includes all available resources, including annual and available multi-year appropriations, reimbursable 

resources, offsetting collections and user fees.
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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, $96,211,000; 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 

amounts provided under this heading, 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.

2C – 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 Demonstration (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 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 demos and provide uniformity and 

integrity within the program. The following legislative language is proposed to discontinue 

TTB’s current Pay Demo program:

Sec.206. Hereafter, funds appropriated by this or any other Act under the heading Alcohol 

and Tobacco Tax and Trade Bureau, Salaries and Expenses shall be available for retention 
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pay for any employee who would otherwise be subject to a reduction in pay upon the 

termination of the Bureau’s Demonstration Project. Such retention pay shall comply with 

section 5363 of title 5, United States Code, and related Office of Personnel Management 

regulations, except as provided in this section. Such retention pay shall be paid at the 

employee’s rate of pay immediately prior to the termination of the demonstration project and 

shall not be subject to the limitation set forth in section 5304(g)(1) of title 5, United States 

Code, and related regulations. Further, the rate of pay of any employee receiving retention 

pay pursuant to this provision shall be increased at the time of any increase in the maximum 

rate of basic pay payable for the grade of the employee's position by 50 percent of the dollar 

amount of each such increase, except that an employee’s retained rate of basic pay shall not 

be so increased if both (a) the employee’s retained rate of basic pay immediately prior to the 

time of such increase exceeds the limitation set forth in in section 5304(g)(1) of title 5, 

United States Code, and related regulations, and (b) the employee’s increased rate of pay 

would exceed the maximum rate of basic pay payable for the employee’s position. 
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Section 3 – Budget and Performance Plan

3A – Collect the Revenue

($49,317,000 from direct appropriations, and $2,684,000 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. TTB collects approximately $23 billion in Federal tax revenue 

annually from roughly 8,500 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. 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. The goal 

owner for this budget activity is the TTB Assistant Administrator for Field Operations.

Description of Performance – Collect the Revenue:

In FY 2012, 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 and Accurately demonstrate the effectiveness and 

efficiency with which TTB operates its revenue collection mission. Streamlining efforts in its tax 

processing function along with improved targeting in its enforcement will help TTB achieve its 

FY 2014 targeted performance level of $400 for every $1 invested in collections activities. 

Further, improvements to the electronic filing options available to the industries regulated by 

TTB will contribute to achieving a 91 percent rate of voluntary compliance in terms of timely 

filed tax payments. Achieving results for both measures will be supported by an effective tax 

enforcement presence that leverages both real-time intelligence data and interagency partnerships 

with counterpart enforcement agencies. 

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 2012, TTB reported a return on investment of $449 for 

every program dollar spent on collection activities. TTB exceeded its annual performance target 

of $410 due to ongoing and successful compliance audit and investigation efforts combined with 

process improvements and streamlining efforts. Moving forward, TTB expects to meet its FY 

2014 targeted performance level of $400 due to savings achieved from the implementation of 

improved targeting techniques for enforcement efforts and through proposed revisions to its 

industry reporting requirements.

Tax Collection Activities

Each year, TTB collects approximately $23 billion in excise taxes, interest, and other revenues 

from alcohol, tobacco, firearms, and ammunition industries. In determining its performance 
TTB - 17

targets for this measure, TTB examines historical collections trends across each of its regulated 

commodities, as well as other predictors that influence consumer behaviors. The following

displays the historical collections at TTB from FY 2001 to 2012 by revenue type:

Excise Tax and Other Collections by Fiscal Year

Note: Tobacco revenue increased in 2009 as a result of the passage of the Chidren’s Health Insurance Program 

Reauthorization Act (CHIPRA) legislation, which increased the tax rate on tobacco products. Also, legislation was 

enacted in July 2005 that repealed the SOT for all alcohol taxpayers. The SOT for tobacco permitees remains intact.

