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[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 236 Introduced in Senate (IS)]

<DOC>

115th CONGRESS
  1st Session
                                 S. 236

   To amend the Internal Revenue Code of 1986 to reform taxation of 
                          alcoholic beverages.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 30, 2017

    Mr. Wyden (for himself, Mr. Blunt, Mr. Carper, Mr. Roberts, Ms. 
 Stabenow, Mr. Moran, Mr. Casey, Mr. Portman, Mr. Bennet, Mrs. Capito, 
Ms. Baldwin, and Mr. Gardner) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
   To amend the Internal Revenue Code of 1986 to reform taxation of 
                          alcoholic beverages.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; RULE OF CONSTRUCTION.

    (a) Short Title.--This Act may be cited as the ``Craft Beverage 
Modernization and Tax Reform Act of 2017''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents; rule of construction.
                       TITLE I--PRODUCTION PERIOD

Sec. 101. Production period for beer, wine, and distilled spirits.
                             TITLE II--BEER

Sec. 201. Reduced rate of excise tax on beer.
Sec. 202. Use of wholesome products suitable for human food consumption 
                            in the production of fermented beverages.
Sec. 203. Simplification of rules regarding records, statements, and 
                            returns.
Sec. 204. Transfer of beer between bonded facilities.
                            TITLE III--WINE

Sec. 301. Reduced rate of excise tax on certain wine.
Sec. 302. Adjustment of alcohol content level for application of excise 
                            tax rates.
Sec. 303. Definition of mead and low alcohol by volume wine.
                      TITLE IV--DISTILLED SPIRITS

Sec. 401. Reduced rate of excise tax on certain distilled spirits.
Sec. 402. Bulk distilled spirits.
                            TITLE V--FUNDING

Sec. 501. Increased funding for the Alcohol and Tobacco Tax and Trade 
                            Bureau.
    (c) Rule of Construction.--Nothing in this Act, the amendments made 
by this Act, or any regulation promulgated under this Act or the 
amendments made by this Act, shall be construed to preempt, supersede, 
or otherwise limit or restrict any State, local, or tribal law that 
prohibits or regulates the production or sale of distilled spirits, 
wine, or malt beverages.

                       TITLE I--PRODUCTION PERIOD

SEC. 101. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED SPIRITS.

    (a) In General.--Section 263A(f) of the Internal Revenue Code of 
1986 is amended--
            (1) by redesignating paragraph (4) as paragraph (5), and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Exemption for aging process of beer, wine, and 
        distilled spirits.--For purposes of this subsection, the 
        production period shall not include the aging period for--
                    ``(A) beer (as defined in section 5052(a)),
                    ``(B) wine (as described in section 5041(a)), or
                    ``(C) distilled spirits (as defined in section 
                5002(a)(8)), except such spirits that are unfit for use 
                for beverage purposes.''.
    (b) Conforming Amendment.--Paragraph (5)(B)(ii) of section 263A(f) 
of the Internal Revenue Code of 1986, as redesignated by this section, 
is amended by inserting ``except as provided in paragraph (4),'' before 
``ending on the date''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest costs paid or incurred in taxable years ending on or 
after December 31, 2018.

                             TITLE II--BEER

SEC. 201. REDUCED RATE OF EXCISE TAX ON BEER.

