[Federal Register Volume 62, Number 105 (Monday, June 2, 1997)]
[Rules and Regulations]
[Pages 29663-29667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14308]
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DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms
[T.D. ATF-390]
27 CFR Part 24
RIN 1512-AB65
Implementation of Public Law 104-188, Section 1702, Amendments
Related to Revenue Reconciliation Act of 1990 (96R-028P)
AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of
the Treasury.
ACTION: Temporary rule (Treasury decision).
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SUMMARY: This temporary rule implements some of the provisions of the
Small Business Job Protection Act of 1996. The new law made changes to
the small producers' wine tax credit and wine bond provisions in the
Internal Revenue Code of 1986. The wine regulations are amended to
extend the application of the credit to ``transferees in bond''
(proprietors who store wine for a small producer but who do not hold
title to such wine) in certain circumstances, and to make conforming
changes to the bond computation instructions, which were also affected
by the law change. In the Proposed Rules section of this Federal
Register, ATF is also issuing a notice of proposed rulemaking inviting
comments on the temporary rule for a 60-day period following the
publication of this temporary rule.
EFFECTIVE DATES: The temporary regulations are retroactive to January
1, 1991. The regulations will remain in effect until superseded by
final regulations.
ADDRESSES: Send written comments to: Chief, Wine, Beer & Spirits
Regulations Branch, Bureau of Alcohol, Tobacco and Firearms, P.O. Box
50221, Washington, DC 20091-0221.
FOR FURTHER INFORMATION CONTACT: Marjorie D. Ruhf, Wine, Beer & Spirits
Regulations Branch, 650 Massachusetts Avenue, NW., Washington, DC
20226, (202) 927-8230.
SUPPLEMENTARY INFORMATION:
Background
Tax Credits for Certain Proprietors of Bonded Wine Premises
The Revenue Reconciliation Act of 1990, Title XI of Public Law 101-
508, 104 Stat. 1388-400, was enacted on November 5, 1990. Section 11201
of this law increased the rate of tax on still wines and artificially
carbonated wines removed from bonded premises or Customs custody on or
after January 1, 1991. The tax rates on these products were increased
by 90 cents per wine gallon. The law did not increase the tax rate on
champagne and other sparkling wines.
In addition to the above-referenced increased rates of tax, section
11201 provided that small domestic producers of wine are entitled to a
credit of up to 90 cents per wine gallon on the first 100,000 gallons
of wine (other than champagne and other sparkling wines) removed for
consumption or sale during a calendar year. This credit may be taken by
a bonded wine premises proprietor who does not produce more than
250,000 gallons of wine in a given calendar year. The 90 cents per wine
gallon credit is equivalent to the amount by which the tax on wine was
increased by the Revenue Reconciliation Act of 1990. However, the full
credit of 90 cents per gallon is reduced 1 percent ($.009 per gallon)
for each thousand gallons of wine over 150,000 gallons which are
produced in a year, until the full increased tax rate is reached.
On December 11, 1990, ATF issued regulations implementing the small
producers' wine tax credit. See T.D. ATF-307, 55 FR 52723. The
regulations appearing at 27 CFR 24.278 implement the tax credit for
small domestic producers. The regulations in 27 CFR 24.279 explain the
procedure for making adjustments to tax returns as a result of claiming
an incorrect credit rate.
On August 9, 1991, ATF issued Industry Circular 91-9 to announce an
ATF ruling (subsequently published as ATF Ruling 92-1 (A.T.F.Q.B. 1992-
3, 55)), which held that the small producer's wine tax credit is
available only to eligible proprietors engaged in the business of
producing wine. A proprietor who has a basic permit to produce wine but
does not produce wine during a calendar year may not take the small
producers' wine tax credit on wine removed during such
[[Page 29664]]
calendar year. A proprietor who has obtained a new wine producers'
basic permit may not take the small producers' wine tax credit on wine
removed until wine is produced by such proprietor. The provisions of
that ruling are hereby incorporated into 27 CFR 24.278(a) and the
ruling is declared obsolete.
