OPERATIONS OF PRODUCTION FACILITIES AT DISTILLED
SPIRITS PLANTS ON A SEVEN-DAY BASIS
Proprietors of distilled spirits plants,
and others concerned:
Purpose. The purpose of this industry circular is
to acquaint you with the provisions of existing regulations
covering the operations of distilled spirits plants, and to
furnish guidelines for operating the production facilities
during the period restricted by the provisions of
26 CFR 220.778.
Background. 26 CFR 220.778, as it applies to spirits
distilled and withdrawn at 190 degrees of proof or more,
by the proprietor of a distilled spirits plant qualified
to produce spirits for industrial purposes, is not applicable
under Subpart Q of Part 170, since it is inconsistent with
the purpose and intent of Public Law 85-859. Such
inapplicability extends only to spirits distilled at 190
degrees or more of proof and does not apply to the production
of any other spirits which could not have been produced during
the restricted hours under law and 26 CFR 220.778, in effect
on June 30, 1959. It is the intent of Public Law 85-859
to eliminate artificial statutory distinctions between
"alcohol" and "neutral spirits."
Operations under 26 CFR Part 220. Production facilities
may be operated seven days a week under Part 220 for the
production of neutral spirits (distilled at 190 degrees or
more of proof), provided you hold an industrial use permit
under Section 5171(b), IRC, and the necessary basic permit
under the F.A.A. Act. No spirits other than spirits of
190 degrees or more of proof may, of course, be produced
during the period restricted by 26 CFR 220.778.
Operations Alternately under 26 CFR Parts 182 and
220. If you desire to operate production facilities under
Parts 182 and 220, you should first file with the assistant
regional commissioner a Form 2607 giving notice of intent
to operate alternately under those regulations. After
approval of the Form 2607, actual alternations will be made
pursuant to Form 1696, filed with and approved by the
internal revenue officer at the distilled spirits plant.
While operating under Part 182, reports of gauge
should be made on Form 1440, records kept and monthly
reports submitted on Form 1442. Spirits finished and
deposited in receiving tanks during such periods must be
designated as alcohol.
While operating the plant under Part 220, reports of
gauge would be made on Form 1520, records kept as provided
in 26 CFR 220.755 220.756, and monthly reports submitted
on Form 1598. Spirits finished during such periods must
be designated as provided in 26 CFR 220.548 220.555.
It will be necessary to determine the quantities of
distilling materials and unfinished spirits on hand at
the time of alternation so that such quantities may be
reported on Forms 1442 and 1598.
Regulations in 26 CFR 201.656 provide that any spirits
distilled at 190 degrees of proof or more, whether or not
subsequently reduced, may be mingled in bonded warehouses.
As the definition of "spirits" in Part 201 includes both
alcohol and neutral spirits, alcohol distilled at or above
190 degrees of proof and neutral spirits (which must be
distilled at 190 degrees of proof or more) may be mingled
in tanks in the bonded storage facilities of a distilled
spirits plant; the mingled spirits may in any case be
designated as alcohol; and they may be designated as
neutral spirits if all components of the mixture were
produced from commodities eligible for use under 26 CFR 220.
While no specified quantities are prescribed for such mingling,
there must be under the statute an actual mingling of such
spirits, and token mingling is not permitted under this
procedure. Mingled spirits may be further mingled under
the same procedure.
Where alcohol and neutral spirits are to be mingled,
the proprietor shall make application to the internal revenue
officer on Form 2323, modified as necessary. On completion
of the mingling, the warehouse records will be adjusted by
debiting and crediting the appropriate accounts.
Inquiries. Inquiries regarding this industry circular
should refer to its number and be addressed to your
assistant regional commissioner (alcohol and tobacco tax).
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division
IRS D. C. 51551