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Katherine F. Froelicher focuses her practice on complex civil litigation and regulatory issues in the alcohol beverage industry. Katherine concentrates on e-discovery and data management issues relative to white-collar criminal defense, contract disputes and corporate compliance. She has completed extensive training on the proper utilization of litigation technology and is recognized as a Relativity Review Specialist by kCura, developers of Relativity. In addition, Katherine counsels clients on federal and state requirements relating to the distribution and sale of alcohol beverages. Read Katherine Froelicher's full bio.

Alcohol and Tobacco Tax and Trade Bureau (TTB) recently began testing a new version of its Permits Online system. The new interface aims to provide several big improvements for users. Among them:

  1. Currently certain types of amendments must be filed individually, forcing industry members to wait for approval of their first amendment to submit their second. The new system should allow for most types of amendments to be bundled together into a single submission thereby reducing wait times;
  1. Personal Questionnaires, which are currently filed separately from a permit, will be filed under the same interface as an amendment to add new personnel; and
  1. Users can enter company-wide changes once and then populate to all permits held by a company.

TTB has not yet released a timeframe for these changes.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recently notified holders of permits that were originally filed in paper of plans to move all permits to the Permits Online (PONL) system this fall. This could lead to substantial delays due to the volume of permits included.  Industry members who wish to submit requests ahead of that time can send their information (EIN, Permit and Registry Numbers) to Permits.Online@ttb.gov and enter Permits Online Data Load in the subject line of the email. Filing amendments electronically has historically been significantly faster using TTB’s PONL system.

On January 4, 2017 TTB published in the Federal Register a temporary rule, T.D. TTB–146, modifying the tax filing timeframe for taxpayers who fall below a certain monetary threshold and removing the bond requirements for certain eligible taxpayers who pay taxes below certain maximum amounts on distilled spirits, wine and beer. See 82 Fed. Reg. 1108 (Jan. 4, 2017). Congress mandated these changes when it enacted the PATH Act in December 2015, and the changes became effective on January 1, 2017. The temporary rule involves two primary changes:

  1. Taxpayers who do not reasonably expect to be liable for more than $1,000 in alcohol excise taxes (for distilled spirits, wine and beer) in the calendar year and were not liable for more than $1,000 in the prior year can pay their taxes annually rather than quarterly or semi-monthly. If a taxpayer has multiple locations, the $1,000 threshold applies to the combined total. A taxpayer must select the return period on its return.
  2. Taxpayers who do not reasonably expect to be liable for more than $50,000 in alcohol excise taxes (for distilled spirits, wine and beer) in the calendar year and were not liable for more than $50,000 in the prior year are exempt from filing bonds to cover operations or withdrawals. In order to take advantage of this exemption, the taxpayer must notify TTB of its eligibility and receive TTB approval. New applicants will do this during the initial application process and existing taxpayers can do so through an amendment to their registration or brewer’s notice. Ironically, the bond exemption does not apply to taxpayers that conduct operations or withdrawals of wine or spirits for industrial (as opposed to beverage) use.

TTB has issued additional guidance on the PATH Act’s impact in Industry Circular 2016–2 (Dec. 30, 2016).

The craft distilling movement is growing rapidly. Indeed, the tor­rid pace of new distillery openings and the boundless enthusiasm of new entrants seem strangely reminiscent of craft brewing (then “microbrewing”) in the late 1980s and early 1990s.  Craft dis­tillers even have a simmering product in­tegrity issue (the use of purchased neutral spirits) that splits the new industry like contract brewing divided craft brewers 20 years ago.  There are, no doubt, signifi­cant differences, but craft distilling today seems poised for a period of growth like the one craft brewers have been (mostly) enjoying for the past 25 years.  Not surprisingly, then, a growing num­ber of craft brewers have followed the path of Anchor Brewing (or should I say Anchor Distilling) and expanded their offerings to include distilled spirits.  But as brewers quickly discover, there are numerous legal, regulatory, and tax differences between these related, but distinct, businesses.  While a full exploration of those differences could fill a rather thick book, this article briefly highlights the most important.

This article was originally published in the March/April 2014 issue of The New Brewer.

Facebook and similar types of social media have become increasingly popular as a promotional tool for craft brewers.  Ease of setup, simplified maintenance, the lure of almost immediate ex­posure to the general public and the ability to reach targeted audiences all make social media extremely attractive. Craft brewers use social media to introduce new products, generate interest or attendance at an event or solicit feedback on proposed new beers, among many other uses.  Brewers should bear in mind, however, that social media is not without regulation.