Public Law 104-188
On August 20, 1996, the Small Business Job Protection Act of 1996,
Public Law 104-188, 110 Stat. 1755, was enacted. Section 1702 of the
Act contains amendments to the Revenue Reconciliation Act of 1990,
including some provisions which affect small wine producers. The law
provides that the amendments made by section 1702 shall take effect as
if included in the provision of the Revenue Reconciliation Act of 1990
to which such amendment relates. Section 11201 of the Revenue
Reconciliation Act, which contained the small producers' wine tax
credit provision, was effective for wine removed after January 1, 1991.
Accordingly, the amendments made in this regulation have been made
retroactive to January 1, 1991.
Before the enactment of Public Law 104-188, small wine producers
were eligible to take the small producers' wine tax credit only on wine
removed for consumption or sale by that producer; if the producer
transferred wine in bond to another bonded wine premises (a transferee
in bond) for storage pending subsequent removal by the transferee, then
the producer could not claim a credit on that wine, since the producer
had not removed the wine for consumption or sale. If the transferee was
not eligible for the small producers' wine tax credit (i.e., it did not
produce wine at all, or it produced more than 250,000 gallons of wine),
then there was no eligibility for the credit. Even if the transferee
produced wine and was eligible for credit in its own right, its
eligibility was limited to the first 100,000 gallons removed during the
year. In order to receive the credit, some small wineries began to
taxpay their wines at the time of removal, and store the wines taxpaid
instead of transferring them in bond.
Public Law No. 104-188 amended 26 U.S.C. 5041(c) to allow the
credit to be taken by ``transferees in bond'' on behalf of their small
producer clients. As amended, 26 U.S.C. 5041(c) provides that where
wine would be eligible for the small producer credit if removed by the
producer, and such wine is transferred in bond to another person (the
transferee) who removes such wine during such calendar year, the
transferee (and not the producer) may be eligible for the small
producer credit under certain prescribed circumstances. The law
requires that the producer must hold title to the wine at the time of
its removal and must provide to the transferee such information as is
necessary to properly determine the transferee's credit under this
paragraph. The statutory language thus limits the application of the
credit to transferees in bond receiving wine from the actual producer
of the wine in question, and not from a subsequent owner who may also
be a small producer. Production is already defined in 27 CFR 24.278 for
purposes of establishing eligibility for wine credit.
A definition of removals is hereby added in 27 CFR 24.278(e)(2). As
amended, 26 U.S.C. 5041(c)(6) provides that, when the producer elects
to transfer the credit, the transferee (and not the producer) will be
eligible for the credit. Therefore, the credit eligibility of the small
producer is still limited to the first 100,000 gallons removed for
consumption or sale during a calendar year, whether the removal is from
its own premises or from the premises of a transferee in bond using the
producer's credit on the producer's instructions.
Another condition of the new credit provision is that the producer
must give the transferee ``such information as is necessary to properly
determine the transferee's credit.'' A new regulation in 27 CFR
24.278(b)(2)(D) sets forth what information is required. The regulatory
requirement to transmit taxpayment instructions ``in writing'' may be
satisfied by any form of electronic transmission available to the
producer and transferee, as long as a permanent copy is filed with the
records required to be maintained in support of tax return and claim
information by both the producer and the transferee.
Liability for Additional Tax
Pursuant to 26 U.S.C. 5043, the proprietor of a bonded wine cellar
is liable for the tax on any wines removed from such premises. Section
5362(b) provides that wine may be withdrawn without payment of tax for
transfer in bond between bonded premises. When such a transfer occurs,
section 5043(a)(1)(A) provides that the liability for payment of the
tax shall become the liability of the transferee from the time of
removal of the wine from the transferor's premises, and the transferor
shall thereupon be relieved of such liability.
Thus, where a small producer transfers wine in bond to a bonded
wine cellar, and the bonded wine cellar thereupon removes the wine, it
is the transferee and not the transferor that is liable for the tax.