    (a) In General.--Paragraph (1) of section 5051(a) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(1) In general.--
                    ``(A) Imposition of tax.--A tax is hereby imposed 
                on all beer brewed or produced, and removed for 
                consumption or sale, within the United States, or 
                imported into the United States. Except as provided in 
                paragraph (2), the rate of such tax shall be--
                            ``(i) $16 on the first 6,000,000 barrels of 
                        beer--
                                    ``(I) brewed by the brewer and 
                                removed during the calendar year for 
                                consumption or sale, or
                                    ``(II) imported by the importer 
                                into the United States during the 
                                calendar year, and
                            ``(ii) $18 on any barrels of beer to which 
                        clause (i) does not apply.
                    ``(B) Barrel.--For purposes of this section, a 
                barrel shall contain not more than 31 gallons of beer, 
                and any tax imposed under this section shall be applied 
                at a like rate for any other quantity or for fractional 
                parts of a barrel.''.
    (b) Reduced Rate for Certain Domestic Production.--Subparagraph (A) 
of section 5051(a)(2) of the Internal Revenue Code of 1986 is amended--
            (1) in the heading, by striking ``$7'' and inserting 
        ``$3.50'', and
            (2) by striking ``$7'' and inserting ``$3.50''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (a) of section 5051 of the Internal Revenue Code 
of 1986 is amended--
            (1) in subparagraph (A)(i)(II) of paragraph (1), as amended 
        by subsection (a) of this section, by inserting ``but only if 
        the importer is an electing importer under paragraph (4) and 
        the barrels have been assigned to the importer pursuant to such 
        paragraph'' after ``during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(4) Reduced tax rate for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any barrels of 
                beer which have been brewed or produced outside of the 
                United States and imported into the United States, the 
                rate of tax applicable under clause (i) of paragraph 
                (1)(A) (referred to in this paragraph as the `reduced 
                tax rate') may be assigned by the brewer (provided that 
                the brewer makes an election described in subparagraph 
                (B)(ii)) to any electing importer of such barrels 
                pursuant to the requirements established by the 
                Secretary of the Treasury under subparagraph (B).
                    ``(B) Assignment.--The Secretary of the Treasury, 
                in consultation with the Secretary of Health and Human 
                Services and the Secretary of the Department of 
                Homeland Security, shall, through such rules, 
                regulations, and procedures as are determined 
                appropriate, establish procedures for assignment of the 
                reduced tax rate provided under this paragraph, which 
                shall include--
                            ``(i) a limitation to ensure that the 
                        number of barrels of beer for which the reduced 
                        tax rate has been assigned by a brewer--
                                    ``(I) to any importer does not 
                                exceed the number of barrels of beer 
                                brewed or produced by such brewer 
                                during the calendar year which were 
                                imported into the United States by such 
                                importer, and
                                    ``(II) to all importers does not 
                                exceed the 6,000,000 barrels to which 
                                the reduced tax rate applies,
                            ``(ii) procedures that allow the election 
                        of a brewer to assign and an importer to 
                        receive the reduced tax rate provided under 
                        this paragraph,
                            ``(iii) requirements that the brewer 
                        provide any information as the Secretary 
                        determines necessary and appropriate for 
                        purposes of carrying out this paragraph, and
                            ``(iv) procedures that allow for revocation 
                        of eligibility of the brewer and the importer 
                        for the reduced tax rate provided under this 
                        paragraph in the case of any erroneous or 
                        fraudulent information provided under clause 
                        (iii) which the Secretary deems to be material 
                        to qualifying for such reduced rate.
                    ``(C) Controlled group.--For purposes of this 
                section, any importer making an election described in 
                subparagraph (B)(ii) shall be deemed to be a member of 
                the controlled group of the brewer, as described under 
                paragraph (5).''.
    (d) Controlled Group and Single Taxpayer Rules.--Subsection (a) of 
section 5051 of the Internal Revenue Code of 1986, as amended by this 
section, is amended--
            (1) in paragraph (2)--
                    (A) by striking subparagraph (B), and
                    (B) by redesignating subparagraph (C) as 
                subparagraph (B), and
            (2) by adding at the end the following new paragraph:
            ``(5) Controlled group and single taxpayer rules.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of a controlled group, 
                the 6,000,000 barrel quantity specified in paragraph 
                (1)(A)(i) and the 2,000,000 barrel quantity specified 
                in paragraph (2)(A) shall be applied to the controlled 
                group, and the 6,000,000 barrel quantity specified in 
                paragraph (1)(A)(i) and the 60,000 barrel quantity 
                specified in paragraph (2)(A) shall be apportioned 
                among the brewers who are members of such group in such 
                manner as the Secretary or his delegate shall by 
                regulations prescribe. For purposes of the preceding 
                sentence, the term `controlled group' has the meaning 
                assigned to it by subsection (a) of section 1563, 
                except that for such purposes the phrase `more than 50 
                percent' shall be substituted for the phrase `at least 
                80 percent' in each place it appears in such 
                subsection. Under regulations prescribed by the 
                Secretary or his delegate, principles similar to the 
                principles of the preceding two sentences shall be 
                applied to a group of brewers under common control 
                where one or more of the brewers is not a corporation.
                    ``(B) Foreign manufacturers and importers.--For 
                purposes of paragraph (4), in the case of a controlled 
                group, the 6,000,000 barrel quantity specified in 
                paragraph (1)(A)(i) shall be applied to the controlled 
                group and apportioned among the members of such group 
                in such manner as the Secretary or his delegate shall 
                by regulations prescribe. For purposes of the preceding 
                sentence, the term `controlled group' has the meaning 
                given such term under subparagraph (A). Under 
                regulations prescribed by the Secretary or his 
                delegate, principles similar to the principles of the 
                preceding two sentences shall be applied to a group of 
                brewers under common control where one or more of the 
                brewers is not a corporation.
                    ``(C) Single taxpayer.--Pursuant to rules issued by 
                the Secretary, two or more entities (whether or not 
                under common control) that produce beer marketed under 
                a similar brand, license, franchise, or other 
                arrangement shall be treated as a single taxpayer for 
                purposes of the application of this subsection.''.
    (e) Effective Date.--
            (1) In general.--Subject to paragraph (2), the amendments 
        made by this section shall apply to beer removed after 
        September 30, 2019.
            (2) Proration.--For purposes of the fourth calendar quarter 
        of 2019, the Secretary of the Treasury (or the Secretary's 
        delegate) shall issue such guidance, rules, or regulations as 
        are deemed appropriate to provide that the amendments made by 
        this section are applied on a prorated basis for purposes of 
        beer removed during such quarter.