Since 2008, the return on investment for the Collect the Revenue program increased by more 

than 43 percent, principally because of the higher Federal excise tax rate imposed on tobacco 

products under the February 2009 CHIPRA legislation. This legislation nearly tripled the 

Federal tax rate on certain tobacco products and, as a result, TTB’s return on investment reached 

an historic high in FY 2010 of 478:1. However, shifts in consumption patterns, product 

manufacturing, and trade will impact Federal revenues in the years ahead. In accounting for 

these types of marketplace shifts, TTB used CBO revenue projections for increased tobacco 

excise tax collections to determine its targeted performance level of 400:1 for fiscal years 2013 –

2014.

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

2014 budget receive approval. The anticipated significant increases to additional collections 

from the planned enforcement initiatives will not occur until year three, once new personnel 

reach full performance levels.

Streamlining Efforts for Tax and Regulatory Requirements

The performance target of $400 in FY 2014 for TTB’s measure of the amount of revenue 

collected per program dollar reflects TTB’s analysis of collections data, and will be met, in part, 

through continued efficiencies gained in TTB’s costs to operate its Collect the Revenue 

activities. Specifically, TTB issued a proposed regulation in December 2011 to streamline its 

distilled spirits plant reporting requirements to reduce the compliance burden for industry and, 

consequently, the TTB workload. This revision to the regulations would replace the current four 

report forms used by distilled spirits plants to report their operations on a monthly basis with just 

two report forms. Plants that qualify to file taxes on a quarterly basis would submit the new 
TTB - 18

reports on a quarterly basis. The bureau plans to re-open the comment period for the revised 

forms in FY 2013, and publish a final rule to implement this change early in FY 2014.

TTB also expects to achieve savings in the processing of surety bonds and tax filings through a

legislative initiative included in the FY 2013 President’s Budget, which, in turn, should improve 

the efficiency quotient for this measure. TTB continues its efforts to seek a legislative change to 

repeal the bond requirement for businesses owing $50,000 or less annually and mandate the 

quarterly filing of tax returns. Currently, the cost of the bond requirement deters these taxpayers 

from filing tax returns and payments on a quarterly basis, and its elimination will reduce this 

filing and financial burden on industry, increase quarterly filings, and, thus, result in efficiencies 

for TTB.

In the interim period, under its regulatory authority, TTB intends to amend its regulations to

eliminate the bond requirement for small brewers and mandate quarterly filing of tax returns and 

reports for these taxpayers to produce efficiencies for both the industry and the bureau. This 

initiative, as described previously, will result in approximately $300,000 in savings in FY 2014.

Increase Voluntary Compliance from Taxpayers

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

for TTB and supports the Agency Priority Goal of the Department of the Treasury, Increase 

Voluntary Tax Compliance. The Percent of Voluntary Compliance from Large Taxpayers in 

Filing Tax Payments Timely and Accurately 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 2012, TTB set a 

performance target of 94 percent, and achieved a 92 percent rate of compliance. The year-toyear decline in performance results between fiscal years 2011 and 2012 is due, in part, to TTB’s 

improved ability to detect non-compliance. Specifically, TTB’s effective use of an automated 

tool, the Error Tracking Database (ETD), to identify and address late tax payments resulted in 

increased filings in FY 2012; however, as these additional filings were submitted late, TTB’s 

overall rate of voluntary compliance under this measure declined 2 percent compared to the prior 

fiscal year. Initiated in FY 2010, TTB has continued to develop the ETD to identify late filers, 

non-filers, and errant filings of operational reports as well as missing excise tax returns for 

breweries and tobacco manufacturers. As industry members take action in response to TTB’s 

notifications, TTB expects that compliance in timely filings may continue to decline before these 

enforcement efforts lead to improved compliance rates. 

The FY 2014 requested funding level enables the continuation of efforts to achieve the target of 

91 percent established for the voluntary compliance performance measure. During a period of 

economic recovery, TTB believes that this is an aggressive target for taxpayer compliance. 