Since the small producers' wine tax credit rate each year is based on
the level of production during the same calendar year, and the total
production is not known until the close of the year, adjustments to the
credit rate are sometimes needed. If ATF determines, for example, that
a transferee took the small producer credit for a certain quantity of
wine, and the small producer subsequently disqualified itself for the
credit by producing more than 250,000 wine gallons during that calendar
year, it is the transferee that will be responsible for paying the
additional tax liability and any applicable interest or penalties
arising out of such an underpayment of tax. Transferees may wish to
take this into account when making contractual arrangements with small
wine producers.
Increasing adjustments are required if a person produces more wine
than anticipated when the credit was computed, or if the person fails
to produce wine during the calendar year and loses eligibility for such
credit after claiming it. The regulations in 27 CFR 24.279(a) cover
increasing adjustments as they relate to the small producer's own
removals, and this section is being expanded to reflect adjustments to
credits taken by a transferee in bond. If excess credits are taken by
the transferee based on information received from a producer, the
transferee is responsible for making the necessary increasing
adjustment, with interest. The section on increasing adjustments is
also being amended to differentiate between the excess credits
discussed above, which are the result of a good faith estimate of
future production, and excess credits taken after the 100,000 gallon
maximum has been reached. The latter excess credits result from
careless recordkeeping of current removals, and not from an inability
to predict exact annual production. As revised, 27 CFR 24.279 notes
that the regional director (compliance) has the discretion to impose a
penalty on excess credits which result from carelessness.
A decreasing adjustment may be claimed if a person qualifies for
the credit but does not deduct it, or deducts less than the full credit
for which such person is eligible. Since the person who paid the tax
(in this case the transferee) must claim a refund or credit of such
tax, yet was most likely reimbursed for the tax by the producer, we
note that the provisions of 26 U.S.C. 6423 and 27 CFR part 70, subpart
E (recently recodified from 27 CFR part 170, subpart E) will apply to
such requests for refund. Using information provided by the producer,
[[Page 29665]]
the transferee must show (1) that the owner of the article (the
producer) has furnished the transferee with the amount claimed for
payment of the tax, (2) the owner has given its written consent to the
allowance of the credit or refund to the transferee, and (3) the owner
bore the ultimate burden of the tax (i.e., did not pass on the burden
of the tax to the consumer as part of the sale price of the product),
or unconditionally repaid the amount claimed to the person who bore the
ultimate burden of the tax. The procedure in 27 CFR 24.279(b) for
claiming credit or refund of taxes to reflect increases in small
producers' wine tax credit eligibility has been modified to take
transferees in bond into account.
Disclosure Issues
Both small wine producers and transferees in bond should note that
at times it will be necessary for ATF to disclose information
concerning the tax liability of the small wine producer to the
transferee who actually claimed the small producer credit, in order to
explain the basis for additional assessments or other adjustments to
the transferee's tax liability. In general, 26 U.S.C. 6103 prohibits
the disclosure of tax returns or return information to anyone other
than the taxpayer unless the taxpayer has consented to such a
disclosure. However, 26 U.S.C. 6103(h)(4)(C) allows the disclosure of a
return or return information in a Federal judicial or administrative
proceeding pertaining to tax administration, if such return or return
information directly relates to a transactional relationship between a
person who is a party to the proceeding and the taxpayer which directly
affects the resolution of an issue in the proceeding. It is ATF's
position that any audit or inspection of the transferee's tax liability
is an administrative proceeding pertaining to tax administration. Thus,
the law authorizes ATF to disclose to the transferee information
pertaining to the credit eligibility of the producer in cases where it
directly relates to credits taken by the transferee on the instructions
of the small producer, which directly affects the resolution of the
issue of the tax liability of the transferee. See generally First
Western Government Securities, Inc. v. United States, 796 F.2d 355
(10th Cir. 1986).