SEC. 202. USE OF WHOLESOME PRODUCTS SUITABLE FOR HUMAN FOOD CONSUMPTION 
              IN THE PRODUCTION OF FERMENTED BEVERAGES.

    (a) In General.--Not later than the date that is 1 year after the 
date of the enactment of this Act, the Secretary of the Treasury or the 
Secretary of the Treasury's delegate shall amend subpart F of part 25 
of subchapter A of chapter I of title 27, Code of Federal Regulations, 
to ensure that, for purposes of such part, wholesome fruits, 
vegetables, and spices suitable for human food consumption that are 
generally recognized as safe for use in an alcoholic beverage and that 
do not contain alcohol are generally recognized as a traditional 
ingredient in the production of fermented beverages.
    (b) Definition.--For purposes of this section, the term ``fruit'' 
means whole fruit, fruit juices, fruit puree, fruit extract, or fruit 
concentrate.
    (c) Rule of Construction.--Nothing in this section shall be 
construed to revoke, prescribe, or limit any other exemptions from the 
formula requirements under subpart F of part 25 of subchapter A of 
chapter I of title 27, Code of Federal Regulations, for any ingredient 
that has been recognized before, on, or after the date of the enactment 
of this Act as a traditional ingredient in the production of fermented 
beverages.

SEC. 203. SIMPLIFICATION OF RULES REGARDING RECORDS, STATEMENTS, AND 
              RETURNS.

    (a) In General.--Subsection (a) of section 5555 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following: 
``The Secretary shall permit a person to employ a unified system for 
any records, statements, and returns required to be kept, rendered, or 
made under this section for any beer produced in the brewery for which 
the tax imposed by section 5051 has been determined, including any beer 
which has been removed for consumption on the premises of the 
brewery.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to any calendar quarters beginning more than 1 year after the 
date of the enactment of this Act.

SEC. 204. TRANSFER OF BEER BETWEEN BONDED FACILITIES.

    (a) In General.--Section 5414 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 5414. TRANSFER OF BEER BETWEEN BONDED FACILITIES.