This article was originally published in the January/February 2014 issue of The New Brewer.

On June 5, 2014 the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued TTB Ruling 2014-4, exempting from TTB’s formula  and pre-import approval (PIA) submission requirements beer made with dozens ingredients as well as beer subjected to wood aging processes.  TTB now finds these ingredients and processes to be traditionally used in the production of beer.  The Ruling stems from a Brewer’s Association Petition filed with TTB in 2006 with the assistance of McDermott Will & Emery.  As the Ruling explains, TTB initially rejected the petition, but with continued industry interest and additional fact-finding the TTB has reversed its position.  The Ruling includes an attached list of exempted ingredients and processes, as well as examples of acceptable label designations.

Materials that brewers (including for imported or PIA beer) can now use without the need for a formula include:

  • Fruits:  Apples, apricots, blackberries, blueberries, cherries, cranberries, juniper berries, lemons, oranges, peaches, pumpkins, raspberries and strawberries.
  • Spices:  Allspice, anise, pepper/peppercorns, cardamom, cinnamon, clove, cocoa (powder or nibs), coriander, ginger, nutmeg, orange or lemon peel or zest, star anise and vanilla (whole bean).
  • Other Ingredients:  Brown Sugar, candy (candi sugar), chili peppers, chocolate, coffee (beans or grounds), honey, maple sugar/syrup, molasses/blackstrap molasses and lactose.
  • Wood Aging:  Allows aging beer with plain barrels, woodchips, spirals or staves, as well as those previously used in the production or storage of wine or distilled spirits.

Ingredients

TTB determined that ingredients including honey, certain fruits, certain spices and certain food ingredients are part of the traditional beer making process.  Industry members remain responsible for ensuring that all ingredients are suitable for food consumption in compliance with applicable Food and Drug Administration regulations and standards.  TTB notes that when using brown sugar, candy (candi) sugar, maple sugar/syrup or molasses/blackstrap molasses in the fermentation of a beer, the beer label is not required to refer to these ingredients.  Instead, the label may identify it as a “beer,” “ale” and so forth.

Wood Aging

The Ruling finds that the process of aging beers in barrels (or with woodchips, staves or spirals from those barrels) that were used previously in the production or storage of wine or distilled spirits is a traditional process.  This finding does not apply to the use of woodchips soaked or infused with wine or spirits for the sole purpose of making beer.  Moreover, brewers must ensure that the use of previously-used barrels or chips will not add any “discernible quantityof wine or distilled spirits to the beer.  Labels do not need to state that the beer was aged in these types of containers.

Labeling

TTB determined that the use of the ingredients listed in the Ruling will no longer require a statement of composition on the label that distinguishes between the exempt ingredients added before or during fermentation and those added after.  A brewer or importer now has the flexibility to label the products in accordance with the trade understanding, and the precise wording is left up to the brewer.  The designation must include the base product (beer, ale, etc.) and enough information to make it clear the product contains at least one of the exempted ingredients.  A label can accomplish this by naming the ingredient that best identifies the product or the category (for example, “blackberry ale” or “fruit ale”).  Previously allowed statements such as “ale with natural flavors” remain in compliance, as does the continued use of fanciful names.  The TTB Ruling includes a list of adequate and inadequate designations.

Existing COLAs 

The Ruling does not affect the validity of previously issued COLAs bearing statements of composition and a fanciful name according to TTB’s prior policy.  To avoid processing delays, TTB has asked applicants to note in their application that they are requesting approval of a product made with an ingredient or label that is now exempted under the new Ruling.

Existing Formulas

Previously approved formulas remain valid.  TTB will no longer accept or review formulas or PIA for products that no longer require a formula or PIA under the new Ruling.

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This action by TTB is a positive step to reduce the burden on brewers and beer importers.  McDermott is proud of its role in achieving this result.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) announced that starting on April 28, 2014 industry members will no longer be required to submit original paper copies of bond and power of attorney forms with electronic applications.  Recent changes to TTB’s regulations and Permits Online program will allow electronic receipt of these forms and other required documentation within the Permits Online system.  TTB hopes that this change will not only encourage industry members to take full advantage of the Permits Online system, but also improve application turnaround times as there will no longer be a delay between submission and TTB’s receipt of the paper forms.  Access TTB’s Permits Online Customer Support.