Claims for Refund or Credit
As previously noted, section 1702(i) of the Small Business Job
Protection Act of 1996 provides that the amendments made by section
1702 of the Act shall take effect as if included in the provision of
the Revenue Reconciliation Act of 1990 to which such amendment relates.
Section 11201 of the Revenue Reconciliation Act, which contained the
small wine producer credit provision, was effective for wine removed
after January 1, 1991. Accordingly, the amendments made in this
regulation have been made retroactive to January 1, 1991. However,
since the law did not contain any language explicitly or implicitly
waiving the statute of limitations for filing claims for credit or
refund, the applicable statutory period provided for in 26 U.S.C. 6511
and 27 CFR 70.261 will still apply. See, e.g., United States v. Zacks,
375 U.S. 59 (1963). In most cases, this means that claims must be filed
within 3 years after the due date of the tax return to which they
relate.
Other Changes Made by the Small Business Job Protection Act of 1996
The cross reference to 26 U.S.C. 5041(e) in 26 U.S.C. 5061(b)(3)
was amended to read ``section 5041(f)'' because paragraph 5041(e) was
redesignated as 5041(f) when the wine credit provisions were added in
1990. No conforming changes to the regulations are needed.
Finally, the wine bond requirement was amended to note that the
appropriate credit should be taken into account in computing the penal
sum of the bond, and this document makes a conforming change to 27 CFR
24.148. We note that, pursuant to ATF Ruling 92-1 (A.T.F.Q.B. 1992-3,
55), now incorporated into 27 CFR 24.278(a), a new proprietor may not
take credit against wine tax until such proprietor actually produces
wine and establishes its eligibility as a small producer. Therefore,
new proprietors may be asked to file bonds at the full tax rate if they
plan to sell wine received in bond or transferred from a predecessor
before they produce wine and qualify for the small producers' wine tax
credit.
Regulatory Flexibility Act
It is hereby certified that these regulations will not have a
significant economic impact on a substantial number of small entities.
Accordingly, a regulatory flexibility analysis is not required. Any
revenue effects of this rulemaking on small businesses flow directly
from the underlying statute. Likewise, any secondary or incidental
effects, and any reporting, recordkeeping, or other compliance burdens
flow directly from the statute. Pursuant to 26 U.S.C. 7805(f), this
temporary regulation will be submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact
on small business.
Executive Order 12866
It has been determined that this temporary rule is not a
significant regulatory action as defined by Executive Order 12866,
because any economic effects flow directly from the underlying statute
and not from this temporary rule. Therefore, a regulatory assessment is
not required.
Paperwork Reduction Act
This regulation is being issued without prior notice and public
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553).
For this reason, the new collection of information contained in this
regulation has been reviewed under the requirements of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(j)) and, pending receipt and
evaluation of public comments, approved by the Office of Management and
Budget (OMB) under control number 1512-0540. An agency may not conduct
or sponsor, and a person is not required to respond to, a collection of
information unless it displays a valid control number assigned by the
Office of Management and Budget.
The collections of information in this regulation are in 27 CFR
24.278 and 24.279 (previously approved under OMB Control Number 1512-
0492). This information is required to advise the transferee of any
available credit, and to support entries on tax returns and claims.
This information will be used by the transferee and the small producer
to compute taxes or claims and may also be reviewed by ATF during an
audit to confirm that wine tax credits were properly taken. The
collections of information are required to obtain a benefit (reduced
rate of tax). The likely recordkeepers are businesses and small
businesses.
For further information concerning these collections of
information, and where to submit comments on the collections of
information, refer to the preamble to the cross reference notice of
proposed rulemaking published elsewhere in this issue of the Federal
Register.
Administrative Procedure Act
Because this document merely implements a law which is retroactive
to January 1, 1991, and because immediate guidance is necessary to
implement the provisions of the law, it is found to be impracticable to
issue this Treasury decision with notice and public procedure under 5
U.S.C. 553(b),
[[Page 29666]]
or subject to the effective date limitation in section 553(d).
