CHANGES IN REGULATIONS
PURSUANT TO PUBLIC LAW 94-455
To Distilled Spirits Plant Proprietors,
Wholesale Liquor Dealers, Manufacturers
of Nonbeverage Drawback Products, and
Purpose. This circular is issued to inform you of the more
significant changes to be set forth in a Treasury decision, soon
to be published in the FEDERAL REGISTER, amending several
parts of 27 CFR. The changes, which implement the provisions of
Public Law 94-455, are effective February 1, 1977.
Background. The Treasury decision implements the provisions
of Public Law 94-455 as it amended 26 U.S.C. with respect to
(1) losses of Puerto Rican and Virgin Islands spirits; (2) eligibility
of imported spirits for nonbeverage drawback; (3) liquor dealer
designations in 27 CFR Part 194; (4) mingling of spirits in bond for
consolidation; (5) filtration and stabilization of spirits in bond prior
to exportation; and (6) withdrawals of spirits from bond under
26 U.S.C. 5174(a)(2).
LOSSES OF PUERTO RICAN
AND VIRGIN ISLANDS SPIRITS
Public Law 94-455 extended the provisions of 26 U.S.C. 5008,
relating to allowance of losses of spirits, to spirits brought into the
United States from Puerto Rico or the Virgin Islands and taxed under
26 U.S.C. 7652. Applicable regulations in 27 CFR Parts 170 and 201
are amended to reflect the eligibility of Puerto Rican and Virgin
Islands spirits for loss provisions.
Claims for losses of Puerto Rican and Virgin Islands spirits are
to be filed in the same manner as claims for losses of domestic
spirits. To ensure proper accounting of operational losses, ATF
Form 2611, Statement of Losses at Bottling Premises, will be pre-
pared; and a new ATF Form 2611, Page 3, will be attached as
supplemental information to separately identify eligible Puerto Rican
rum, other Puerto Rican spirits, and Virgin Islands spirits, from
other eligible spirits.
ATF Forms 1577, Destruction of Spirits, 2612, Taxpaid Spirits
Returned to Bonded Premises, and 4738, Notice and Gauge of
Spirits Returned to Bottling Premises, have been revised to indi-
cate the eligibility of Puerto Rican and Virgin Islands spirits for
abatement or refund of tax on applicable losses. In each instance,
separate forms shall be prepared for Puerto Rican rum, for other
Puerto Rican spirits and for Virgin Islands spirits.
Revised ATF Forms 1577, 2612, 4738, and new ATF Form 2611,
page 3, are available from the ATF Distribution Center, 3800 S.
Four Mile Run Drive, Arlington, Virginia 22206.
NONBEVERAGE DRAWBACK PRODUCTS
Public Law 94-455 amended 26 U.S.C. 5131, with respect to
drawback of tax on spirits used in nonbeverage products, to delete
the requirement that the spirits be produced in a domestic distillery
or withdrawn from the bonded premises of a distilled spirits plant.
This amendment will permit manufacturers of nonbeverage products
to claim drawback of taxes on imported spirits used in their pro-
ducts. Claims for drawback of tax on products containing imported
spirits should be accompanied by appropriate Customs forms ( e.g.,
Customs Forms 7501, Consumption Entry, or 7505, Warehouse
Withdrawal for Consumption) to indicate payment of tax. The regu-
lations in 27 CFR Part 197 are amended to reflect these changes.
WHOLESALE LIQUOR DEALERS
Public Law 94-455 eliminated the special tax designation for
"wholesale dealers in wine" and "wholesale dealers in wine and
beer." Persons engaging in business in these categories will be
classified in the primary designation of business (e.g., "wholesale
dealers in wine" and "wholesale dealers in wine and beer" will be
classified as "wholesale liquor dealers"). The designation changes
do not affect the special tax rate. IRS Form 11, Special Tax Return,
will be appropriately amended to include these changes.
MINGLING OF SPIRITS IN
BOND FOR CONSOLIDATION
Public Law 94-455 amended 26 U.S.C. 5234, with respect to
mingling of spirits in bond for consolidation. The amended statute
provides that consolidation must be accomplished within 20 years of
the date of original entry of spirits, thereby superseding the previ-
ous 8-year limitation. Applicable regulations in 27 CFR Part 201
FILTRATION AND STABILIZATION
OF SPIRITS IN BOND PRIOR TO EXPORTATION
Section 26 U.S.C. 5025 was amended to extend the exemption
from rectification tax to distilled spirits subjected to filtration or
other physical treatments prior to exportation. The change will
permit distilled spirits plant proprietors to filter and stabilize
spirits destined for exportation in a manner similar to spirits
entered for bottling in bond and pursuant to 27 CFR 201.324.
WITHDRAWAL OF SPIRITS FROM
BOND UNDER 26 U.S.C 5174(a)(2)
Public Law 94-455 amended 26 U.S.C. 5174(a)(2), which pro-
vides for the withdrawal of spirits from bond by proprietors
authorized to rectify or bottle distilled spirits pursuant to a
withdrawal bond. Prior statutory requirements limited withdraw-
als under section 5174(a)(2) to spirits intended to be rectified or
bottled by the authorized proprietor. The statutory amendment
extends authorized withdrawal to all spirits including those
bottled-in-bond. This will permit proprietors of bottling premises
to defer payment of tax on bottled-in-bond spirits for payment on
ATF Form 4077, Distilled Spirits Tax Return - Deferred Payment -
Bottling Premises, and pursuant to regulations in 27 CFR Part 170,
Subpart C. These statutory changes, however, require a minor
regulatory change. Proprietors desiring to withdraw bottled-in-bond
spirits pursuant to section 5174(a)(2) should prepare ATF Form 179,
Withdrawal of Spirits Tax Determined, in the same manner as for
other spirits withdrawn from bond.
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
Pennsylvania Avenue, N.W., Washington, DC 20226.
Rex D. Davis