I
105TH CONGRESS
1ST SESSION
H. R. 450
To amend the Internal Revenue Code of 1986 to simplify the method of
payment of taxes on distilled spirits.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 20, 1997
Mr. ENSIGN (for himself, Mr. MATSUI, Mr. CRANE, Mr. RIGGS, Mr. NOR-
WOOD, Mr. PICKETT, Mrs. MEEK of Florida, Ms. WOOLSEY, Ms.
DELAURO, and Mr. DEAL of Georgia) introduced the following bill; which
was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to simplify
the method of payment of taxes on distilled spirits.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Distilled Spirits Tax Payment Simplification Act of
1997’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever an amendment or repeal
is expressed in terms of an amendment to, or repeal of,
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a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the In-
ternal Revenue Code of 1986.
SEC. 2. TRANSFER OF DISTILLED SPIRITS BETWEEN BOND-
ED PREMISES.
(a) Section 5212 is amended to read as follows:
‘‘SEC. 5212. TRANSFER OF DISTILLED SPIRITS BETWEEN
BONDED PREMISES.
‘‘Distilled spirits on which the internal revenue tax
has not been paid as authorized by law may, under such
regulations as the Secretary shall prescribe, be transferred
in bond between bonded premises in any approved con-
tainer. For the purposes of this chapter, except in the case
of any transfer from a premise of a bonded dealer, the
removal of distilled spirits for transfer in bond between
bonded premises shall not be construed to be a withdrawal
from bonded premises.’’
(b) The first sentence of section 5232 is amended to
read as follows:
‘‘Distilled spirits imported or brought into the United
States, under such regulations as the Secretary shall pre-
scribe, may be withdrawn from customs custody and
transferred to the bonded premises of a distilled spirits
plant without payment of the internal revenue tax imposed
on such distilled spirits.’’
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SEC. 3. ESTABLISHMENT OF DISTILLED SPIRITS PLANT.
Section 5171 is amended by—
(1) striking from subsection (a) the phrase ‘‘or
processor’’ and inserting therein ‘‘processor, or
bonded dealer’’; and
(2) deleting from subsection (b) the ‘‘or both.’’
and inserting thereafter ‘‘as a bonded dealer, or as
any combination thereof.’’
SEC. 4. DISTILLED SPIRITS PLANTS.
Section 5178(a) is amended by adding the following
new paragraph after paragraph (4) to read as follows:
‘‘(5) BONDED DEALER OPERATIONS.—Any per-
son establishing a distilled spirits plant to conduct
operations as a bonded dealer may, as described in
the application for registration—
‘‘(A) store distilled spirits in any approved
container on the bonded premises of such plant,
and
‘‘(B) under such regulations as the Sec-
retary shall prescribe, store taxpaid distilled
spirits, beer and wine and such other beverages
and items (products) not subject to tax or regu-
lation under this title on such bonded prem-
ises.’’
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SEC. 5. BONDED DEALERS.
(a) Section 5002(a) is amended by inserting after
subsection (a)(15) the following new paragraphs:
‘‘(16) BONDED DEALER.—The term ‘bonded dealer’
means any person who has elected under section 5011 to
be treated as a bonded dealer.
‘‘(17) CONTROL STATE ENTITY.—The term ‘control
State entity’ means a State or a political subdivision of
a State in which only the State or a political subdivision
thereof is allowed under applicable law to perform distilled
spirit operations, or any instrumentality of such a State
or political subdivision.’’
(b) Subpart A of part I of subchapter A of chapter
51 (relating to distilled spirits) is amended by adding at
the end thereof the following new section:
‘‘SEC. 5011. ELECTION TO BE TREATED AS BONDED
DEALER.
‘‘(a) ELECTION.—Any wholesale dealer, or any con-
trol State entity, may elect, at such time and in such man-
ner as the Secretary shall prescribe, to be treated as a
bonded dealer if such wholesale dealer or entity sells bot-
tled distilled spirits exclusively to a wholesale dealer in liq-
uor, to an independent retail dealer subject to the limita-
tion set forth in subsection (b), or to another bonded
dealer.
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‘‘(b) SPECIAL RULES.—(1) Any person, other than
a control State entity, who is a bonded dealer shall not
be considered as selling to an independent retail dealer
if the bonded dealer has a greater than 10 percent owner-
ship interest in, or control of the retail dealer; the retail
dealer has a greater than 10 percent ownership interest
in, or control of the bonded dealer; or where any person
has a greater than 10 percent ownership interest in, or
control of both the bonded and retail dealer. For purposes
of this subparagraph, ownership interest, not limited to
stock ownership, shall be attributed to other persons in
the manner prescribed by section 318.
