II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

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

4 CONSTRUCTION. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Craft Beverage Modernization and Tax Reform Act of 

7 2017’’. 

8 (b) TABLE OF CONTENTS.—The table of contents of 

9 this Act is as follows: 


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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. 

1 (c) RULE OF CONSTRUCTION.—Nothing in this Act, 

2 the amendments made by this Act, or any regulation pro3 mulgated under this Act or the amendments made by this 

4 Act, shall be construed to preempt, supersede, or other5 wise limit or restrict any State, local, or tribal law that 

6 prohibits or regulates the production or sale of distilled 

7 spirits, wine, or malt beverages. 

8 TITLE I—PRODUCTION PERIOD 

9 SEC. 101. PRODUCTION PERIOD FOR BEER, WINE, AND DIS10 TILLED SPIRITS. 

11 (a) IN GENERAL.—Section 263A(f) of the Internal 

12 Revenue Code of 1986 is amended— 


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1 (1) by redesignating paragraph (4) as para2 graph (5), and 

3 (2) by inserting after paragraph (3) the fol4 lowing new paragraph: 

5 ‘‘(4) EXEMPTION FOR AGING PROCESS OF

6 BEER, WINE, AND DISTILLED SPIRITS.—For pur7 poses of this subsection, the production period shall 

8 not include the aging period for— 

9 ‘‘(A) beer (as defined in section 5052(a)), 

10 ‘‘(B) wine (as described in section 

11 5041(a)), or 

12 ‘‘(C) distilled spirits (as defined in section 

13 5002(a)(8)), except such spirits that are unfit 

14 for use for beverage purposes.’’. 

15 (b) CONFORMING AMENDMENT.—Paragraph 

16 (5)(B)(ii) of section 263A(f) of the Internal Revenue Code 

17 of 1986, as redesignated by this section, is amended by 

18 inserting ‘‘except as provided in paragraph (4),’’ before 

19 ‘‘ending on the date’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to interest costs paid or incurred 

22 in taxable years ending on or after December 31, 2018. 


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1 TITLE II—BEER 

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

3 (a) IN GENERAL.—Paragraph (1) of section 5051(a) 

4 of the Internal Revenue Code of 1986 is amended to read 

5 as follows: 

6 ‘‘(1) IN GENERAL.— 

7 ‘‘(A) IMPOSITION OF TAX.—A tax is here8 by imposed on all beer brewed or produced, and 

9 removed for consumption or sale, within the 

10 United States, or imported into the United 

11 States. Except as provided in paragraph (2), 

12 the rate of such tax shall be— 

13 ‘‘(i) $16 on the first 6,000,000 barrels 

14 of beer— 

15 ‘‘(I) brewed by the brewer and 

16 removed during the calendar year for 

17 consumption or sale, or 

18 ‘‘(II) imported by the importer 

19 into the United States during the cal20 endar year, and 

21 ‘‘(ii) $18 on any barrels of beer to 

22 which clause (i) does not apply. 

23 ‘‘(B) BARREL.—For purposes of this sec24 tion, a barrel shall contain not more than 31 

25 gallons of beer, and any tax imposed under this 


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1 section shall be applied at a like rate for any 

2 other quantity or for fractional parts of a bar3 rel.’’. 

4 (b) REDUCED RATE FOR CERTAIN DOMESTIC PRO5 DUCTION.—Subparagraph (A) of section 5051(a)(2) of the 

6 Internal Revenue Code of 1986 is amended— 

7 (1) in the heading, by striking ‘‘$7’’ and insert8 ing ‘‘$3.50’’, and 

9 (2) by striking ‘‘$7’’ and inserting ‘‘$3.50’’. 