Drafting Information: The principal author of this document is
Marjorie Ruhf, Wine, Beer & Spirits Regulations Branch, Bureau of
Alcohol, Tobacco and Firearms.
List of Subjects in 27 CFR Part 24
Administrative practice and procedure, Authority delegations,
Claims, Electronic fund transfers, Excise taxes, Exports, Food
additives, Fruit juices, Labeling, Liquors, Packaging and containers,
Reporting and recordkeeping requirements, Research, Scientific
equipment, Spices and flavoring, Surety bonds, Taxpaid wine bottling
house, Transportation, Vinegar, Warehouses, Wine.
Authority and Issuance
Chapter I of title 27, Code of Federal Regulations is amended as
follows:
PART 24--WINE
Paragraph 1. The authority citation for 27 CFR part 24 continues to
read as follows:
Authority: 5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042,
5044, 5061, 5062, 5081, 5111-5113, 5121, 5122, 5142, 5143, 5173,
5206, 5214, 5215, 5351, 5353, 5354, 5356, 5357, 5361, 5362, 5364-
5373, 5381-5388, 5391, 5392, 5511, 5551, 5552, 5661, 5662, 5684,
6065, 6091, 6109, 6301, 6302, 6311, 6651, 6676, 7011, 7302, 7342,
7502, 7503, 7606, 7805, 7851; 31 U.S.C. 9301, 9303, 9304, 9306.
Par. 2. Section 24.148 is revised to read as follows:
Sec. 24.148 Penal sums of bonds.
The penal sums of bonds prescribed in this part are as follows:
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Penal sum
Bond Basis -------------------------
Minimum Maximum
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(a) Wine Bond, AFT F 5120.36........ (1) Not less than the tax on all wine or spirits $1,000 $50,000
in transit or unaccounted for at any one time,
taking into account the appropriate small
producer's wine tax credit.
Where such liability exceeds $250,000........... ........... 100,000
(2) Where the unpaid tax amounts to more than 500 250,000
$500, not less than the amount of tax which, at
any one time, has been determined but not paid.
Except: $1,000 of the wine operations coverage
may be allocated to cover the amount of tax
which, at any one time, has been determined but
not paid, if the total operations coverage is
$2,000 or more.
(b) Wine Vinegar Plant Bond ATF F Not less than the tax on all wine on hand, in 1,000 100,000
5510.2*. transit, or unaccounted for at any one time.
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* The proprietor of a bonded wine premises who operates an adjacent or contiguous wine vinegar plant with a Wine
Bond which does not cover the operation may file a consent of surety to extend the terms of the Wine Bond in
lieu of filing a wine vinegar plant bond.
(26 U.S.C. 5354, 5362)
Par. 3. Section 24.278 is revised and the OMB authorization number
is added to read as follows:
Sec. 24.278 Tax credit for certain small domestic producers.
(a) General. In the case of a person who produces not more than
250,000 gallons of wine during the calendar year, there shall be
allowed as a credit against any tax imposed by Title 26, U.S.C. (other
than Chapters 2, 21 and 22), an amount computed in accordance with
paragraph (d) of this section, on the first 100,000 gallons of wine
(other than champagne and other sparkling wine) removed during such
year for consumption or sale. Such credit applies only to wine which
has been produced at a qualified bonded wine premises in the United
States. The small wine producer's tax credit is available only to
eligible proprietors engaged in the business of producing wine. A
proprietor who has a basic permit to produce wine but does not produce
wine during a calendar year may not take the small producers' wine tax
credit on wine removed during such calendar year. A proprietor who has
obtained a new wine producers' basic permit may not take the small
producers' wine tax credit on wine removed until wine is produced by
such proprietor. ``Wine production operations'' include those
activities described in paragraph (e) of this section.