    ``(a) In General.--Beer may be removed from one brewery to another 
bonded brewery, without payment of tax, and may be mingled with beer at 
the receiving brewery, subject to such conditions, including payment of 
the tax, and in such containers, as the Secretary by regulations shall 
prescribe, which shall include--
            ``(1) any removal from one brewery to another brewery 
        belonging to the same brewer,
            ``(2) any removal from a brewery owned by one corporation 
        to a brewery owned by another corporation when--
                    ``(A) one such corporation owns the controlling 
                interest in the other such corporation, or
                    ``(B) the controlling interest in each such 
                corporation is owned by the same person or persons, and
            ``(3) any removal from one brewery to another brewery 
        when--
                    ``(A) the proprietors of transferring and receiving 
                premises are independent of each other and neither has 
                a proprietary interest, directly or indirectly, in the 
                business of the other, and
                    ``(B) the transferor has divested itself of all 
                interest in the beer so transferred and the transferee 
                has accepted responsibility for payment of the tax.
    ``(b) Transfer of Liability for Tax.--For purposes of subsection 
(a)(3), such relief from liability shall be effective from the time of 
removal from the transferor's bonded premises, or from the time of 
divestment of interest, whichever is later.''.
    (b) Removal From Brewery by Pipeline.--Section 5412 of the Internal 
Revenue Code of 1986 is amended by inserting ``pursuant to section 5414 
or'' before ``by pipeline''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any calendar quarters beginning more than 1 year after the 
date of the enactment of this Act.

                            TITLE III--WINE

SEC. 301. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.

    (a) In General.--Section 5041(c) of the Internal Revenue Code of 
1986 is amended--
            (1) in the heading, by striking ``for Small Domestic 
        Producers'',
            (2) by amending paragraph (1) to read as follows:
            ``(1) Allowance of credit.--
                    ``(A) In general.--There shall be allowed as a 
                credit against any tax imposed by this title (other 
                than chapters 2, 21, and 22) an amount equal to the sum 
                of--
                            ``(i) $1 per wine gallon on the first 
                        30,000 wine gallons of wine, plus
                            ``(ii) 90 cents per wine gallon on the 
                        first 100,000 wine gallons of wine to which 
                        clause (i) does not apply, plus
                            ``(iii) 53.5 cents per wine gallon on the 
                        first 620,000 wine gallons of wine to which 
                        clauses (i) and (ii) do not apply,
                which are produced by the producer and removed during 
                the calendar year for consumption or sale, or which are 
                imported by the importer into the United States during 
                the calendar year.
                    ``(B) Adjustment of credit for hard cider.--In the 
                case of wine described in subsection (b)(6), 
                subparagraph (A) of this paragraph shall be applied--
                            ``(i) in clause (i) of such subparagraph, 
                        by substituting `6.2 cents' for `$1',
                            ``(ii) in clause (ii) of such subparagraph, 
                        by substituting `5.6 cents' for `90 cents', and
                            ``(iii) in clause (iii) of such 
                        subparagraph, by substituting `3.3 cents' for 
                        `53.5 cents'.'',
            (3) by striking paragraph (2),
            (4) by redesignating paragraphs (3) through (7) as 
        paragraphs (2) through (6), respectively, and
            (5) by amending paragraph (6), as redesignated by paragraph 
        (4) of this subsection, to read as follows:
            ``(6) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including regulations to ensure proper 
        calculation of the credit provided in this subsection.''.
    (b) Controlled Group and Single Taxpayer Rules.--Paragraph (3) of 
section 5041(c), as redesignated by subsection (a)(4), is amended by 
striking ``section 5051(a)(2)(B)'' and inserting ``section 
5051(a)(5)''.
    (c) Allowance of Credit for Foreign Manufacturers and Importers.--
Subsection (c) of section 5041 of the Internal Revenue Code of 1986, as 
amended by subsection (a), is amended--
            (1) in subparagraph (A) of paragraph (1), by inserting 
        ``but only if the importer is an electing importer under 
        paragraph (6) and the wine gallons of wine have been assigned 
        to the importer pursuant to such paragraph'' after ``into the 
        United States during the calendar year'',
            (2) by redesignating paragraph (6) as paragraph (7), and
            (3) by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) Allowance of credit for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any wine gallons 
                of wine which have been produced outside of the United 
                States and imported into the United States, the credit 
                allowable under paragraph (1) (referred to in this 
                paragraph as the `tax credit') may be assigned by the 
                person who produced such wine (referred to in this 
                paragraph as the `foreign producer'), provided that 
                such person makes an election described in subparagraph 
                (B)(ii), to any electing importer of such wine gallons 
                pursuant to the requirements established by the 
                Secretary of the Treasury under subparagraph (B).
                    ``(B) Assignment.--The Secretary of the Treasury, 
                in consultation with the Secretary of Health and Human 
                Services and the Secretary of the Department of 
                Homeland Security, shall, through such rules, 
                regulations, and procedures as are determined 
                appropriate, establish procedures for assignment of the 
                tax credit provided under this paragraph, which shall 
                include--
                            ``(i) a limitation to ensure that the 
                        number of wine gallons of wine for which the 
                        tax credit has been assigned by a foreign 
                        producer--
                                    ``(I) to any importer does not 
                                exceed the number of wine gallons of 
                                wine produced by such foreign producer 
                                during the calendar year which were 
                                imported into the United States by such 
                                importer, and
                                    ``(II) to all importers does not 
                                exceed the 750,000 wine gallons of wine 
                                to which the tax credit applies,
                            ``(ii) procedures that allow the election 
                        of a foreign producer to assign and an importer 
                        to receive the tax credit provided under this 
                        paragraph,
                            ``(iii) requirements that the foreign 
                        producer provide any information as the 
                        Secretary determines necessary and appropriate 
                        for purposes of carrying out this paragraph, 
                        and
                            ``(iv) procedures that allow for revocation 
                        of eligibility of the foreign producer and the 
                        importer for the tax credit provided under this 
                        paragraph in the case of any erroneous or 
                        fraudulent information provided under clause 
                        (iii) which the Secretary deems to be material 
                        to qualifying for such credit.
                    ``(C) Controlled group.--For purposes of this 
                section, any importer making an election described in 
                subparagraph (B)(ii) shall be deemed to be a member of 
                the controlled group of the foreign producer, as 
                described under paragraph (3).''.
    (d) Effective Date.--
            (1) In general.--Subject to paragraph (2), the amendments 
        made by this section shall apply to wine removed after 
        September 30, 2019.
            (2) Proration.--For purposes of the fourth calendar quarter 
        of 2019, the Secretary of the Treasury (or the Secretary's 
        delegate) shall issue such guidance, rules, or regulations as 
        are deemed appropriate to provide that the amendments made by 
        this section are applied on a prorated basis for purposes of 
        wine removed during such quarter.