Strategies that TTB will employ to meet its FY 2014 performance target focus on enhancing efiling options, developing a balanced field approach of audits and investigations that targets noncompliant industry members, establishing an identifiable presence within the industry that 

encourages voluntary compliance, and identifying any gaps in tax payment from illegal entities 

operating outside of the lawful distribution system for alcohol and tobacco products. 
TTB - 19

Electronic Filing Improvements

TTB aims to improve voluntary compliance by working toward allowing TTB permittees and 

taxpayers to file all payments, returns, and applications online with the National Revenue Center. 

In FY 2012, TTB expanded the e-filing program to allow all excise taxpayers to file and pay 

taxes and file monthly operational reports electronically through the Pay.gov system. The total 

number of Pay.gov registrants in FY 2012 increased over the prior year by 33 percent, bringing 

the total to almost 9,500. 

To meet its FY 2014 performance target, TTB is intensifying its efforts to increase the electronic 

filing rate of operational reports and tax returns through the Pay.gov system. In order to raise the 

industry awareness level and demonstrate the benefits of electronic submissions, a multi-faceted 

approach has been initiated, which includes: conducting Pay.gov presentations at industrysponsored seminars; emphasizing Pay.gov in communications with new industry members; 

adding information about Pay.gov to notification letters related to missing or late tax payments; 

and increasing the number of TTB tax-related forms available in Pay.gov.

Further, TTB is working to allow credit card payments through Pay.gov, which would address a 

system issue that requires early payment of taxes for those that elect to e-file. This timing issue 

is the primary obstacle that prevents industry members from filing and paying their taxes through 

the electronic filing system.

Tax Enforcement Audits and Investigations

An identifiable enforcement presence is a well-established driver of compliance rates. In FY 

2012, in support of its voluntary compliance efforts, TTB used increasingly sophisticated risk 

models and audit targeting techniques to complete audits, examinations, and revenue 

investigations. These audits and investigations resulted in the identification of $47.7 million in 

additional tax, penalties, and interest from industry members. 

TTB initiated several priority enforcement initiatives in FY 2012 that leverage technology and 

analytical techniques to better identify high-risk targets so that TTB makes the most efficient use 

of its enforcement resources. A primary focus was the development of an integrated tobacco risk 

model for the identification of high-risk tobacco importers for audit or investigation. With this 

new model, TTB is able to perform more real-time targeting of tobacco importers, including 

importers of processed tobacco. 

In FY 2012, due to the potential for tax evasion, TTB concentrated a portion of its enforcement 

resources on manufacturers of processed tobacco. Under the CHIPRA legislation, tobacco 

processors must now obtain a permit and report on the first removal, transfer, or sale of 

processed tobacco to another entity. There is no requirement that processed tobacco be 

transferred or sold to a permitted or that subsequent transfers be reported. Consequently, 

transfers of this non-taxpaid tobacco product carry a high revenue risk. TTB initiated a pilot 

project, driven by a newly developed risk model, which directs its auditors and investigators to 

conduct ―forward traces‖ of processed tobacco through the distribution system. These forward 

trace investigations have resulted in multiple civil and criminal cases that have identified more 

than $182 million in potential revenue loss from the diversion of more than 10 million pounds of 

processed tobacco to non-permitted entities. 
TTB - 20

Going forward, TTB will continue its development of a similar risk model for alcohol importers. 

The alcohol importer risk model analyzes import data from U.S. Customs and Border Protection

(CBP) and alcohol importer permit data from TTB’s databases to identify potential import 

activity by non-permitted entities and other anomalies for potential audit. After initial testing in 

FY 2012, TTB is refining and expanding the scope of the alcohol importer risk model to include 

national data on alcohol imports. In fiscal years 2013 and 2014, TTB plans to use the new risk 

model in its audit planning, and to continue refinements to all of its alcohol and tobacco risk 

models through the integration of viable external data, including FinCEN data and Census 

population data, among other sources. 