(b) Special rules relating to eligibility for wine credit--(1)
Controlled groups. For purposes of this section and Sec. 24.279, the
term ``person'' includes a controlled group of corporations, as defined
in 26 U.S.C. 1563(a), except that the phrase ``more than 50 percent''
shall be substituted for the phrase ``at least 80 percent'' wherever it
appears. Also, the rules for a ``controlled group of corporations''
apply in a similar fashion to groups which include partnerships and/or
sole proprietorships. Production and removals of all members of a
controlled group are treated as if they were the production and
removals of a single taxpayer for the purpose of determining what
credit may be used by a person.
(2) Credit for transferees in bond. A person other than an eligible
small producer (hereafter in this paragraph referred to as the
``transferee'') shall be allowed the credit under paragraph (a) of this
section which would be allowed to the producer if the wine removed by
the transferee had been removed by the producer on that date, under the
following conditions:
(i) Wine produced by any person would be eligible for any credit
under this section if removed by such person during the calendar year,
(ii) Wine produced by such person is removed during such calendar
year by the transferee to whom such wine was transferred in bond and
who is liable for the tax imposed by this section with respect to such
wine, and
(iii) Such producer holds title to such wine at the time of its
removal and provides to the transferee such information as is necessary
to properly determine the transferee's credit under this paragraph.
(iv) At the time of taxable removal, the following information
shall be provided to the transferee by the producer, in writing, and
the producer and transferee shall each retain a copy with the record of
taxpaid removal from bond required by Sec. 24.310:
(A) The names of the producer and transferee;
(B) The quantity and tax class of the wines to be shipped;
(C) The date of removal from bond for consumption or sale;
(D) A confirmation that the producer is eligible for credit, with
the credit rate to which the wines are entitled; and
(E) A confirmation that the subject shipment is within the first
100,000 gallons of eligible wine removed by (or on behalf of) the
producer for the calendar year.
[[Page 29667]]
(c) Time for determining and allowing credit. The credit allowable
by paragraph (a) of this section shall be determined at the same time
as the tax is determined under 26 U.S.C. 5041(a), and shall be
allowable at the time any tax described in paragraph (a) of this
section is payable. The credit allowable by this section is treated as
if it constituted a reduction in the rate of such tax.
(d) Computation of credit. The credit which may be taken on the
first 100,000 gallons of wine (other than champagne and other sparkling
wine) removed for consumption or sale by an eligible person during a
calendar year shall be computed as follows:
(1) For persons who produce 150,000 gallons or less of wine during
the calendar year, the credit is $0.90 per gallon for wine eligible for
such credit at the time it is removed for consumption or sale;
(2) For persons who produce more than 150,000 gallons but not more
than 250,000 gallons during the calendar year, the credit shall be
reduced 1 percent ($0.009) for every 1,000 gallons produced in excess
of 150,000 gallons. For example, the credit which would be taken by a
person who produced 159,500 gallons of wine would be reduced by 9
percent, or $0.081, for a net credit against the tax of $0.819 per
gallon for the first 100,000 gallons of wine removed for consumption or
sale.
(e) Definitions--(1) Production. For the purpose of determining if
a person's production is within the 250,000 gallon limitation, in
addition to wine produced by fermentation, production includes any
increases in the volume of such wine due to the winery operations of
amelioration, wine spirits addition, sweetening, and the production of
formula wine. Production of champagne and other sparkling wines is not
excluded for purposes of determining whether total production of a
winery exceeds 250,000 gallons. Production includes all wine produced
at qualified bonded wine premises within the United States and wine
produced outside the United States by such person.
(2) Removals. For the purpose of determining if a person's removals
are within the 100,000 gallon limitation, removals include wine removed
from all qualified bonded wine premises within the United States by
such person. Wine removed by a transferee in bond under the provisions
Sec. 24.278(b)(2) will be counted as a removal by the small producer
who owns such wine, and not by the transferee in bond.
