REDUCED RATE OF BEER TAX FOR SMALL BREWERS
To Brewers and Others Concerned:
Purpose. This circular is to inform you of a Treasury decision,
soon to be published in the FEDERAL REGISTER, which will amend 27 CFR
Part 245, Beer, by prescribing a reduced rate of tax on beer for cer-
tain qualified brewers.
Background. Public Law 94-529, effective January 1, 1977, reduced
the tax on beer from $9 to $7 per barrel on the first 60,000 barrels of
beer removed for consumption or sale in a calendar year by brewers
(or controlled groups of brewers) who produce not more than 2,000,000
barrels annually. Brewers who operate more than one brewery, or
controlled groups of brewers must include total production at all
plants in determining compliance with the 2,000,000 barrel limitation,
and shall pay reduced tax of $7 per barrel on a maximum of 60,000
barrels. Brewers may pay the reduced rate of tax either by return, ATF
Form 2034, or by a claim for refund at the end of the year.
Qualification of brewers. To take advantage of this tax reduc-
tion, a brewer must meet the following qualifications:
(1) Beer must be produced or brewed in a qualified brewery in
the United States.
(2) Total production of beer, as reported on line 2 of the
Brewer's Monthly Report of Operations, ATF Form 103, must not exceed
2,000,000 barrels of beer on a calendar year basis. To determine
compliance with this 2,000,000 barrel limitation, a brewer shall
include both beer produced at qualified breweries within the United
States and beer produced outside the United States. Brewers who
operate more than one brewery must include the combined production
of beer at all their breweries in determining eligibility under the
2,000,000 barrel limitation.
(3) The brewer must not be a member of a controlled group as
defined in 26 U.S.C. sections 1563(a) and 5051(a)(2)(B) whose members
together produce more than 2,000,000 barrels of beer per calendar
year. Examples of this type of business structure include, but are
not limited to: parent-subsidiary controlled groups, brother-sister
controlled groups, and combined groups. Fifty-one percent stock
ownership in a corporation need not be direct but may be acquired
through an option to buy stock, attribution from partnerships,
corporations, or estates, and by family holdings. Regulations
regarding controlled groups of corporations are contained in
26 CFR 1.1563-1 through 1.1563-3.
Payment of reduced tax by return, Form 2034. In order to
pay the reduced rate of beer tax by return, the brewer must file
a notice with the regional regulatory administrator in each region
in which he operates breweries. This notice must be prepared in
duplicate; the original will be submitted with the first tax return
(prepayment or semimonthly) in which the brewer applies the reduced
tax rate, and a copy of the notice will be retained with the brewer's
records. The notice shall include the following information:
(1) A statement that the brewer does not anticipate producing
more than 2,000,000 barrels of beer during the calendar year.
(2) A statement that the brewer is not a member of a controlled
group of brewers, or if the brewer is a member of a controlled group,
a statement that the combined production of the controlled group will
not exceed or is not likely to exceed 2,000,000 barrels of beer during
the calendar year.
(3) If the brewer is an eligible member of a controlled group of
brewers, or if the brewer operates breweries at more than one location,
a statement listing the number and location of breweries within the
above classifications and how the 60,000 barrel limitation for the
reduced rate of tax will be apportioned among the members of the
controlled group of brewers, or among the breweries operated by the
(4) Each notice shall be executed by the brewer under penalties
of perjury as provided in 27 CFR section 245.5.
The brewer shall pay the reduced rate of tax by return until he has
taxpaid 60,000 barrels of beer (or the apportioned limitation) at the
reduced tax rate for that calendar year.
Claim for refund of tax excessively collected. A situation may
occur in which a brewer,who does not anticipate qualifying for the
reduced tax rate during a given calendar year, finds at some time
during the year that he does qualify to pay the reduced rate.
In this situation, the brewer may file a claim, IRS Form 843, with the
regional regulatory administrator in the region of his principal place
of business, for refund of tax excessively collected, based on the
quantity of beer that was eligible to be taxpaid at the $7 per
barrel rate, subject to the 60,000 barrel or apportioned limitation.
The claim shall contain the following information:
(1) Name and address of the brewer.
(2) Quantity of beer covered by the claim.
(3) Amount of tax paid in excess.
(4) A statement of the exact number of barrels of beer which the
brewer produced during the calendar year.
(5) A statement that the brewer is not a member of a controlled
group of brewers, or a statement of the combined barrels of beer
produced by all members of the controlled group in the calendar year.
(6) If the brewer is a member of a controlled group of brewers,
a list of the names and addresses of all the member brewers and a
statement of how the 60,000-barrel limitation for the reduced rate of
tax is to be apportioned among the members.
Claim procedures. Current regulations, 27 CFR 245.160 and 245.163,
allow brewers to claim refund or credit of tax on returned, lost, or
unmerchantable beer based upon a $9 per barrel tax rate. Amended
regulations will limit claims for this beer to $7 per barrel for brewers
who have qualified and paid the reduced tax rate. However, brewers
within this classification may be allowed claims for refund, credit,
or relief of tax based upon the $9 per barrel tax rate if they can
establish to the satisfaction of the regional regulatory administrator
that the beer being claimed was originally taxpaid or determined at
the higher rate of tax. Special mention should be made that this
procedure will, in no way, apply to returned beer used to offset removals.
Repayment of tax reduction erroneously taken. A situation may also
occur in which a brewer, who anticipates qualifying for the reduced tax
rate during a calendar year and who pays the reduced rate, finds at some
time during that calendar year that he does not qualify for the reduced
rate of tax.
In this situation, the brewer must pay an additional $2 per barrel on
all beer removed at the reduced tax rate that year, plus interest com-
puted from the date the beer was erroneously taxpaid at the lower rate.
The repayment shall be made as an adjustment increasing the tax on the
brewer's tax return, Form 2034(5130.7), not later than the period in
which the brewer exceeds 2,000,000 barrels production.
ATF Form 2034(5130.7). To reflect both the reduced tax rate and
the refund limitation on returned, lost, or unmerchantable beer, the
tax return, ATF Form 2034(5130.7), has been revised to contain the
(1) Line 10, Net Removals and Amount of Tax, has been subdivided
to reflect removals and tax at the $9 per barrel and the $7 per barrel
(2) In Schedule A, a new line has been added to show the aggregate
quantity of barrels removed for consumption or sale at the $7 rate of
tax, from January 1 to the end of the current tax period.
(3) An additional sentence explaining the $7 per barrel limi-
tation on returned, lost, or unmerchantable beer has been included
in item 2 of the instructions.
Availability of forms. The revised forms will be initially
supplied to brewers by the regional office. To obtain additional
supplies of the form, submit a requisition on ATF Form 1600.1 to
the distribution center at the following address:
Bureau of Alcohol, Tobacco and Firearms
3800 South Four Mile Run Drive
Arlington, Virginia 22206
Effective date. Public Law 94-529 is effective January 1, 1977.
Therefore, qualified brewers may, upon filing the required notice,
pay the reduced rate of tax for the first return period beginning
January 1, 1977. All brewers shall use the revised Form 2034(5130.7)
beginning with the first tax period in 1977.
Inquiries. Inquiries concerning this circular should refer to
its number and be addressed to the Assistant Director (Regulatory
Enforcement), Bureau of Alcohol, Tobacco and Firearms, 1200 Penn-
sylvania Avenue, N.W., Washington, DC 20226.
Rex D. Davis