Today, TTB published additional Tax Act guidance on its website. Three new clarifications address the interaction of the new Tax Act rates/credits with the wine and flavor credits available under 26 U.S.C. § 5010. The clarifications are:

  1. TTB re-confirms that the 5010 credit applies to spirits subject to the Tax Act’s reduced rates, but the 5010 credit cannot reduce the effective rate of tax on any spirit to below zero.
  2. TTB indicates that the effective rate of tax on products receiving 5010 flavor credit will vary, depending on the applicable Tax Act rate applied to the finished product.
  3. The wine base rates, before any reduction through Tax Act credit allowances, are to be used when calculating the wine content credit applied to a spirit under Section 5010.

On Friday, March 2, 2018, Alcohol and Tobacco Tax and Trade Bureau (TTB) issued its next round of guidance concerning the alcohol excise tax provisions of the recently enacted tax law (Tax Act). TTB has not yet addressed some of the biggest ambiguities contained in the Tax Act, such as (i) how foreign producers can assign excise tax credits to US importers and (ii) how the “Single Taxpayer Rule” will work. Nevertheless, TTB continues to make incremental progress in interpreting the Tax Act.

The March 2 guidance features the following:

  1. A new TTB Industry Circular, No. 2018-1 (March 2, 2018), announces the creation of a temporary “alternate procedure” (aka, variance) allowing wine producers to tax determine and tax pay wine of the winery’s own production stored untaxpaid at another bonded wine cellar as if the wine were removed from the producing winery’s bonded premises. Prior law allowed wineries eligible for tax credits under the small winery tax provisions to transfer their credits to another bonded winery. So, for example, an eligible small winery could transfer bulk wine in bond to a larger bonded winery for bottling without losing the tax credits. The new tax law does not contain a similar transfer provision, leading to the prospect of small wineries losing their tax credits because they transferred the wine to a bonded winery that already used up its tax credits available under the Tax Act. The alternate procedure permits a winery to tax pay the wine as if it were removed from the producing winery’s premises, allowing it to take the tax credit. The temporary alternate procedure authorized by Industry Circular 2018-1 expires on June 30, 2018.
  2. Beer, wine and spirits removed from a brewery, winery or distillery but received in bond from elsewhere can benefit from the Tax Act’s reduced rates and/or tax credits only if the taxpaying brewery, winery or distillery “produced,” “distilled” and/or “processed” the beer, wine or spirits in question. Exactly what processing qualifies the taxpaying facility for the reduced rate or tax credits will depend on specific facts and the commodity at issue.
  3. TTB further qualifies the produced/distilled/processed requirement by indicating that any production process should be made “in good faith in the ordinary course of production” and not done for purposes of obtaining a tax advantage.

Please let us know if you have any questions about these developments.

Earlier this week the Trump Administration presented its Fiscal Year 2019 Budget Proposal. While many portions of a president’s proposed budget do not get enacted, such proposals provide insight into the thinking of the administration.

With respect to the alcohol beverage industry, the budget proposal would transfer to the Alcohol and Tobacco Tax and Trade Bureau the remaining (criminal) authority the old Bureau of Alcohol, Tobacco & Firearms (ATF) has over alcohol beverages, stating:

ATF would transfer the entirety of its alcohol and tobacco regulatory and enforcement responsibilities to the Alcohol and Tobacco Tax and Trade Bureau (TTB) in the Department of the Treasury. This transfer would enable the ATF to hone its focus on activities that protect U.S. communities from violent criminals and criminal organizations, while consolidating duplicative alcohol and tobacco enforcement mechanisms within the TTB.

We suspect TTB would welcome an expansion of its authority to include criminal matters involving alcohol (e.g., diversion a/k/a “bootlegging”).

Two sections of Craft Beverage Modernization and Tax Reform Act (CBMTRA) that were dropped from the 2017 federal tax reform law were subsequently added to the Bipartisan Budget Act of 2018, signed into law by President Trump on February 9, 2018.