10 (c) APPLICATION OF REDUCED TAX RATE FOR FOR11 EIGN MANUFACTURERS AND IMPORTERS.—Subsection (a) 

12 of section 5051 of the Internal Revenue Code of 1986 is 

13 amended— 

14 (1) in subparagraph (A)(i)(II) of paragraph (1), 

15 as amended by subsection (a) of this section, by in16 serting ‘‘but only if the importer is an electing im17 porter under paragraph (4) and the barrels have 

18 been assigned to the importer pursuant to such 

19 paragraph’’ after ‘‘during the calendar year’’, and 

20 (2) by adding at the end the following new 

21 paragraph: 

22 ‘‘(4) REDUCED TAX RATE FOR FOREIGN MANU23 FACTURERS AND IMPORTERS.— 

24 ‘‘(A) IN GENERAL.—In the case of any 

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1 duced outside of the United States and im2 ported into the United States, the rate of tax 

3 applicable under clause (i) of paragraph (1)(A) 

4 (referred to in this paragraph as the ‘reduced 

5 tax rate’) may be assigned by the brewer (pro6 vided that the brewer makes an election de7 scribed in subparagraph (B)(ii)) to any electing 

8 importer of such barrels pursuant to the re9 quirements established by the Secretary of the 

10 Treasury under subparagraph (B). 

11 ‘‘(B) ASSIGNMENT.—The Secretary of the 

12 Treasury, in consultation with the Secretary of 

13 Health and Human Services and the Secretary 

14 of the Department of Homeland Security, shall, 

15 through such rules, regulations, and procedures 

16 as are determined appropriate, establish proce17 dures for assignment of the reduced tax rate 

18 provided under this paragraph, which shall in19 clude— 

20 ‘‘(i) a limitation to ensure that the 

21 number of barrels of beer for which the re22 duced tax rate has been assigned by a 

23 brewer— 

24 ‘‘(I) to any importer does not ex25 ceed the number of barrels of beer 


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1 brewed or produced by such brewer 

2 during the calendar year which were 

3 imported into the United States by 

4 such importer, and 

5 ‘‘(II) to all importers does not 

6 exceed the 6,000,000 barrels to which 

7 the reduced tax rate applies, 

8 ‘‘(ii) procedures that allow the election 

9 of a brewer to assign and an importer to 

10 receive the reduced tax rate provided under 

11 this paragraph, 

12 ‘‘(iii) requirements that the brewer 

13 provide any information as the Secretary 

14 determines necessary and appropriate for 

15 purposes of carrying out this paragraph, 

16 and 

17 ‘‘(iv) procedures that allow for revoca18 tion of eligibility of the brewer and the im19 porter for the reduced tax rate provided 

20 under this paragraph in the case of any er21 roneous or fraudulent information provided 

22 under clause (iii) which the Secretary 

23 deems to be material to qualifying for such 

24 reduced rate. 


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1 ‘‘(C) CONTROLLED GROUP.—For purposes 

2 of this section, any importer making an election 

3 described in subparagraph (B)(ii) shall be 

4 deemed to be a member of the controlled group 

5 of the brewer, as described under paragraph 

6 (5).’’. 

7 (d) CONTROLLED GROUP AND SINGLE TAXPAYER

8 RULES.—Subsection (a) of section 5051 of the Internal 

9 Revenue Code of 1986, as amended by this section, is 

10 amended— 

11 (1) in paragraph (2)— 

12 (A) by striking subparagraph (B), and 

13 (B) by redesignating subparagraph (C) as 

14 subparagraph (B), and 

15 (2) by adding at the end the following new 

16 paragraph: 

17 ‘‘(5) CONTROLLED GROUP AND SINGLE TAX18 PAYER RULES.— 

19 ‘‘(A) IN GENERAL.—Except as provided in 

20 subparagraph (B), in the case of a controlled 

21 group, the 6,000,000 barrel quantity specified 

22 in paragraph (1)(A)(i) and the 2,000,000 barrel 

23 quantity specified in paragraph (2)(A) shall be 

24 applied to the controlled group, and the 

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1 graph (1)(A)(i) and the 60,000 barrel quantity 

2 specified in paragraph (2)(A) shall be appor3 tioned among the brewers who are members of 

4 such group in such manner as the Secretary or 

5 his delegate shall by regulations prescribe. For 

6 purposes of the preceding sentence, the term 

7 ‘controlled group’ has the meaning assigned to 

8 it by subsection (a) of section 1563, except that 

9 for such purposes the phrase ‘more than 50 

10 percent’ shall be substituted for the phrase ‘at 

11 least 80 percent’ in each place it appears in 

12 such subsection. Under regulations prescribed 

13 by the Secretary or his delegate, principles simi14 lar to the principles of the preceding two sen15 tences shall be applied to a group of brewers 

16 under common control where one or more of the 

17 brewers is not a corporation. 

