TRANSITIONAL PROCEDURES TO CONFORM WINERY OPERATIONS AND RECORDS
TO THE PROVISIONS OF PUBLIC LAW 89-44, EXCISE TAX REDUCTION ACT
OF 1965, EFFECTIVE JANUARY 1, 1966
Proprietors of bonded wine cellars
and others concerned:
Purpose. This circular is issued to inform you of the provisions of a
revenue procedure, soon to be published in the Internal Revenue Bulletin,
which will provide transitional procedures necessary to conform winery
operations and records to the provisions of Public Law 89-44, effective
January 1, 1966.
Substance of the Revenue Procedure. The revenue procedure will prescribe
transitional procedures to be followed by proprietors of bonded wine
cellars for terminating recordkeeping requirements under the wine reserve
inventory, for establishing new records of amelioration; and procedures
for completing the sweetening of wine removed from reserve inventory as
of the close of business December 31, 1965. The revenue procedure will
be substantially as follows:
(a) FORM 2054, RECORD OF FERMENTATION. As of the beginning of business
January 1, 1966, each Wine Fermentation Record, Form 2054, shall be closed,
and a new record of amelioration shall be established for each kind of
fruit or berries, including grapes. The balance of wine, column (o),
Form 2054, and the gallons of ameliorating credits, column (y), Form 2054,
in each account, shall be transferred to the new record of amelioration;
an appropriate explanatory notation, such as "Received from Form 2054,"
shall be made in the new record of amelioration. No particular form is
prescribed for the record of amelioration, but regulations, 26 CFR
Part 240, will require that such record reflect all quantities in gallons
and contain all data necessary to enable internal revenue officers to
readily ascertain that the limitations on amelioration have been complied
with. Each separate record shall include data as follows:
(1) The quantity of juice (exclusive of pulp) deposited
(2) For juice from fruit or berries, other than grapes, the
maximum quantity of pure dry sugar or liquid sugar authorized for adjustment of the total solids content.
(3) The maximum quantity of ameliorating material to
which the juice is entitled.
(4) The quantity of ameliorating material used, including pure dry sugar or liquid sugar used for adjustment of total solids content.
(5) The quantity of ameliorating material authorized but
not yet used.
At the time the Wine Fermentation Record, Form 2054, is closed and the
balance of wine included in such record is transferred to the new record
of amelioration, the quantity of any such wine held in intermediate
storage shall, if the fermentation thereof has been completed, be accurately determined and reported in column (c), Form 2056, Record of Still
Wine, as wine produced; wine held in intermediate storage on December 31,
1965, shall, if the fermentation thereof has not been completed, become
wine in fermenters, on January 1, 1966.
(b) FORM 2055, WINE RESERVE INVENTORY RECORD. As of the close of business December 31, 1965, each Wine Reserve Inventory Record, Form 2055,
shall be closed by making a final entry in column (f) showing that all
wine is, at that time, withdrawn from the reserve inventory. The quantity of wine so withdrawn shall be reported in column (g) of the appropriate Record of Still Wine, Form 2056, as wine received from reserve
inventory. Also, the quantity of wine so withdrawn from reserve inventory,
and the quantity of wine received from reserve inventory, shall be reported
in the usual manner in Part I, Section A, of the Monthly Report of Wine
Cellar Operation, Form 702, for December 1965.
(c) FORM 2056, RECORD OF STILL WINE. The quantity of wine received from
reserve inventory shall be entered in column (g) of the appropriate
Form 2056, as of the close of business December 31, 1965. Also, the
quantity of completely fermented wine which was held in intermediate
storage on December 31, 1965, shall, as of the beginning of business
January 1, 1966, be entered in column (c), Form 2056, as wine produced by
Commencing January 1, 1966, all sweetening of wine shall be recorded on
Form 2056, in columns (d) and (o); and the kind of sweetening material
used (if pure dry sugar or liquid sugar is used) shall be entered in
column (b), except that where a particular lot of wine is sweetened with
both sugar (dry or liquid) and juice (concentrated or unconcentrated), a
separate entry therefor shall be made on Form 2056, and the quantity of
sugar and type of juice used for sweetening shall be shown in column (b).
Commencing January 1, 1966, the amelioration of wine after completion of
fermentation and removal from fermenters shall be recorded on Form 2056.
For this purpose Form 2056 may be modified by changing the heading of an
unused column in the right-hand portion of the form to read "Used for
Amelioration" and by changing the heading of column (g) to read "Produced
(d) MONTHLY REPORT OF WINE CELLAR OPERATIONS, FORM 702, AND INVENTORY OF
WINE, FORM 702-C. The Monthly Report of Wine Cellar Operations, Form 702
(Rev. 3-65), for the month of December 1965, shall reflect the closeout
of the reserve inventory; on the Inventory of Wine, Form 702-C, for
December 31, 1965, all still wine shall be reported as "Still Wine in
The quantity of wine in intermediate storage as of December 31, 1965,
shall be reported in the usual manner in Part VII of Form 702 (Rev. 3-65);
thereafter, Part VII of Form 702 (Rev. 1-66) will be used to report the
quantity of "Still Wine in Fermenters Last of Month."
(a) MARKINGS ON TANKS. Each tank which on December 31, 1965, is designated as "Intermediate Storage" or "Reserve Storage" shall, as of
January 1, 1966, be designated to reflect its intended use, such as
"Fermenting Tank" (or "Fermenter") or "Storage Tank."
(2) SWEETTENING OF WINE WITHDRAWN FROM RESERVE INVENTORY AS OF DECEMBER 31,
1965. Wine withdrawn as of the close of business December 31, 1965, from
reserve inventory may, if sweetening has not been completed, be sweetened
on and after January 1, 1966, as provided in this section, but only if
such wine is kept separate from other wine until sweetening operations
are completed. Wine so withdrawn from reserve inventory may be sweetened
with pure dry sugar or liquid sugar to the extent that:
.01 In the case of grape wine, the total solids content of
the finished wine does not exceed (1) 17 percent by weight if the
alcohol content is 14 percent or more by volume, or (2) 21 percent
by weight if the alcohol content is less than 14 percent by volume; or
.02 In the case of fruit or berry wine, the total solids content
of the finished wine does not exceed 21 percent by weight.
The use of liquid sugar under this section shall be limited so that the
resultant volume will not exceed the volume which could result from the
maximum authorized use of pure dry sugar only.
Inquiries. Inquiries regarding this circular should refer to its number
and should be addressed to your Assistant Regional Commissioner, Alcohol
and Tobacco Tax.
Harold A. Serr
Director, Alcohol and Tobacco Tax Division