Craft Beverage Modernization and Tax Reform Act of 2015

Bill: 114-s-1562
Sponsor: full_name: Sen. Wyden, Ron [D-OR]
Introduced: 2015-06-11
Policy area: Taxation
Subjects: Administrative law and regulatory procedures

Alcoholic beverages

Appropriations

Department of the Treasury

Drug, alcohol, tobacco use

Executive agency funding and structure

Fruit and vegetables

Sales and excise taxes

Tax administration and collection, taxpayers
Latest action: action_date: 2015-06-11
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2015-06-11
action_desc: Introduced in Senate
text: <p><strong>Craft Beverage Modernization and Tax Reform Act of 2015</strong></p> <p>Amends the Internal Revenue Code to: </p> <ul> <li>allow taxpayers who are liable for not more than $50,000 per year in excise taxes on distilled spirits, wine, or beer to file and pay such taxes quarterly without the requirement of posting a bond covering the operations and withdrawals of such distilled spirits, wines, or beer; </li> <li>allow such taxpayers who reasonably expect to have a tax liability of not more than $1,000 per year and who were liable for not more than $1,000 in taxes in the preceding calendar year to file and pay such taxes annually rather than quarterly; </li> <li>exclude the aging period from the production period for beer, wine, or distilled spirits for purposes of determining whether a taxpayer can expense, rather than capitalize, interest costs paid or incurred during the production period; </li> <li>reduce excise tax rates on beer, wine, and distilled spirits produced in the United States; </li> <li>permit the transfer of beer between bonded facilities without payment of tax; </li> <li>modify the definition of "hard cider" for excise tax purposes; and </li> <li>exempt home distillery establishments that produce distilled spirits solely for personal or family use from excise tax and bonding requirements. </li></ul> <p>Directs the Department of the Treasury to amend applicable Treasury regulations with respect to the use of wholesome products suitable for human consumption in the production of fermented beverages. </p> <p>Amends the Balanced Budget and Emergency Deficit Control Act of 1985 to establish funding levels in FY2016-FY2021 for the enforcement and compliance activities of the Alcohol and Tobacco Tax and Trade Bureau. </p>