18 ‘‘(B) FOREIGN MANUFACTURERS AND IM19 PORTERS.—For purposes of paragraph (4), in 

20 the case of a controlled group, the 6,000,000 

21 barrel quantity specified in paragraph (1)(A)(i) 

22 shall be applied to the controlled group and ap23 portioned among the members of such group in 

24 such manner as the Secretary or his delegate 

25 shall by regulations prescribe. For purposes of 


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1 the preceding sentence, the term ‘controlled 

2 group’ has the meaning given such term under 

3 subparagraph (A). Under regulations prescribed 

4 by the Secretary or his delegate, principles simi5 lar to the principles of the preceding two sen6 tences shall be applied to a group of brewers 

7 under common control where one or more of the 

8 brewers is not a corporation. 

9 ‘‘(C) SINGLE TAXPAYER.—Pursuant to 

10 rules issued by the Secretary, two or more enti11 ties (whether or not under common control) 

12 that produce beer marketed under a similar 

13 brand, license, franchise, or other arrangement 

14 shall be treated as a single taxpayer for pur15 poses of the application of this subsection.’’. 

16 (e) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—Subject to paragraph (2), 

18 the amendments made by this section shall apply to 

19 beer removed after September 30, 2019. 

20 (2) PRORATION.—For purposes of the fourth 

21 calendar quarter of 2019, the Secretary of the 

22 Treasury (or the Secretary’s delegate) shall issue 

23 such guidance, rules, or regulations as are deemed 

24 appropriate to provide that the amendments made 


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1 by this section are applied on a prorated basis for 

2 purposes of beer removed during such quarter. 

3 SEC. 202. USE OF WHOLESOME PRODUCTS SUITABLE FOR 

4 HUMAN FOOD CONSUMPTION IN THE PRO5 DUCTION OF FERMENTED BEVERAGES. 

6 (a) IN GENERAL.—Not later than the date that is 

7 1 year after the date of the enactment of this Act, the 

8 Secretary of the Treasury or the Secretary of the Treas9 ury’s delegate shall amend subpart F of part 25 of sub10 chapter A of chapter I of title 27, Code of Federal Regula11 tions, to ensure that, for purposes of such part, wholesome 

12 fruits, vegetables, and spices suitable for human food con13 sumption that are generally recognized as safe for use in 

14 an alcoholic beverage and that do not contain alcohol are 

15 generally recognized as a traditional ingredient in the pro16 duction of fermented beverages. 

17 (b) DEFINITION.—For purposes of this section, the 

18 term ‘‘fruit’’ means whole fruit, fruit juices, fruit puree, 

19 fruit extract, or fruit concentrate. 

20 (c) RULE OF CONSTRUCTION.—Nothing in this sec21 tion shall be construed to revoke, prescribe, or limit any 

22 other exemptions from the formula requirements under 

23 subpart F of part 25 of subchapter A of chapter I of title 

24 27, Code of Federal Regulations, for any ingredient that 

25 has been recognized before, on, or after the date of the 


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1 enactment of this Act as a traditional ingredient in the 

2 production of fermented beverages. 

3 SEC. 203. SIMPLIFICATION OF RULES REGARDING 

4 RECORDS, STATEMENTS, AND RETURNS. 

5 (a) IN GENERAL.—Subsection (a) of section 5555 of 

6 the Internal Revenue Code of 1986 is amended by adding 

7 at the end the following: ‘‘The Secretary shall permit a 

8 person to employ a unified system for any records, state9 ments, and returns required to be kept, rendered, or made 

10 under this section for any beer produced in the brewery 

11 for which the tax imposed by section 5051 has been deter12 mined, including any beer which has been removed for 

13 consumption on the premises of the brewery.’’. 