Further, in a continuation of efforts to enforce the CHIPRA legislation enacted in 2009, TTB 

continued its Floor Stocks Tax (FST) enforcement efforts through its FST non-filer program. 

Under this program, TTB is able to take enforcement action on companies where TTB’s 

targeting analysis indicates that FST liabilities still exist, but where it is not cost effective or 

practical for TTB to conduct an on-site examination. The National Revenue Center uses the 

results of TTB’s targeting analysis to initiate a ―substitute-for-return‖ process to issue 

assessments on the estimated tax liabilities en masse. The IRC allows TTB to create a tax return 

for a taxpayer where no return has been filed, or where the return that was filed is considered

false. In FY 2012, this approach resulted in TTB compliance actions against 188 taxpayers that 

had failed to file FST, with potential FST liabilities of $22.5 million, plus interest and penalties. 

In total, the FST non-filer program has resulted in TTB collections in excess of $1.28 million in 

FY 2012. In FY 2013, TTB will continue collection actions and seek resolution of outstanding 

FST liabilities identified through the non-filer project. 

Interagency Partnerships

TTB also uses an interagency approach in applying its enforcement strategies that involves 

cooperation with local, state, Federal, and foreign government counterpart agencies to maximize 

the deterrent impact of enforcement actions. In FY 2012, in response to the specific revenue 

threat from imported alcohol and tobacco products, TTB engaged CBP to address alcohol and 

tobacco importers that are delinquent in paying tax liabilities, as identified through TTB audits 

and investigations. In general, CBP’s decisions regarding duty and tax collection are deemed to 

be final within 180 days after liquidation. However, in 2009, CHIPRA extended the statute of 

limitations for the collection of taxes on imported alcohol and tobacco products to three years. 

While this amendment addressed the time period in which assessment and collection can occur, 

it did not address how these actions were to be enforced. TTB seeks to close this gap by 

partnering with CBP’s Office of Regulatory Audits to conduct joint audits of tobacco importers. 

TTB initiated a pilot project with CBP in FY 2012 to conduct joint audits of alcohol and tobacco 

importers, and intends to begin implementing this unified enforcement approach in FY 2013.

Criminal Enforcement

In its efforts to maintain tax compliance within the industries it regulates and to collect all 

revenue due on alcohol and tobacco products, TTB worked to address 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. 

TTB has criminal enforcement authority under the IRC, which includes penalties for illicit 

tobacco product manufacturing and evasion of excise tax. Until FY 2010, however, TTB did not 
TTB - 21

have the resources for special agents to effectuate this authority. Instead, TTB had to rely on the 

availability and interest of other Federal and state law enforcement agencies, agencies with 

separate and distinct missions, to either initiate joint investigations that would include violations 

of IRC provisions enforced by TTB or accept a criminal investigation referral. 

Using two-year funding, TTB entered into an interagency agreement in FY 2011 to reimburse

the Internal Revenue Service (IRS) for agent services to enforce the criminal provisions of 

TTB’s jurisdiction. After a lapse in funding, while operating under a continuing resolution, TTB 

received an additional $2 million in its FY 2012 appropriation to continue its efforts to combat 

tobacco smuggling and other criminal diversion activities. TTB used this funding to 

recommence its criminal enforcement program under an interagency agreement with the IRS. 

Between fiscal years 2011 and 2012, in just 16 months of actively opening new investigations, 

this program has resulted in the initiation of 48 cases (27 of which were opened in FY 2012) with 

a total estimated Federal excise tax liability of over $336 million, and combined seizures and 

forfeitures totaling more than $115 million. 