tv_txt: II 114th CONGRESS 1st Session S. 1562 IN THE SENATE OF THE UNITED STATES June 11, 2015 Mr. Wyden 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. 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 2015 . (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—Bonding and capitalization requirements Sec. 101. Removal of bond requirements and extending filing periods for certain taxpayers with limited excise tax liability. Sec. 102. 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—Hard Cider Sec. 301. Modification of definition of hard cider. TITLE IV—Wine Sec. 401. Reduced rate of excise tax on wine produced domestically by certain qualifying producers. Sec. 402. Adjustment of alcohol content level for application of excise tax rates. TITLE V—Distilled Spirits Sec. 501. Reduced rate of excise tax on certain distilled spirits. Sec. 502. Exemption of home distillery establishments from certain taxation and bonding requirements. TITLE VI—Program integrity and excise tax administration Sec. 601. Program Integrity Cap Adjustment for the Alcohol and Tobacco Tax and Trade Bureau. Sec. 602. Increase information sharing to administer excise taxes. (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. I Bonding and capitalization requirements 101. Removal of bond requirements and extending filing periods for certain taxpayers with limited excise tax liability (a) Filing requirements Paragraph (4) of section 5061(d) of the Internal Revenue Code of 1986 is amended— (1) in subparagraph (A)— (A) by striking In the case of and inserting the following: (i) More than $1,000 and not more than $50,000 in taxes Except as provided in clause (ii), in the case of , (B) by striking under bond for deferred payment , and (C) by adding at the end the following new clause: (ii) Not more than $1,000 in taxes In the case of any taxpayer who reasonably expects to be liable for not more than $1,000 in taxes imposed with respect to distilled spirits, wines, and beer under subparts A, C, and D and section 7652 for the calendar year and who was liable for not more than $1,000 in such taxes in the preceding calendar year, the last day for the payment of tax on withdrawals, removals, and entries (and articles brought into the United States from Puerto Rico) shall be the 14th day after the last day of the calendar year. , and (2) in subparagraph (B)— (A) by striking Subparagraph (A) and inserting the following: (i) Exceeds $50,000 limit Subparagraph (A)(i) , and (B) by adding at the end the following new clause: (ii) Exceeds $1,000 limit Subparagraph (A)(ii) shall not apply to any taxpayer for any portion of the calendar year following the first date on which the aggregate amount of tax due under subparts A, C, and D and section 7652 from such taxpayer during such calendar year exceeds $1,000, and any tax under such subparts which has not been paid on such date shall be due on the 14th day after the last day of the calendar quarter in which such date occurs. . (b) Bond requirements (1) In general Section 5551 of such Code is amended— (A) in subsection (a), by striking No individual and inserting Except as provided under subsection (d), no individual , and (B) by adding at the end the following new subsection: (d) Removal of bond requirements (1) In general During any period to which subparagraph (A) of section 5061(d)(4) applies to a taxpayer (determined after application of subparagraph (B) thereof), such taxpayer shall not be required to furnish any bond covering operations or withdrawals of distilled spirits or wines for nonindustrial use or of beer. (2) Satisfaction of bond requirements Any taxpayer for any period described in paragraph (1) shall be treated as if sufficient bond has been furnished for purposes of covering operations and withdrawals of distilled spirits or wines for nonindustrial use or of beer for purposes of any requirements relating to bonds under this chapter. . (2) Conforming amendments (A) Bonds for distilled spirits plants Section 5173(a) of such Code is amended— (i) in paragraph (1), by striking No person and inserting Except as provided under section 5551(d), no person , and (ii) in paragraph (2), by striking No distilled spirits and inserting Except as provided under section 5551(d), no distilled spirits . (B) Bonded wine cellars Section 5351 of such Code is amended— (i) by striking Any person and inserting the following: (a) In general Any person , (ii) by inserting , except as provided under section 5551(d), before file bond , (iii) by striking Such premises shall and all that follows through the period, and (iv) by adding at the end the following new subsection: (b) Definitions For purposes of this chapter— (1) Bonded wine cellar The term bonded wine cellar means any premises described in subsection (a), including any such premises established by a taxpayer described in section 5551(d). (2) Bonded winery At the discretion of the Secretary, any bonded wine cellar that engages in production operations may be designated as a bonded winery . . (C) Bonds for breweries Section 5401 of such Code is amended by adding at the end the following new subsection: (c) Exception from bond requirements for certain breweries Subsection (b) shall not apply to any taxpayer for any period described in section 5551(d). . (c) Effective date The amendments made by this section shall take effect on the date that is 1 year after the date of the enactment of this Act. 102. 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 finished beer, wine, and distilled spirits For purposes of this section, 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 production periods beginning after December 31, 2016. II Beer 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 which are removed during the calendar year for consumption or sale by a brewer or imported into the United States in such year by an importer, 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) Conforming amendments Section 5051(a)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting the 6,000,000 barrel quantity specified in paragraph (1)(A)(i) and before the 2,000,000 barrel quantity . (d) Effective date The amendments made by this section shall apply to beer removed during calendar years beginning after December 31, 2016. 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. 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. 