14 (b) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to any calendar quarters beginning 

16 more than 1 year after the date of the enactment of this 

17 Act. 

18 SEC. 204. TRANSFER OF BEER BETWEEN BONDED FACILI19 TIES. 

20 (a) IN GENERAL.—Section 5414 of the Internal Rev21 enue Code of 1986 is amended to read as follows: 

22 ‘‘SEC. 5414. TRANSFER OF BEER BETWEEN BONDED FACILI23 TIES. 

24 ‘‘(a) IN GENERAL.—Beer may be removed from one 

25 brewery to another bonded brewery, without payment of 


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1 tax, and may be mingled with beer at the receiving brew2 ery, subject to such conditions, including payment of the 

3 tax, and in such containers, as the Secretary by regula4 tions shall prescribe, which shall include— 

5 ‘‘(1) any removal from one brewery to another 

6 brewery belonging to the same brewer, 

7 ‘‘(2) any removal from a brewery owned by one 

8 corporation to a brewery owned by another corpora9 tion when— 

10 ‘‘(A) one such corporation owns the con11 trolling interest in the other such corporation, 

12 or 

13 ‘‘(B) the controlling interest in each such 

14 corporation is owned by the same person or per15 sons, and 

16 ‘‘(3) any removal from one brewery to another 

17 brewery when— 

18 ‘‘(A) the proprietors of transferring and 

19 receiving premises are independent of each 

20 other and neither has a proprietary interest, di21 rectly or indirectly, in the business of the other, 

22 and 

23 ‘‘(B) the transferor has divested itself of 

24 all interest in the beer so transferred and the 


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1 transferee has accepted responsibility for pay2 ment of the tax. 

3 ‘‘(b) TRANSFER OF LIABILITY FOR TAX.—For pur4 poses of subsection (a)(3), such relief from liability shall 

5 be effective from the time of removal from the transferor’s 

6 bonded premises, or from the time of divestment of inter7 est, whichever is later.’’. 

8 (b) REMOVAL FROM BREWERY BY PIPELINE.—Sec9 tion 5412 of the Internal Revenue Code of 1986 is amend10 ed by inserting ‘‘pursuant to section 5414 or’’ before ‘‘by 

11 pipeline’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to any calendar quarters beginning 

14 more than 1 year after the date of the enactment of this 

15 Act. 

16 TITLE III—WINE 

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

18 WINE. 

19 (a) IN GENERAL.—Section 5041(c) of the Internal 

20 Revenue Code of 1986 is amended— 

21 (1) in the heading, by striking ‘‘FOR SMALL

22 DOMESTIC PRODUCERS’’, 

23 (2) by amending paragraph (1) to read as fol24 lows: 

25 ‘‘(1) ALLOWANCE OF CREDIT.— 


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1 ‘‘(A) IN GENERAL.—There shall be allowed 

2 as a credit against any tax imposed by this title 

3 (other than chapters 2, 21, and 22) an amount 

4 equal to the sum of— 

5 ‘‘(i) $1 per wine gallon on the first 

6 30,000 wine gallons of wine, plus 

7 ‘‘(ii) 90 cents per wine gallon on the 

8 first 100,000 wine gallons of wine to which 

9 clause (i) does not apply, plus 

10 ‘‘(iii) 53.5 cents per wine gallon on 

11 the first 620,000 wine gallons of wine to 

12 which clauses (i) and (ii) do not apply, 

13 which are produced by the producer and re14 moved during the calendar year for consump15 tion or sale, or which are imported by the im16 porter into the United States during the cal17 endar year. 

18 ‘‘(B) ADJUSTMENT OF CREDIT FOR HARD

19 CIDER.—In the case of wine described in sub20 section (b)(6), subparagraph (A) of this para21 graph shall be applied— 

22 ‘‘(i) in clause (i) of such subpara23 graph, by substituting ‘6.2 cents’ for ‘$1’, 


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1 ‘‘(ii) in clause (ii) of such subpara2 graph, by substituting ‘5.6 cents’ for ‘90 

3 cents’, and 

4 ‘‘(iii) in clause (iii) of such subpara5 graph, by substituting ‘3.3 cents’ for ‘53.5 

6 cents’.’’, 

7 (3) by striking paragraph (2), 

8 (4) by redesignating paragraphs (3) through 

9 (7) as paragraphs (2) through (6), respectively, and 

10 (5) by amending paragraph (6), as redesignated 

11 by paragraph (4) of this subsection, to read as fol12 lows: 

13 ‘‘(6) REGULATIONS.—The Secretary may pre14 scribe such regulations as may be necessary to carry 

15 out the purposes of this subsection, including regula16 tions to ensure proper calculation of the credit pro17 vided in this subsection.’’. 