SEC. 302. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF EXCISE 
              TAX RATES.

    (a) In General.--Paragraphs (1) and (2) of section 5041(b) of the 
Internal Revenue Code of 1986 are amended by striking ``14 percent'' 
each place it appears and inserting ``16 percent''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wine removed during calendar years beginning after December 
31, 2018.

SEC. 303. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME WINE.

    (a) In General.--Section 5041 of the Internal Revenue Code of 1986 
is amended--
            (1) in subsection (a), by striking ``Still wines'' and 
        inserting ``Subject to subsection (h), still wines'', and
            (2) by adding at the end the following new subsection:
    ``(h) Mead and Low Alcohol by Volume Wine.--
            ``(1) In general.--For purposes of subsections (a) and 
        (b)(1), mead and low alcohol by volume wine shall be deemed to 
        be still wines containing not more than 16 percent of alcohol 
        by volume.
            ``(2) Definitions.--
                    ``(A) Mead.--For purposes of this section, the term 
                `mead' means a wine--
                            ``(i) containing not more than 0.64 gram of 
                        carbon dioxide per hundred milliliters of wine, 
                        except that the Secretary may by regulations 
                        prescribe such tolerances to this limitation as 
                        may be reasonably necessary in good commercial 
                        practice,
                            ``(ii) which is derived solely from honey 
                        and water,
                            ``(iii) which contains no fruit product or 
                        fruit flavoring, and
                            ``(iv) which contains less than 8.5 percent 
                        alcohol by volume.
                    ``(B) Low alcohol by volume wine.--For purposes of 
                this section, the term `low alcohol by volume wine' 
                means a wine--
                            ``(i) containing not more than 0.64 gram of 
                        carbon dioxide per hundred milliliters of wine, 
                        except that the Secretary may by regulations 
                        prescribe such tolerances to this limitation as 
                        may be reasonably necessary in good commercial 
                        practice,
                            ``(ii) which is derived--
                                    ``(I) primarily from grapes, or
                                    ``(II) from grape juice concentrate 
                                and water,
                            ``(iii) which contains no fruit product or 
                        fruit flavoring other than grape, and
                            ``(iv) which contains less than 8.5 percent 
                        alcohol by volume.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wine removed during calendar years beginning after December 
31, 2018.