Of the 48 active cases, 25 relate to illicit tobacco trade (52 percent), 21 relate to the illegal 

alcohol trade (44 percent), and 2 cases involve both alcohol and tobacco products, demonstrating 

that criminal activity is present across the industries TTB regulates. TTB has presented 43 cases 

to an AUSA for prosecutorial investigation, and 100 percent have been accepted, indicating the 

quality of the cases that TTB has referred. The earmark that provides for the reimbursement of 

the IRS for its agent services expired at the close of FY 2012. Under the FY 2013 CR, TTB has 

continued an interagency agreement with the IRS for these services. In FY 2014, TTB is 

requesting agent funding as part of a program integrity cap adjustment for its Alcohol and 

Tobacco Enforcement Program so that the bureau is able to continue its criminal enforcement 

program to uphold a fair marketplace through the compliant trade of alcohol and tobacco 

products. The FY 2014 President’s Budget proposes a transfer of $5 million from the IRS 

program integrity cap adjustment, of which $2 million will be used to fund agent support, to 

provide the necessary resources to TTB to investigate complex, multi-year cases.
TTB - 22

3.1.1 – Collect the Revenue Budget and Performance Plan

Dollars in Thousands

Collect the Revenue Budget Activity

Resource Level FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Enacted Enacted Enacted Enacted Enacted Enacted Annualized 

CR Rate

Request

 Appropriated Resources $46,215 $47,693 $50,524 $53,000 $50,399 $50,939 $52,254 $49,317

 Reimbursable Resources $1,350 $1,733 $1,898 $2,117 $1,979 $2,464 $2,892 $2,684

 Appropriations Transferred 

from IRS Cap Adjustment

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

Total $47,565 $49,426 $52,422 $55,117 $52,378 $53,403 $55,146 $57,001

Budget Activity Total $47,565 $49,426 $52,422 $55,117 $52,378 $53,403 $55,146 $57,001

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Actual Actual Actual Actual Actual Actual Target Target

Amount of Revenue Collected 

Per Program Dollar 

N/A 313.0 427.0 478.0 468.0 449.0 400.0 400.0

Percent of Voluntary 

Compliance from Large 

Taxpayers in Filing Tax 

Payments Timely and 

Accurately (In Terms of 

Revenue) 

N/A 94.0 94.0 94.0 95.0 92.0 90.0 91.0

Key: N/A - Not in Effect; DISC - Discontinued; B - Baseline

3B – Protect the Public

($46,894,000 from direct appropriations, and $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 

nearly 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. The goal owner for this 

budget activity is the TTB Assistant Administrator for Headquarters Operations.

Description of Performance – Protect the Public:

In FY 2012, TTB met three of its four annual targets for the performance measures under the 

Protect the Public budget activity. TTB tracks its success in meeting its trade and consumer 

protections goals through four principal performance measures that indicate how timely the 

bureau is in issuing permits to qualified alcohol and tobacco businesses, how satisfied businesses 

are with TTB’s permitting and claims process, how effective TTB is in deterring 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 reflect 

the priorities of a service-oriented organization, which applies technology to the greatest extent 

in order to perform its consumer protection role and in order to assure that commerce is fair, 

lawful, and open. TTB’s strategies to achieve its performance targets in this budget activity 
TTB - 23

include a combination of streamlining its internal procedures, implementing enhancements to its 

online filing systems, and publishing clear guidance to industry members. As a result of these 

efforts, TTB expects to achieve an improvement in its processing time for original permit 

applications of 63 days in FY 2014. Given these improvements to service and processing times, 

TTB anticipates maintaining a customer satisfaction rate of 85 percent or better in FY 2014, but 

will reconsider this targeted performance level following the implementation of a new e-mail 

survey tool. TTB also anticipates that its streamlining efforts in the label processing area will 

continue to drive down processing times and drive up usage rates for the COLAs Online system. 

TTB expects to achieve an e-filing rate for alcohol beverage label applications of 92 percent in 

FY 2014, a result that reflects the industry’s satisfaction with this e-Gov system. Finally, 

through focused and cooperative enforcement efforts, TTB expects to improve upon its prior 

year performance in reducing the number of importers that are importing tobacco products 

without a Federal permit, achieving a rate of 13 percent for FY 2014.