18 (b) CONTROLLED GROUP AND SINGLE TAXPAYER

19 RULES.—Paragraph (3) of section 5041(c), as redesig20 nated by subsection (a)(4), is amended by striking ‘‘sec21 tion 5051(a)(2)(B)’’ and inserting ‘‘section 5051(a)(5)’’. 

22 (c) ALLOWANCE OF CREDIT FOR FOREIGN MANU23 FACTURERS AND IMPORTERS.—Subsection (c) of section 

24 5041 of the Internal Revenue Code of 1986, as amended 

25 by subsection (a), is amended— 


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1 (1) in subparagraph (A) of paragraph (1), by 

2 inserting ‘‘but only if the importer is an electing im3 porter under paragraph (6) and the wine gallons of 

4 wine have been assigned to the importer pursuant to 

5 such paragraph’’ after ‘‘into the United States dur6 ing the calendar year’’, 

7 (2) by redesignating paragraph (6) as para8 graph (7), and 

9 (3) by inserting after paragraph (5) the fol10 lowing new paragraph: 

11 ‘‘(6) ALLOWANCE OF CREDIT FOR FOREIGN

12 MANUFACTURERS AND IMPORTERS.— 

13 ‘‘(A) IN GENERAL.—In the case of any 

14 wine gallons of wine which have been produced 

15 outside of the United States and imported into 

16 the United States, the credit allowable under 

17 paragraph (1) (referred to in this paragraph as 

18 the ‘tax credit’) may be assigned by the person 

19 who produced such wine (referred to in this 

20 paragraph as the ‘foreign producer’), provided 

21 that such person makes an election described in 

22 subparagraph (B)(ii), to any electing importer 

23 of such wine gallons pursuant to the require24 ments established by the Secretary of the 

25 Treasury under subparagraph (B). 


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1 ‘‘(B) ASSIGNMENT.—The Secretary of the 

2 Treasury, in consultation with the Secretary of 

3 Health and Human Services and the Secretary 

4 of the Department of Homeland Security, shall, 

5 through such rules, regulations, and procedures 

6 as are determined appropriate, establish proce7 dures for assignment of the tax credit provided 

8 under this paragraph, which shall include— 

9 ‘‘(i) a limitation to ensure that the 

10 number of wine gallons of wine for which 

11 the tax credit has been assigned by a for12 eign producer— 

13 ‘‘(I) to any importer does not ex14 ceed the number of wine gallons of 

15 wine produced by such foreign pro16 ducer during the calendar year which 

17 were imported into the United States 

18 by such importer, and 

19 ‘‘(II) to all importers does not 

20 exceed the 750,000 wine gallons of 

21 wine to which the tax credit applies, 

22 ‘‘(ii) procedures that allow the election 

23 of a foreign producer to assign and an im24 porter to receive the tax credit provided 

25 under this paragraph, 


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1 ‘‘(iii) requirements that the foreign 

2 producer provide any information as the 

3 Secretary determines necessary and appro4 priate for purposes of carrying out this 

5 paragraph, and 

6 ‘‘(iv) procedures that allow for revoca7 tion of eligibility of the foreign producer 

8 and the importer for the tax credit pro9 vided under this paragraph in the case of 

10 any erroneous or fraudulent information 

11 provided under clause (iii) which the Sec12 retary deems to be material to qualifying 

13 for such credit. 

14 ‘‘(C) CONTROLLED GROUP.—For purposes 

15 of this section, any importer making an election 

16 described in subparagraph (B)(ii) shall be 

17 deemed to be a member of the controlled group 

18 of the foreign producer, as described under 

19 paragraph (3).’’. 