The new law mandates a temporary (two year) change in tax recordkeeping requirements for domestic breweries to eliminate duplicate reports and accounting obligations for breweries that have pub and sampling areas. The intent of the new law is to allow brewers to keep one set of books covering (a) beer removed from brewery for sale for distribution to retailers and (b) beer sold or provided for sampling to consumers at a brewery. Existing regulations and policies led to unnecessary complexity in accounting for brewers and for auditors from the Alcohol and Tobacco Tax and Trade Bureau (TTB). While the recordkeeping changes are required for calendar years 2018 and 2019, TTB may be able to make changes in regulations and policies that will provide permanent relief from unnecessary administrative burdens. Continue Reading 2018 Federal Budget Legislation Provides Breweries with Administrative Relief and Acknowledges 21st Amendment

The Food and Drug Administration (FDA) recently issued a draft guidance on the agency’s voluntary recall process and announced the agency’s intention to notify the public faster when a product is recalled. The guidance aims to assist and provide recommendations to industry and FDA staff regarding the use, content and circumstances for issuance of public warnings and public notifications for firm‑initiated or FDA‑requested recalls. In addition, the guidance discusses what information to include in a public warning, as well as the parties responsible for issuing it. Notably, the draft guidance does not specifically address recalls of alcohol beverage products regulated by the Federal Alcohol Administration (FAA) Act or the primary role of the Alcohol and Tobacco Tax and Trade Bureau (TTB) in seeking and monitoring recalls of such beverages. Comments on the draft guidance are due by March 20, 2018. Continue Reading FDA Releases Draft Guidance on Public Warnings and Notifications of Recalls

Last week in its regular newsletter, Alcohol and Tobacco Tax and Trade Bureau (TTB) announced updates to the Fall edition of the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda). Like other federal agencies, TTB uses the Regulatory Agenda to report on its current rulemaking projects.

In the updated agenda, a few new items have been added, and many expected publication dates of Notices of Proposed Rulemaking (NPRMs), Advanced Notices of Proposed Rulemaking (ANPRMs) and Final Rules have changed. As always, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda. Continue Reading TTB Updates to the Semi-Annual Regulatory Agenda

This post does not constitute tax advice. It summarizes changes in alcohol beverage excise tax laws to assist industry members in planning to implement the changes. Excise tax calculations and liability must be determined for each taxpayer based on numerous variables.

The new tax law formerly referred to as the Tax Cuts and Jobs Act of 2017, provides a temporary reduction in alcohol beverage excise taxes for US brewers, winemakers, distillers and beverage importers. Temporary tax relief is available for beer, wine and spirits removed from a US manufacturing facility or released from Custom’s custody after January 1, 2018, and prior to December 31, 2019. Several provisions of the new law will require the Alcohol and Tobacco Tax and Trade Bureau (TTB) to quickly promulgate new regulations. Continue Reading Excise Tax Relief for Breweries, Wineries and Distilleries

In the past three years, TTB has approved an increasing number of certificate of label approvals (“COLA”) for hemp-flavored vodka, from Mill Six’s hemp, white tea and ginger flavored vodka to Olde Imperial Mystic’s hemp infused vodka. Distillers have designed labels with green smoke-like images and psychedelic sixties-style lettering to hint at their cultural connection to marijuana. As more states have legalized recreational cannabis, distillers have been thinking more ambitiously about combining their distilling business with one or more aspects of the emerging marijuana business.

Read the full article.

Originally published in Artisan Spirit: Winter 2017.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) has confirmed that compliance with the temporary rule implementing the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) (T.D. TTB-147), which changes the eligibility criteria for the “hard cider” tax rate, will be extended by one year. The new compliance deadline will be January 1, 2019. Additionally, the comment period for the temporary rule will be reopened. The file will be available for public view beginning Monday, December 4, 2017, and will be announced in the Federal Register on Tuesday, December 5, 2017.