‘‘(2) In the case of any control State entity, sub-
section (a) shall be applied without regard to the word
‘independent’.
‘‘(c) INVENTORY OWNED AT TIME OF ELECTION.—
Any bottled distilled spirits in the inventory of any person
electing under section 5011 to be treated as a bonded deal-
er shall, to the extent that the Federal excise tax pre-
viously has been determined and paid at the time the elec-
tion becomes effective, not be subject to additional Federal
excise tax on such spirits as a result of the election being
in effect.
‘‘(d) REVOCATION OF ELECTION.—The election made
under this section may be revoked by the bonded dealer
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at any time, but once revoked shall not be made again
without the consent of the Secretary. When the election
is revoked, the bonded dealer shall immediately withdraw
the distilled spirits on determination of tax in accordance
with a tax payment procedure established by the Sec-
retary.
‘‘(e) EQUITABLE TREATMENT OF BONDED DEALERS
USING LIFO INVENTORY.—The Secretary shall provide
such rules as may be necessary to assure that taxpayers
using the last-in first-out method of inventory valuation
do not suffer a recapture of their LIFO reserve by reason
of making the election under section 5011 or by reason
of operating a bonded wine cellar as permitted by section
5351.
‘‘(f) APPROVAL OF APPLICATION.—Any person sub-
mitting an application under section 5171(c) and electing
under this section to be treated as a bonded dealer shall
be entitled to approval of such application to the same ex-
tent they would be entitled to approval of an application
for a basic permit under section 204(a)(2) of title 27 of
the United States Code (the Federal Alcohol Administra-
tion Act) and shall be accorded notice and hearing as de-
scribed in section 204(b) of such title 27.’’
(c) CONFORMING AMENDMENT.—The table of sec-
tions of subpart A of part I of subchapter A of chapter
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51 and the table of contents of subtitle E are amended
by adding at the appropriate places:
‘‘Sec. 5011. Election To Be Treated As Bonded Dealer.’’
SEC. 6. DETERMINATION OF TAX.
Section 5006 is amended by amending the first sen-
tence of subsection (a)(1) to read as follows: ‘‘Except as
otherwise provided in this section, the tax on distilled spir-
its shall be determined when the spirits are transferred
from a distilled spirits plant to a bonded dealer or are
withdrawn from bond.’’
SEC. 7. LOSS OR DESTRUCTION OF DISTILLED SPIRITS.
(a) Subsections (a)(1)(A) and (a)(2) of section 5008
are amended by adding ‘‘bonded dealer,’’ immediately
after ‘‘distilled spirits plant’’.
(b) Subsection (c)(1) of section 5008 is amended by
striking the words ‘‘of a distilled spirits plant’’.
(c) Subsection (c)(2) of section 5008 is amended by
striking the words ‘‘distilled spirits plant’’ and inserting
in lieu thereof the words ‘‘bonded premises’’.
SEC. 8. TIME FOR COLLECTING TAX ON DISTILLED SPIRITS.
(a) In section 5061(d) redesignate paragraph (5) as
paragraph (6) and insert after paragraph (4) the following
new paragraph:
‘‘(5) ADVANCED PAYMENT OF DISTILLED SPIR-
ITS TAX.—Notwithstanding the preceding provisions
of this subsection, in the case of any tax imposed by
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section 5001 with respect to a bonded dealer who
has an election in effect on September 20 of any
year, any payment of which would, but for this para-
graph, be due in October or November of that year,
shall be made on such September 20. No penalty or
interest shall be imposed for the period from such
September 20 until the due date determined without
regard to this paragraph to the extent that tax due
exceeds the tax which would have been due with re-
spect to distilled spirits in the preceding October and
November had the election under section 5011 been
in effect.’’
(b) Section 5061(e) is amended by inserting in para-
graph (1) the words ‘‘or any bonded dealer,’’ immediately
after ‘‘respectively,’’.
SEC. 9. EXEMPTION FROM OCCUPATIONAL TAX NOT APPLI-
CABLE.
Section 5113(a) is amended by adding immediately
after the last sentence the following new sentence to read
as follows: ‘‘This exemption shall not apply to a proprietor
of a distilled spirits plant whose premises are used for op-
erations of a bonded dealer.’’
SEC. 10. TECHNICAL, CONFORMING AND CLERICAL AMEND-
MENTS.