20 (d) EFFECTIVE DATE.— 

21 (1) IN GENERAL.—Subject to paragraph (2), 

22 the amendments made by this section shall apply to 

23 wine removed after September 30, 2019. 

24 (2) PRORATION.—For purposes of the fourth 

25 calendar quarter of 2019, the Secretary of the 


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1 Treasury (or the Secretary’s delegate) shall issue 

2 such guidance, rules, or regulations as are deemed 

3 appropriate to provide that the amendments made 

4 by this section are applied on a prorated basis for 

5 purposes of wine removed during such quarter. 

6 SEC. 302. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR 

7 APPLICATION OF EXCISE TAX RATES. 

8 (a) IN GENERAL.—Paragraphs (1) and (2) of section 

9 5041(b) of the Internal Revenue Code of 1986 are amend10 ed by striking ‘‘14 percent’’ each place it appears and in11 serting ‘‘16 percent’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to wine removed during calendar 

14 years beginning after December 31, 2018. 

15 SEC. 303. DEFINITION OF MEAD AND LOW ALCOHOL BY 

16 VOLUME WINE. 

17 (a) IN GENERAL.—Section 5041 of the Internal Rev18 enue Code of 1986 is amended— 

19 (1) in subsection (a), by striking ‘‘Still wines’’ 

20 and inserting ‘‘Subject to subsection (h), still 

21 wines’’, and 

22 (2) by adding at the end the following new sub23 section: 

24 ‘‘(h) MEAD AND LOW ALCOHOL BY VOLUME

25 WINE.— 


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1 ‘‘(1) IN GENERAL.—For purposes of sub2 sections (a) and (b)(1), mead and low alcohol by vol3 ume wine shall be deemed to be still wines con4 taining not more than 16 percent of alcohol by vol5 ume. 

6 ‘‘(2) DEFINITIONS.— 

7 ‘‘(A) MEAD.—For purposes of this section, 

8 the term ‘mead’ means a wine— 

9 ‘‘(i) containing not more than 0.64 

10 gram of carbon dioxide per hundred milli11 liters of wine, except that the Secretary 

12 may by regulations prescribe such toler13 ances to this limitation as may be reason14 ably necessary in good commercial prac15 tice, 

16 ‘‘(ii) which is derived solely from 

17 honey and water, 

18 ‘‘(iii) which contains no fruit product 

19 or fruit flavoring, and 

20 ‘‘(iv) which contains less than 8.5 per21 cent alcohol by volume. 

22 ‘‘(B) LOW ALCOHOL BY VOLUME WINE.— 

23 For purposes of this section, the term ‘low alco24 hol by volume wine’ means a wine— 


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1 ‘‘(i) containing not more than 0.64 

2 gram of carbon dioxide per hundred milli3 liters of wine, except that the Secretary 

4 may by regulations prescribe such toler5 ances to this limitation as may be reason6 ably necessary in good commercial prac7 tice, 

8 ‘‘(ii) which is derived— 

9 ‘‘(I) primarily from grapes, or 

10 ‘‘(II) from grape juice con11 centrate and water, 

12 ‘‘(iii) which contains no fruit product 

13 or fruit flavoring other than grape, and 

14 ‘‘(iv) which contains less than 8.5 per15 cent alcohol by volume.’’. 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to wine removed during calendar 

18 years beginning after December 31, 2018. 

19 TITLE IV—DISTILLED SPIRITS 

20 SEC. 401. REDUCED RATE OF EXCISE TAX ON CERTAIN DIS21 TILLED SPIRITS. 

22 (a) IN GENERAL.—Section 5001 of the Internal Rev23 enue Code of 1986 is amended by redesignating subsection 

24 (c) as subsection (d) and by inserting after subsection (b) 

25 the following new subsection: 


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1 ‘‘(c) REDUCED RATE.— 

2 ‘‘(1) IN GENERAL.—In the case of a distilled 

3 spirits operation, the otherwise applicable tax rate 

4 under subsection (a)(1) shall be— 

5 ‘‘(A) $2.70 per proof gallon on the first 

6 100,000 proof gallons of distilled spirits, and 

7 ‘‘(B) $13.34 per proof gallon on the first 

8 22,130,000 of proof gallons of distilled spirits 

9 to which subparagraph (A) does not apply, 

10 which have been distilled or processed by such oper11 ation and removed during the calendar year for con12 sumption or sale, or which have been imported by 

13 the importer into the United States during the cal14 endar year. 