(f) Preparation of tax return. A person who is eligible for the
credit shall show the amount of wine tax before credit on the Excise
Tax Return, ATF F 5000.24, and enter the quantity of wine subject to
credit and the applicable credit rate as the explanation for an
adjusting entry in Schedule B of the return for each tax period. Where
a person does not use the credit authorized by this section to directly
reduce the rate of Federal excise tax on wine, that person shall report
on ATF F 5000.24 where such credit will be, or has been, applied. Where
a transferee in bond takes credit on behalf of one or more small
producers, the names of such producers, their credit rate, and the
total credit taken on behalf of each during the tax return period shall
be shown in schedule B.
(g) Denial of deduction. Any deduction under 26 U.S.C. chapters 1-
6, with respect to any tax against which the credit is allowed under
paragraph (a) of this section shall only be for the amount of such tax
as reduced by such credit.
(h) Exception to credit. The regional director (compliance) shall
deny any tax credit taken under paragraph (a) of this section where it
is determined that the allowance of such credit would benefit a person
who would otherwise fail to qualify for the use of such credit. (26
U.S.C. 5041(c).)
(Approved by the Office of Management and Budget under control
number 1512-0540)
Par. 4. Section 24.279 is revised and the OMB authorization number
is added to read as follows:
Sec. 24.279 Tax adjustments related to wine credit.
(a) Increasing adjustments. Persons who produce more wine than the
amount used in computation of the credit, or who lose eligibility by
not producing during a calendar year, must make increasing tax
adjustments. Where an increasing adjustment to a person's tax return is
necessary as a result of an incorrect credit rate claimed pursuant to
Sec. 24.278, such adjustment shall be made on Excise Tax Return, ATF F
5000.24, no later than the return period in which production (or the
production of the controlled group of which the person is a member)
exceeds the amount used in computation of the credit. If the adjustment
is due to failure to produce, it shall be made no later than the last
return period of the calendar year. The adjustment is the difference
between the credit taken for prior return periods in that year and the
appropriate credit for such return periods. The person shall make tax
adjustments for all bonded wine premises where excessive credits were
taken against tax that year, and shall include interest payable. In the
case of a person who continued to deduct credit after reaching the
100,000 gallon maximum during the calendar year, the adjustment is the
full amount of excess credit taken, and shall include interest payable
under 26 U.S.C. 6601 from the date on which the excess credit was
taken, and may include the penalty payable under 26 U.S.C. 6662, at the
discretion of the regional director (compliance). The regional director
(compliance) will provide information, when requested, regarding
interest rates applicable to specific time periods, and any applicable
penalties. In the case of a controlled group of bonded wine premises
who took excess credits, all member proprietors who took incorrect
credits shall make tax adjustments as determined in this section. In
the case of a small producer who instructed a transferee in bond to
take credit as authorized by Sec. 24.278(b)(2), and subsequently
determines the credit was less or not applicable, such producer shall
immediately inform the transferee in bond, in writing, of the correct
credit information. The transferee shall make any increasing adjustment
on its next tax return based on revised credit information given by the
producer or by an ATF officer.
(b) Decreasing adjustments. Where a person fails to deduct the
credit, or deducts less than the appropriate credit provided for by
Sec. 24.278, during the calendar year, a claim may be filed for refund
of tax excessively paid. Such claims will be filed in accordance with
Sec. 24.69 of this part. In the case of wine removed on behalf of a
small producer by a transferee in bond, if the transferee in bond was
instructed to deduct credit and failed to deduct credit or deducted
less than the appropriate credit and was later reimbursed for the tax
by such producer, such transferee may file the claim. The provisions of
26 U.S.C. 6423 and 27 CFR part 70, subpart F, will apply, and the
producer and transferee in bond must show the conditions of
Sec. 24.278(b)(2) were met. (26 U.S.C. 5041(c).)
(Approved by the Office of Management and Budget under control
number 1512-0492)
Signed: December 23, 1996.
John W. Magaw,
Director.
Approved: January 3, 1997.
Dennis M. O'Connell,
Acting Deputy Assistant Secretary (Regulatory, Tariff and Trade
Enforcement).
[FR Doc. 97-14308 Filed 5-30-97; 8:45 am]
BILLING CODE 4810-31-P