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: 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. III Hard Cider 301. Modification of definition of hard cider (a) In general Section 5041 of the Internal Revenue Code of 1986 is amended— (1) in paragraph (6) of subsection (b), by striking which is a still wine and all that follows through alcohol by volume , and (2) by adding at the end the following new subsection: (g) Hard cider For purposes of subsection (b)(6), the term hard cider means a wine— (1) 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, (2) which is derived primarily from— (A) apples, apple juice concentrate, pears, or pear juice concentrate, and (B) water, (3) which contains no fruit product or fruit flavoring other than apple or pear, and (4) which contains at least one-half of 1 percent and less than 8.5 percent alcohol by volume. . (b) Effective date The amendments made by this section shall apply to hard cider removed during calendar years beginning after December 31, 2016. IV Wine 401. Reduced rate of excise tax on wine produced domestically by certain qualifying producers (a) In general Section 5041(c) of the Internal Revenue Code of 1986 is amended— (1) by amending paragraph (1) to read as follows: (1) Allowance of credit (A) In general Except as provided in paragraph (2), 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, on wine gallons which are removed during such year for consumption or sale and which have been produced at qualified facilities in the United States. (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 , and (ii) in clause (ii) of such subparagraph, by substituting 5.6 cents for 90 cents . (C) Denial of credit for champagne and other sparkling wines This paragraph shall not apply to wines described in subsection (b)(4). , (2) in paragraph (2)— (A) by striking paragraph (1) and inserting clause (ii) of paragraph (1)(A) , and (B) by striking 1,000 wine gallons of wine produced in excess of 150,000 wine gallons and inserting 10,000 wine gallons of wine produced in excess of 1,000,000 wine gallons , and (3) in paragraph (7)— (A) in subparagraph (A), by striking this subsection from benefiting any person who produces more than 250,000 wine gallons and inserting paragraph (1)(A)(ii) from benefitting any person who produces more than 2,000,000 wine gallons , and (B) in subparagraph (B), by striking 150,000 wine gallons and inserting 1,000,000 wine gallons . (b) Effective date The amendments made by this section shall apply to wine removed during calendar years beginning after December 31, 2016. 402. 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 14.25 percent . (b) Effective date The amendments made by this section shall apply to wine removed during calendar years beginning after December 31, 2016. V Distilled Spirits 501. 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) on the first 100,000 of proof gallons of distilled spirits which are removed in the calendar year and which have been distilled or processed by such operation at a qualified facility in the United States shall be $2.70 per proof gallon. (2) Controlled groups (A) In general In the case of a controlled group, the 100,000 proof gallon quantity specified in paragraph (1) shall be applied to the controlled group. (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— (i) more than 50 percent shall be substituted for at least 80 percent each place it appears in such subsection, and (ii) such determination shall be made without regard to section 1563(b)(2)(C). (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, any distilled spirits operation which produces 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 paragraph. . (b) Conforming amendment Section 7652(f)(2) of the Internal Revenue Code of 1986 is amended by striking section 5001(a) and inserting sections 5001(a)(1) and 5001(c)(1) . (c) Effective date The amendments made by this section shall apply to distilled spirits removed in calendar years beginning after December 31, 2016. 502. Exemption of home distillery establishments from certain taxation and bonding requirements (a) In general Section 5001 of the Internal Revenue Code of 1986, as amended by section 501, is amended by redesignating subsection (d) as subsection (e), and by inserting after subsection (c) the following new subsection: (d) Exemption for distilled spirits produced at a home distillery establishment Subject to regulations prescribed by the Secretary, the tax imposed by subsection (a) shall not apply to distilled spirits produced at a home distillery establishment (as defined in section 5002(a)(16)). . (b) Definition of home distillery establishment Section 5002(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (16) Home distillery establishment (A) In general The term home distillery establishment means an establishment that— (i) is located in the dwelling house of the owner of such establishment or in any shed, yard, enclosure, or other property connected with such dwelling house, and (ii) produces distilled spirits solely for personal or family use by the owner of such establishment. (B) Personal or family use (i) In general A home distillery establishment shall be treated as producing distilled spirits for personal or family use if— (I) any stills or distilling apparatuses contained in such establishment have a mash capacity of not greater than 15.5 gallons, (II) such establishment produces no more than— (aa) in the case of a household with 1 adult, 24 proof gallons of distilled spirits during the calendar year, or (bb) in the case of a household with 2 or more adults, 48 proof gallons of distilled spirits during the calendar year, and (III) no distilled spirits produced by such establishment are sold to any person, or transferred to any person (for payment or otherwise) for sale by such person. (ii) Adult For purposes of this paragraph, the term adult means an individual who has attained 18 years of age, or the minimum age (if any) established by law applicable in the locality in which the household is situated at which distilled spirits may be sold to individuals, whichever is greater. . (c) Exemption from establishment requirements Section 5171 of the Internal Revenue Code of 1986 is amended— (1) in subsection (a), by striking Except as otherwise provided by law and inserting Except as provided by subsection (e) or any other provision of law , and (2) by redesignating subsection (e) as subsection (f), and by inserting after subsection (d) the following new subsection: (e) Exception for home distillery