Improve Efficiency and Effectives 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 2012, TTB processed approximately 7,940 original and 19,400 amended permits, and 

performed 300 investigations into high-risk applicants to meet TTB’s business integrity 

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 at the 

National Revenue Center. Undue delays in permit application processing stunt Federal revenues 

and impede economic growth, primarily in the small business sector, as taxable commodities, 

such as finished 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 

2012, and exceeded its target by achieving an average processing time of 67 days for 

applications. Moving forward, TTB will promote electronic filing, continue to implement 

system enhancements to Permits Online, and streamline its processing procedures to meet its 

performance target of 63 days in FY 2014.

TTB completed its rollout of the Permits Online system in FY 2012 in order to improve permit 

processing times and increase the number of paperless transactions with the business community 

TTB services. Permits Online provides a secure, web-based solution that allows members of the 

alcohol and tobacco industries to electronically submit applications for permits to operate. 

Applicants who plan to produce finished distilled spirits, wines, malt beverages, and tobacco 

products, and persons wishing to operate businesses such as alcohol wholesalers, alcohol 

importers, tobacco importers, specially denatured spirits users and dealers, tax-free alcohol users, 

alcohol fuel plants, tobacco processors, and tobacco export warehouses, must submit original and 

amended permit applications. TTB’s National Revenue Center currently processes original 

application packets for 23 types of permits or registrations.

Over the past several years, however, the volume of applications has increased, making it 

difficult to maintain service levels. Between 2008 and 2011, TTB experienced an average 

annual increase of 3 percent in original permits applications. In FY 2012, however, the number 

of original permit applications received increased 33 percent, primarily due to growth in the craft 

brewers and alcohol wholesalers segments. In comparing applications received in FY 2012 to 
TTB - 24

those received in FY 2011, the number of brewer and alcohol wholesaler applications increased 

74 percent and 61 percent, respectively. 

Even with greater than anticipated adoption rates for the Permits Online system, which reached 

62 percent for the year, TTB does not anticipate achieving reductions to turnaround time until the 

latter quarters of FY 2013 or early FY 2014. Rather, the immediate benefit of Permits Online 

has been cost savings, with system efficiencies contributing to nearly $1 million in budget 

reductions. These reductions (equivalent to 9 FTE) have produced monetary savings, but have 

slowed anticipated improvements in service delivery. TTB projects to average 65 days to 

process an original permit application at the close of FY 2013, and 63 days by the close of FY 

2014. Incremental improvements to performance during a period of declining staff and 

increasing workloads will demonstrate TTB’s effectiveness and the success of its new e-filing 

system, without which processing times would exceed 90 days. 

TTB intends to meet this performance target through a combination of streamlining its internal 

procedures, industry outreach, and ongoing system enhancements. TTB will update its risk 

model and its procedures used to process permit applications. Increased focus on risk modeling 

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

applicants while managing workloads. In addition, TTB will continue to promote use of the 

Permits Online system by all permit applicants, including through Webinars and online training 

modules. 

TTB also understands that the customer experience with the system is a critical driver of 

adoption rates. TTB routinely updates the business rules and customer support features 

embedded in the system to help prospective industry members submit complete and accurate 

information on their permit application the first time. By receiving 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 making steps to speed its transition to an entirely online processing environment. 

System enhancements planned for fiscal years 2013 and 2014 include the data upload of 

historical permit application data from TTB’s legacy permit and tax database to the Permits 

Online system. This initiative will allow 61,700 TTB permittees who originally filed a paper 

permit application to file for amendments to their permit (i.e., change in control or change in 

address) electronically through Permits Online. As TTB receives between 18,000 – 20,000 

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

businesses its serves.