15 ‘‘(2) CONTROLLED GROUPS.— 

16 ‘‘(A) IN GENERAL.—In the case of a con17 trolled group, the proof gallon quantities speci18 fied under subparagraphs (A) and (B) of para19 graph (1) shall be applied to such group and 

20 apportioned among the members of such group 

21 in such manner as the Secretary or his delegate 

22 shall by regulations prescribe. 

23 ‘‘(B) DEFINITION.—For purposes of sub24 paragraph (A), the term ‘controlled group’ shall 

25 have the meaning given such term by subsection 


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1 (a) of section 1563, except that ‘more than 50 

2 percent’ shall be substituted for ‘at least 80 

3 percent’ each place it appears in such sub4 section. 

5 ‘‘(C) RULES FOR NON-CORPORATIONS.— 

6 Under regulations prescribed by the Secretary, 

7 principles similar to the principles of subpara8 graphs (A) and (B) shall be applied to a group 

9 under common control where one or more of the 

10 persons is not a corporation. 

11 ‘‘(D) SINGLE TAXPAYER.—Pursuant to 

12 rules issued by the Secretary, two or more enti13 ties (whether or not under common control) 

14 that produce distilled spirits marketed under a 

15 similar brand, license, franchise, or other ar16 rangement shall be treated as a single taxpayer 

17 for purposes of the application of this sub18 section.’’. 

19 (b) CONFORMING AMENDMENT.—Section 7652(f)(2) 

20 of the Internal Revenue Code of 1986 is amended by strik21 ing ‘‘section 5001(a)(1)’’ and inserting ‘‘subsection (a)(1) 

22 of section 5001, determined as if subsection (c)(1) of such 

23 section did not apply’’. 

24 (c) APPLICATION OF REDUCED TAX RATE FOR FOR25 EIGN MANUFACTURERS AND IMPORTERS.—Subsection (c) 


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1 of section 5001 of the Internal Revenue Code of 1986, 

2 as added by subsection (a), is amended— 

3 (1) in paragraph (1), by inserting ‘‘but only if 

4 the importer is an electing importer under para5 graph (3) and the proof gallons of distilled spirits 

6 have been assigned to the importer pursuant to such 

7 paragraph’’ after ‘‘into the United States during the 

8 calendar year’’, and 

9 (2) by adding at the end the following new 

10 paragraph: 

11 ‘‘(3) REDUCED TAX RATE FOR FOREIGN MANU12 FACTURERS AND IMPORTERS.— 

13 ‘‘(A) IN GENERAL.—In the case of any 

14 proof gallons of distilled spirits which have been 

15 produced outside of the United States and im16 ported into the United States, the rate of tax 

17 applicable under paragraph (1) (referred to in 

18 this paragraph as the ‘reduced tax rate’) may 

19 be assigned by the distilled sprits operation 

20 (provided that such operation makes an election 

21 described in subparagraph (B)(ii)) to any elect22 ing importer of such proof gallons pursuant to 

23 the requirements established by the Secretary 

24 of the Treasury under subparagraph (B). 


