II 

109TH CONGRESS 

1ST SESSION S. 646 

To amend the Internal Revenue Code of 1986 to allow distilled spirits wholesalers a credit against income tax for their cost of carrying Federal 

excise taxes prior to the sale of the product bearing the tax. 

IN THE SENATE OF THE UNITED STATES 

MARCH 17, 2005 

Mr. BUNNING (for himself, Mrs. LINCOLN, Mr. LOTT, Mr. BOND, and Mr. 

CHAMBLISS) 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 allow distilled spirits wholesalers a credit against income tax for 

their cost of carrying Federal excise taxes prior to the 

sale of the product bearing the tax. 

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. 

4 This Act may be cited as the ‘‘Domestic Spirits Tax 

5 Equity Act of 2005’’. 
2 

•S 646 IS

1 SEC. 2. INCOME TAX CREDIT FOR DISTILLED SPIRITS 

2 WHOLESALERS AND FOR DISTILLED SPIRITS 

3 IN CONTROL STATE BAILMENT WAREHOUSES 

4 FOR COSTS OF CARRYING FEDERAL EXCISE 

5 TAXES ON BOTTLED DISTILLED SPIRITS. 

6 (a) IN GENERAL.—Subpart A of part I of subchapter 

7 A of chapter 51 of the Internal Revenue Code of 1986 

8 (relating to gallonage and occupational taxes) is amended 

9 by adding at the end the following new section: 

10 ‘‘SEC. 5011. INCOME TAX CREDIT FOR AVERAGE COST OF 

11 CARRYING EXCISE TAX. 

12 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

13 amount of the distilled spirits credit for any taxable year 

14 is the amount equal to the product of— 

15 ‘‘(1) in the case of— 

16 ‘‘(A) any eligible wholesaler— 

17 ‘‘(i) the number of cases of bottled 

18 distilled spirits— 

19 ‘‘(I) which were bottled in the 

20 United States, and 

21 ‘‘(II) which are purchased by 

22 such wholesaler during the taxable 

23 year directly from the bottler of such 

24 spirits, or 

25 ‘‘(B) any person which is subject to section 

26 5005 and which is not an eligible wholesaler, 
3 

•S 646 IS

1 the number of cases of bottled distilled spirits 

2 which are stored in a warehouse operated by, or 

3 on behalf of, a State, or agency or political sub4 division thereof, on which title has not passed 

5 on an unconditional sale basis, and 

6 ‘‘(2) the average tax-financing cost per case for 

7 the most recent calendar year ending before the be8 ginning of such taxable year. 

9 ‘‘(b) ELIGIBLE WHOLESALER.—For purposes of this 

10 section, the term ‘eligible wholesaler’ means any person 

11 which holds a permit under the Federal Alcohol Adminis12 tration Act as a wholesaler of distilled spirits which is not 

13 a State, or agency or political subdivision thereof. 

14 ‘‘(c) AVERAGE TAX-FINANCING COST.— 

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion, the average tax-financing cost per case for any 

17 calendar year is the amount of interest which would 

18 accrue at the deemed financing rate during a 60-day 

19 period on an amount equal to the deemed Federal 

20 excise tax per case. 

21 ‘‘(2) DEEMED FINANCING RATE.—For purposes 

22 of paragraph (1), the deemed financing rate for any 

23 calendar year is the average of the corporate over24 payment rates under paragraph (1) of section 

25 6621(a) (determined without regard to the last sen-
4 

•S 646 IS

1 tence of such paragraph) for calendar quarters of 

2 such year. 

3 ‘‘(3) DEEMED FEDERAL EXCISE TAX PER

4 CASE.—For purposes of paragraph (1), the deemed 

5 Federal excise tax per case is $25.68. 

6 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.— 

7 For purposes of this section— 

8 ‘‘(1) CASE.—The term ‘case’ means 12 80- 

9 proof 750 milliliter bottles. 

10 ‘‘(2) NUMBER OF CASES IN LOT.—The number 

11 of cases in any lot of distilled spirits shall be deter12 mined by dividing the number of liters in such lot 

13 by 9.’’. 

14 (b) CONFORMING AMENDMENTS.— 

15 (1) Subsection (b) of section 38 of the Internal 

16 Revenue Code of 1986 is amended by striking 

17 ‘‘plus’’ at the end of paragraph (18), by striking the 

18 period at the end of paragraph (19) and inserting ‘‘, 

19 plus’’, and by adding at the end the following new 

20 paragraph: 

21 ‘‘(20) the distilled spirits credit determined 

22 under section 5011(a).’’. 

23 (2) The table of sections for subpart A of part 

24 I of subchapter A of chapter 51 of such Code is 
5 

•S 646 IS

1 amended by adding at the end the following new 

2 item: 

‘‘Sec. 5011. Income tax credit for average cost of carrying excise tax.’’. 

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

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

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