Increase Customer Satisfaction with TTB Service Delivery

TTB also measures its performance in its permit processing function through surveying the 

businesses that apply for a TTB permit in its measure of the National Revenue Center Customer 

Satisfaction Survey Results. The National Revenue Center customer survey solicits feedback on 

the level of service provided to applicants for an original or amended permit, and those industry 

members who file a claim to recover taxes paid on nonbeverage alcohol or overpayments of tax. 

TTB targets a sustained score of 85 percent on customer satisfaction for permit application and 

claims processing, and achieved a composite score of 84 percent in FY 2012. TTB’s satisfaction 
TTB - 25

rate, derived from a telephone survey of industry members who received permitting or claims 

service from the TTB National Revenue Center in the prior month, decreased in FY 2012 due in 

part to the process changes associated with the Permits Online system. For those who elected to 

file original or amended permit applications electronically, increased satisfaction with faster 

response times was potentially offset by the learning curve associated with adapting to the new 

system. This was true for those industry members types added to the system in FY 2012, which 

represented the most complex permit applications, and who reported decreased satisfaction rates. 

For those who paper-filed their permit applications, satisfaction scores were also impacted due to 

the Permits Online rollout, as processing times for paper applications increased during this 

period. 

Service enhancements, including the initiative to enable all permittees to file a permit 

amendment electronically through Permits Online, are expected to contribute to the bureau’s 

ability to meet its customer expectations. In FY 2013, TTB also will implement improvements 

to its business processes and TTB call centers that directly impact the business community that 

TTB services. TTB introduced an e-mail survey in FY 2013 to replace the labor intensive 

telephonic surveying method that supports this measure. TTB, therefore, discontinued its current 

measure and will reconsider its performance target after establishing a new baseline measure in 

FY 2013.

Ensure Compliance with Importer Permit Requirement 

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

TTB objective. 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 Illegally Operating without a Federal

Permit, TTB monitors CBP’s International Trade Data System, and compares the import data to 

the permittees on file with TTB, which enables the bureau to identify and take action against 

those entities engaging in unlawful operations. In FY 2012, TTB set a performance target of 14 

percent and, through this data comparison, determined that just 13 percent of entities reporting 

importations of tobacco products had done so without a permit. The number of importers has 

remained steady throughout the fiscal year, with the vast majority of unpermitted importers 

consisting of individuals purchasing tobacco products from overseas via the Internet. TTB’s 

issuance of cease and desist letters, and appropriate follow up activities, ensured that the 

responsible parties ended operations or obtained a permit.

TTB intends to meet its FY 2014 performance target of 13 percent for this measure by 

continuing to monitor and take action to address imports of tobacco products by non-permitted 

parties. These efforts support the enforcement of Federal laws designed to prevent tobacco 

smuggling and to ensure the collection of all taxes levied on tobacco products. As an example, 

the Prevent All Cigarette Trafficking Act (PACT Act), a law enacted in 2010, prohibits 

shipments of tobacco products via the U.S. Postal Service (USPS). As the vast majority of the 

non-permitted importers are individuals purchasing tobacco products in small quantities for 

personal consumption through online tobacco outlets via the USPS and FedEx, TTB continues to 

coordinate with the USPS and other ground carriers to provide enforcement assistance. TTB 

also will continue to focus its enforcement efforts on the importation of processed tobacco, 

which is subject to new regulation and oversight under CHIPRA, to ensure that importers 
TTB - 26

comply with Federal law. Processed tobacco is the subject of intense TTB enforcement scrutiny, 

as it is a non-taxpaid tobacco product that may be diverted for illegal manufacturing of 

cigarettes. TTB will incorporate import data into its risk models for audit and investigation 

targets to help deter illegal importations of tobacco.

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. In FY 2012, TTB 

met this objective and facilitated U.S. commerce through the approval of 134,600 of the 152,700

COLA applications received; the remaining 18,100 (12 percent) were rejected, returned for 

correction, withdrawn, or expired. In furtherance of Treasury’s Agency Priority Goal of 

increasing paperless transactions, the bureau targeted a performance level of 88 percent 

electronic filing for COLA applications, and in FY 2012 reached an electronic filing rate of 91 

percent. The ongoing rise in electronic filing is due to system improvements that track with 

customer feedback and which simplify the filing process for industry members. 