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1 ‘‘(B) ASSIGNMENT.—The Secretary of the 

2 Treasury, in consultation with the Secretary of 

3 Health and Human Services and the Secretary 

4 of the Department of Homeland Security, shall, 

5 through such rules, regulations, and procedures 

6 as are determined appropriate, establish proce7 dures for assignment of the reduced tax rate 

8 provided under this paragraph, which shall in9 clude— 

10 ‘‘(i) a limitation to ensure that the 

11 number of proof gallons of distilled spirits 

12 for which the reduced tax rate has been as13 signed by a distilled spirits operation— 

14 ‘‘(I) to any importer does not ex15 ceed the number of proof gallons pro16 duced by such operation during the 

17 calendar year which were imported 

18 into the United States by such im19 porter, and 

20 ‘‘(II) to all importers does not 

21 exceed the 22,230,000 proof gallons of 

22 distilled spirits to which the reduced 

23 tax rate applies, 

24 ‘‘(ii) procedures that allow the election 

25 of a distilled spirits operation to assign 


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1 and an importer to receive the reduced tax 

2 rate provided under this paragraph, 

3 ‘‘(iii) requirements that the distilled 

4 spirits operation provide any information 

5 as the Secretary determines necessary and 

6 appropriate for purposes of carrying out 

7 this paragraph, and 

8 ‘‘(iv) procedures that allow for revoca9 tion of eligibility of the distilled spirits op10 eration and the importer for the reduced 

11 tax rate provided under this paragraph in 

12 the case of any erroneous or fraudulent in13 formation provided under clause (iii) which 

14 the Secretary deems to be material to 

15 qualifying for such reduced rate. 

16 ‘‘(C) CONTROLLED GROUP.— 

17 ‘‘(i) IN GENERAL.—For purposes of 

18 this section, any importer making an elec19 tion described in subparagraph (B)(ii) 

20 shall be deemed to be a member of the 

21 controlled group of the distilled spirits op22 eration, as described under paragraph (2). 

23 ‘‘(ii) APPORTIONMENT.—For purposes 

24 of this paragraph, in the case of a conVerDate Sep 11 2014 23:29 Feb 03, 2017 Jkt 069200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\S236.IS S236

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1 trolled group, rules similar to section 

2 5051(a)(5)(B) shall apply.’’. 

3 (d) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—Subject to paragraph (2), 

5 the amendments made by this section shall apply to 

6 distilled spirits removed after September 30, 2019. 

7 (2) PRORATION.—For purposes of the fourth 

8 calendar quarter of 2019, the Secretary of the 

9 Treasury (or the Secretary’s delegate) shall issue 

10 such guidance, rules, or regulations as are deemed 

11 appropriate to provide that the amendments made 

12 by this section are applied on a prorated basis for 

13 purposes of distilled spirits removed during such 

14 quarter. 

15 SEC. 402. BULK DISTILLED SPIRITS. 

16 (a) IN GENERAL.—Section 5212 of the Internal Rev17 enue Code of 1986 is amended— 

18 (1) by striking ‘‘Bulk distilled spirits on which’’ 

19 and inserting ‘‘Distilled spirits on which’’, and 

20 (2) by striking ‘‘bulk’’ each place it appears. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply distilled spirits transferred in bond 

23 in any calendar quarters beginning more than 1 year after 

24 the date of the enactment of this Act. 


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1 TITLE V—FUNDING 

2 SEC. 501. INCREASED FUNDING FOR THE ALCOHOL AND 

3 TOBACCO TAX AND TRADE BUREAU. 

4 (a) IN GENERAL.—For necessary expenses of car5 rying out section 1111(d) of the Homeland Security Act 

6 of 2002 (6 U.S.C. 531(d)), there are authorized to be ap7 propriated— 

8 (1) for fiscal year 2017, $116,439,000, to re9 main available until September 30, 2018; and 

10 (2) for fiscal year 2018, $119,081,000, to re11 main available until September 30, 2019. 

12 (b) AVAILABILITY OF FUNDS.—Of the amounts au13 thorized to be appropriated under subsection (a), for each 

14 of fiscal years 2017 and 2018— 

15 (1) $5,000,000 shall be for the costs of accel16 erating the processing of formula and label applica17 tions; 

18 (2) $5,000,000 shall be for the costs of pro19 grams to enforce trade practice violations of the 

20 Federal Alcohol Administration Act (27 U.S.C. 201 

21 et seq.); and 

22 (3) $5,000,000 shall be for the purpose of car23 rying out the provisions of this Act and the amend24 ments made by this Act, including accelerating the 


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1 processing of permit applications for non-industrial 

2 alcohol production and distribution. 

Æ 


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