                      TITLE IV--DISTILLED SPIRITS

SEC. 401. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS.

    (a) In General.--Section 5001 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (c) as subsection (d) and by 
inserting after subsection (b) the following new subsection:
    ``(c) Reduced Rate.--
            ``(1) In general.--In the case of a distilled spirits 
        operation, the otherwise applicable tax rate under subsection 
        (a)(1) shall be--
                    ``(A) $2.70 per proof gallon on the first 100,000 
                proof gallons of distilled spirits, and
                    ``(B) $13.34 per proof gallon on the first 
                22,130,000 of proof gallons of distilled spirits to 
                which subparagraph (A) does not apply,
        which have been distilled or processed by such operation and 
        removed during the calendar year for consumption or sale, or 
        which have been imported by the importer into the United States 
        during the calendar year.
            ``(2) Controlled groups.--
                    ``(A) In general.--In the case of a controlled 
                group, the proof gallon quantities specified under 
                subparagraphs (A) and (B) of paragraph (1) shall be 
                applied to such group and apportioned among the members 
                of such group in such manner as the Secretary or his 
                delegate shall by regulations prescribe.
                    ``(B) Definition.--For purposes of subparagraph 
                (A), the term `controlled group' shall have the meaning 
                given such term by subsection (a) of section 1563, 
                except that `more than 50 percent' shall be substituted 
                for `at least 80 percent' each place it appears in such 
                subsection.
                    ``(C) Rules for non-corporations.--Under 
                regulations prescribed by the Secretary, principles 
                similar to the principles of subparagraphs (A) and (B) 
                shall be applied to a group under common control where 
                one or more of the persons is not a corporation.
                    ``(D) Single taxpayer.--Pursuant to rules issued by 
                the Secretary, two or more entities (whether or not 
                under common control) that produce distilled spirits 
                marketed under a similar brand, license, franchise, or 
                other arrangement shall be treated as a single taxpayer 
                for purposes of the application of this subsection.''.
    (b) Conforming Amendment.--Section 7652(f)(2) of the Internal 
Revenue Code of 1986 is amended by striking ``section 5001(a)(1)'' and 
inserting ``subsection (a)(1) of section 5001, determined as if 
subsection (c)(1) of such section did not apply''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (c) of section 5001 of the Internal Revenue Code 
of 1986, as added by subsection (a), is amended--
            (1) in paragraph (1), by inserting ``but only if the 
        importer is an electing importer under paragraph (3) and the 
        proof gallons of distilled spirits have been assigned to the 
        importer pursuant to such paragraph'' after ``into the United 
        States during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(3) Reduced tax rate for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any proof gallons 
                of distilled spirits which have been produced outside 
                of the United States and imported into the United 
                States, the rate of tax applicable under paragraph (1) 
                (referred to in this paragraph as the `reduced tax 
                rate') may be assigned by the distilled sprits 
                operation (provided that such operation makes an 
                election described in subparagraph (B)(ii)) to any 
                electing importer of such proof gallons pursuant to the 
                requirements established by the Secretary of the 
                Treasury under subparagraph (B).
                    ``(B) Assignment.--The Secretary of the Treasury, 
                in consultation with the Secretary of Health and Human 
                Services and the Secretary of the Department of 
                Homeland Security, shall, through such rules, 
                regulations, and procedures as are determined 
                appropriate, establish procedures for assignment of the 
                reduced tax rate provided under this paragraph, which 
                shall include--
                            ``(i) a limitation to ensure that the 
                        number of proof gallons of distilled spirits 
                        for which the reduced tax rate has been 
                        assigned by a distilled spirits operation--
                                    ``(I) to any importer does not 
                                exceed the number of proof gallons 
                                produced by such operation during the 
                                calendar year which were imported into 
                                the United States by such importer, and
                                    ``(II) to all importers does not 
                                exceed the 22,230,000 proof gallons of 
                                distilled spirits to which the reduced 
                                tax rate applies,
                            ``(ii) procedures that allow the election 
                        of a distilled spirits operation to assign and 
                        an importer to receive the reduced tax rate 
                        provided under this paragraph,
                            ``(iii) requirements that the distilled 
                        spirits operation provide any information as 
                        the Secretary determines necessary and 
                        appropriate for purposes of carrying out this 
                        paragraph, and
                            ``(iv) procedures that allow for revocation 
                        of eligibility of the distilled spirits 
                        operation and the importer for the reduced tax 
                        rate provided under this paragraph in the case 
                        of any erroneous or fraudulent information 
                        provided under clause (iii) which the Secretary 
                        deems to be material to qualifying for such 
                        reduced rate.
                    ``(C) Controlled group.--
                            ``(i) In general.--For purposes of this 
                        section, any importer making an election 
                        described in subparagraph (B)(ii) shall be 
                        deemed to be a member of the controlled group 
                        of the distilled spirits operation, as 
                        described under paragraph (2).
                            ``(ii) Apportionment.--For purposes of this 
                        paragraph, in the case of a controlled group, 
                        rules similar to section 5051(a)(5)(B) shall 
                        apply.''.
    (d) Effective Date.--
            (1) In general.--Subject to paragraph (2), the amendments 
        made by this section shall apply to distilled spirits removed 
        after September 30, 2019.
            (2) Proration.--For purposes of the fourth calendar quarter 
        of 2019, the Secretary of the Treasury (or the Secretary's 
        delegate) shall issue such guidance, rules, or regulations as 
        are deemed appropriate to provide that the amendments made by 
        this section are applied on a prorated basis for purposes of 
        distilled spirits removed during such quarter.