TTB has set a performance target of 92 percent for FY 2014 for this electronic filing measure 

and, to meet this performance goal, the bureau will use targeted outreach to reach the segments 

of the industry that have not migrated to the online filing environment. Beginning in FY 2013, 

TTB plans to modify its internal operating procedures to process paper label applications 

electronically. This move to a paperless processing environment will result in efficiencies in 

communicating with industry members regarding rejected applications or applications that are 

returned to the applicant for correction. 

Even with high rates of electronic filing, annual increases in label applications necessitate 

consideration of broader efforts to streamline the alcohol beverage label application process. 

Between fiscal years 2011 and 2012, the number of label applications has increased 5 percent, 

and since 2008, the number of applications has increased by 14 percent. Addressing this issue 

requires TTB to continue its efforts to update and streamline its labeling program. Through 

various changes to forms, guidance, and internal processing procedures, as well as planned 

modernization of the Federal alcohol labeling regulations, the bureau will shift from a laborintensive label application pre-approval process to a more useful marketplace review of labels. 

These efforts will reduce the time it takes industry to enter compliantly labeled alcohol beverages 

into the marketplace. TTB plans to publish a rulemaking document proposing changes to its

labeling and advertising regulations in FY 2014, and will follow up with a final rule after 

reviewing the comments. 

Additionally, in FY 2012, TTB acted to further its unique regulatory role in assuring that alcohol 

beverage products in the marketplace meet Federal standards and do not mislead consumers. 

The integrity of U.S. products is critical in global commerce, and incidents of mislabeling or 

product safety can have crippling effects on trade. In support of this objective, TTB conducted 

its fifth year of the Alcohol Beverage Sampling Program (ABSP)—a program designed to 

generate statistically reliable information that can be used to estimate the percentage of alcohol 

beverage products in the market that are fully and accurately labeled. TTB uses this information 

to target enforcement efforts as well as to make improvements to industry guidance.
TTB - 27

Approximately 650 products were inspected and tested in FY 2012, and the program results will 

be published in FY 2013. This program augments the routine formula evaluation and scientific 

analysis work that TTB performs annually. In FY 2012, TTB evaluated over 11,700 beverage 

alcohol formulas and analyzed about 2,900 alcohol beverage samples in support of the ABSP, 

tax enforcement, and consumer complaint activities.

3.1.2 – Protect the Public Budget and Performance Plan

Dollars in Thousands

Protect the Public Budget Activity

Resource Level FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Enacted Enacted Enacted Enacted Enacted Enacted Annualized 

CR Rate

Request

 Appropriated Resources $44,403 $45,822 $48,541 $50,000 $50,399 $48,939 $48,235 $46,894

 Reimbursable Resources $1,349 $1,733 $1,898 $2,117 $1,979 $2,464 $2,670 $2,578

Budget Activity Total $45,752 $47,555 $50,439 $52,117 $52,378 $51,403 $50,905 $49,472

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Actual Actual Actual Actual Actual Actual Target Target

Average Number of Days to 

Process an Original Permit 

Application at the National 

Revenue Center 

N/A 64.0 64.0 65.0 74.0 67.0 65.0 63.0

Percent of Electronically Filed 

Certificate of Label Approval 

Applications 

51.0 62.0 74.0 79.0 88.0 91.0 92.0 92.0

Percentage of Importers 

Identified by TTB as Illegally 

Operating without a Federal 

Permit (%) 

N/A 22.0 15.0 15.0 14.0 13.0 14.0 13.0

Key: N/A - Not in Effect; DISC - Discontinued; B - Baseline
TTB - 28

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 - 29

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 here: 

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