(a) TECHNICAL AND CONFORMING AMENDMENTS.—
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(1) Section 5003(3) is amended to delete the
term ‘‘certain’’ from the sentence.
(2) Section 5214 is amended by redesignating
subsection (b) as (c) and inserting a new subsection
(b) to read as follows:
‘‘(b) EXCEPTION.—Subsections (a) (1), (2), (3), (5),
(10), (11), and (12) of this section shall not apply to dis-
tilled spirits withdrawn from premises used for operations
as a bonded dealer.’’
(3) Section 5215(a) is amended by inserting a
period after the word ‘‘plant’’ and striking the words
‘‘but only for destruction, denaturation, redistilla-
tion, reconditioning, or rebottling:’’.
(4) Section 5362(b)(5) is amended by adding
the following sentence to read as follows: ‘‘This term
will not apply to premises used for operations as a
bonded dealer.’’.
(5) Section 5551(a) is amended by inserting
after the term ‘‘processor’’ at each place it appears
the phrase ‘‘bonded dealer,’’.
(6) Section 5601(a) (2), (3), (4), (5), and (b)
are amended by inserting ‘‘, bonded dealer’’ imme-
diately before the word ‘‘processor’’ at each place it
appears.
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(7) Section 5602 is amended by inserting
‘‘, warehouseman, processor, or bonded dealer’’ im-
mediately after the word ‘‘distiller’’.
(8) Section 5115, 5180, and 5681 are repealed.
(b) CLERICAL AMENDMENTS.—
(1) The table of sections for part II of sub-
chapter A of chapter 51 is amended by striking out
the item relating to section 5115.
(2) The table of sections for subchapter B of
chapter 51 is amended by striking out the item re-
lating to section 5180.
(3) The table of sections for part IV of sub-
chapter J of chapter 51 is amended by striking out
the item relating to section 5681.
SEC. 11. REGISTRATION FEES.
(a) GENERAL RULE.—The Director of the Bureau of
Alcohol, Tobacco, and Firearms shall, in accordance with
this section, assess and collect registration fees solely to
defray a portion of any net increased costs of regulatory
activities of the Government resulting from enactment of
this Act.
(b) PERSONS SUBJECT TO FEE.—Fees shall be paid
in a manner prescribed by the Director by the bonded
dealer.
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(c) AMOUNT AND TIMING OF FEES.—Fees shall be
paid annually and shall not exceed $1,000 per bonded
premise.
(d) DEPOSIT AND CREDIT.—The moneys received
during any fiscal year from fees described in subsection
(a) shall be deposited as an offsetting collection in, and
credited to, the account providing appropriations to con-
duct the regulatory activities of the Government resulting
from enactment of this Act.
(e) LIMITATION.—The aggregate amount of fees as-
sessed and collected under this section may not exceed in
any fiscal year the aggregate amount of any net increased
costs of regulatory activity referred to in subsection (a).
SEC. 12. COOPERATIVE AGREEMENTS.
(a) STUDY.—The Secretary of the Treasury shall
study and report to Congress concerning possible adminis-
trative efficiencies which could inure to the benefit of the
Federal Government of cooperative agreements with
States regarding the collection of distilled spirits excise
taxes. Such study shall include, but not be limited to, pos-
sible benefits of the standardization of forms and collec-
tion procedures and shall be submitted 1 year after the
date of the enactment of this Act.
(b) COOPERATIVE AGREEMENT.—The Secretary of
the Treasury is authorized to enter into such cooperative
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agreements with States which the Secretary deems will in-
crease the efficient collection of distilled spirits excise
taxes.
SEC. 13. EFFECTIVE DATE.
(a) Except as provided in subsection (b) the provi-
sions of this Act shall take effect one hundred and twenty
days following enactment.
(b)(1) The amendments made by section 3 of this Act
shall take effect on the date of enactment of this Act, and
(2) Each wholesale dealer who is required to file an
application for registration under section 5171(c) whose
operations are required to be covered by a basic permit
under the Federal Alcohol Administration Act (27 U.S.C.
203 and 204) and who has received such basic permits
as an importer, wholesaler, or as both, and has obtained
a bond required under this subchapter before the close of
the fourth month following enactment of this Act, shall
be qualified to operate bonded premises until such time
as the Secretary takes final action on the application. Any
control State entity that has obtained a bond required
under this subchapter shall be qualified to operate bonded
premises until such time as the Secretary takes final ac-
tion on the application for registration under section
5171(c).
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