establishment The requirements of this section shall not apply in the case of a home distillery establishment (as described in section 5002(a)(16)). . (d) Criminal penalties Paragraph (6) of section 5601(a) of the Internal Revenue Code of 1986 is amended by inserting or section 5171(e) after 5178(a)(1)(C) . (e) Limitation on sales for personal or family use Section 5101 of such Code is amended— (1) by redesignating subsection (b) as subsection (c), and (2) by inserting after subsection (a) the following new subsection: (b) Limitation on sales for home distillery establishments The Secretary shall, pursuant to regulations, require that no still, boiler, or other vessel with a mash capacity of greater than 15.5 gallons be sold or transferred to any person who intends to use such still, boiler, or vessel solely as part of a home distillery establishment (as described in section 5002(a)(16)). . (f) Effective date The amendments made by this section shall take effect on the date that is 1 year after the date of the enactment of this Act. VI Program integrity and excise tax administration 601. Program Integrity Cap Adjustment for the Alcohol and Tobacco Tax and Trade Bureau Section 251(b)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985 ( 2 U.S.C. 901(b)(2) ) is amended by adding at the end the following new subparagraphs: (E) Enforcement and Compliance Activities Conducted by the Alcohol and Tobacco Tax and Trade Bureau (i) In general If a bill or joint resolution is enacted making appropriations for a fiscal year to the Alcohol and Tobacco Tax and Trade Bureau of not less than the first amount specified in subclauses (I) through (VI) of clause (ii) for tax activities for that fiscal year, including tax compliance to address the Federal tax gap (taxes owed but not paid), and provides an additional appropriation for tax activities, including tax compliance to address the Federal tax gap, the adjustment shall be the amount of the additional appropriation, except that the adjustment shall not exceed the second amount specified in that subclause. (ii) Amounts specified The amounts specified are— (I) for fiscal year 2016, an appropriation of $101,000,000, and an additional appropriation of $5,000,000; (II) for fiscal year 2017, an appropriation of $103,000,000, and an additional appropriation of $9,000,000; (III) for fiscal year 2018, an appropriation of $106,000,000, and an additional appropriation of $14,000,000; (IV) for fiscal year 2019, an appropriation of $108,000,000, and an additional appropriation of $18,000,000; (V) for fiscal year 2020, an appropriation of $111,000,000, and an additional appropriation of $24,000,000; and (VI) for fiscal year 2021, an appropriation of $113,000,000, and an additional appropriation of $24,000,000. (iii) Definitions As used in this subparagraph— (I) the term additional appropriation for tax activities, including tax compliance to address the Federal tax gap means new and continuing investments in expanding and improving the effectiveness and efficiency of the overall tax enforcement and compliance program of the Alcohol and Tobacco Tax and Trade Bureau and fully funding operational support activities at the Alcohol and Tobacco Tax and Trade Bureau; and (II) the term new and continuing investments includes additional resources for implementing new authorities and for conducting additional examinations and audits. (iv) Appropriation The first amount specified in subclauses (I) through (VI) of clause (ii) is the amount under the heading in an appropriations Act for the Alcohol and Tobacco Tax and Trade Bureau that is specified to pay for the costs of tax activities, including tax compliance to address the Federal tax gap, and to pay for regulatory activities that protect the public. (v) Additional amount The amounts further specified in subclauses (I) through (VI) of clause (ii) are the amounts under the heading in an appropriations act for the Alcohol and Tobacco Tax and Trade Bureau for the amount of the additional appropriation for tax activities, including tax compliance to address the Federal tax gap. (F) Activities that Protect the Public Conducted by the Alcohol and Tobacco Tax and Trade Bureau (i) In general If a bill or joint resolution is enacted making appropriations for a fiscal year to the Alcohol and Tobacco Tax and Trade Bureau of not less than the first amount specified in subclauses (I) through (VI) of subparagraph (E)(ii) for tax activities for that fiscal year, including tax compliance to address the Federal tax gap (taxes owed but not paid), and regulatory activities conducted by the Alcohol and Tobacco Tax and Trade Bureau, and making appropriations in the amount and for the purpose of the adjustment in the second amount specified in subclauses (I) through (VI) of subparagraph (E)(ii), then the further additional adjustment for that fiscal year shall be the further additional appropriation provided in that Act for regulatory activities that protect the public for that fiscal year, but shall not exceed $5,000,000 in additional new budget authority. (ii) Definitions As used in this subparagraph— (I) the term regulatory activities that protect the public means new budget authority for new and continuing investments in expanding and improving programs at the Alcohol and Tobacco Tax and Trade Bureau, such as regulating permitting, labeling, advertising, distribution and trade of alcohol and tobacco products; and (II) the term further additional new budget authority means the amount provided for a fiscal year in excess of the first amount specified in subclauses (I) through (VI) of subparagraph (E)(ii) and the adjustment in the second amount specified in subclauses (I) through (VI) of subparagraph (E)(ii), not to exceed $5,000,000. . 602. Increase information sharing to administer excise taxes (a) In general Section 6103(o) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (3) Taxes imposed by section 4481 Returns and return information with respect to taxes imposed by section 4481 shall be open to inspection by or disclosure to officers and employees of United States Customs and Border Protection of the Department of Homeland Security whose official duties require such inspection or disclosure for purposes of administering such section. . (b) Conforming amendments Paragraph (4) of section 6103(p) of the Internal Revenue Code of 1986 is amended by striking or (o)(1)(A) each place it appears and inserting , (o)(1)(A) or (o)(3) .