SEC. 402. BULK DISTILLED SPIRITS.

    (a) In General.--Section 5212 of the Internal Revenue Code of 1986 
is amended--
            (1) by striking ``Bulk distilled spirits on which'' and 
        inserting ``Distilled spirits on which'', and
            (2) by striking ``bulk'' each place it appears.
    (b) Effective Date.--The amendments made by this section shall 
apply distilled spirits transferred in bond in any calendar quarters 
beginning more than 1 year after the date of the enactment of this Act.

                            TITLE V--FUNDING

SEC. 501. INCREASED FUNDING FOR THE ALCOHOL AND TOBACCO TAX AND TRADE 
              BUREAU.

    (a) In General.--For necessary expenses of carrying out section 
1111(d) of the Homeland Security Act of 2002 (6 U.S.C. 531(d)), there 
are authorized to be appropriated--
            (1) for fiscal year 2017, $116,439,000, to remain available 
        until September 30, 2018; and
            (2) for fiscal year 2018, $119,081,000, to remain available 
        until September 30, 2019.
    (b) Availability of Funds.--Of the amounts authorized to be 
appropriated under subsection (a), for each of fiscal years 2017 and 
2018--
            (1) $5,000,000 shall be for the costs of accelerating the 
        processing of formula and label applications;
            (2) $5,000,000 shall be for the costs of programs to 
        enforce trade practice violations of the Federal Alcohol 
        Administration Act (27 U.S.C. 201 et seq.); and
            (3) $5,000,000 shall be for the purpose of carrying out the 
        provisions of this Act and the amendments made by this Act, 
        including accelerating the processing of permit applications 
        for non-industrial alcohol production and distribution.
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