[Federal Register Volume 61, Number 115 (Thursday, June 13, 1996)]
[Proposed Rules]
[Pages 30019-30021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14850]
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DEPARTMENT OF THE TREASURY
27 CFR Part 22
[Notice No. 828]
RIN 1512-AB51
Distribution and Use of Tax-Free Alcohol (95R-030P)
AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of
the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: Pursuant to the President's regulatory reform initiative, the
Bureau of Alcohol, Tobacco and Firearms (ATF) is proposing revisions in
this notice to eliminate and liberalize certain regulatory requirements
relating to tax-free alcohol. ATF believes that these proposed
revisions will greatly reduce and simplify the qualification process
governing the tax-free alcohol permit application process.
DATES: Written comments must be received on or before August 12, 1996.
ADDRESSES: Submit written comments to: Chief, Wine, Beer, and Spirits
[[Page 30020]]
Regulations Branch; Bureau of Alcohol, Tobacco and Firearms; P.O. Box
50221; Washington, DC 20091-0221. ATTN: Notice No. 828.
FOR FURTHER INFORMATION CONTACT: Mary A. Wood, Wine, Beer, and Spirits
Regulations Branch; Bureau of Alcohol, Tobacco and Firearms; 650
Massachusetts Avenue, NW; Washington, DC 20226; (202) 927-8210.
SUPPLEMENTARY INFORMATION:
Background
There are certain registration requirements under the law and its
implementing regulations that must be met prior to the issuance of a
permit to withdraw and use tax-free alcohol. Depending upon the class
of the applicant, these registration requirements may include the
submission of a detailed application and supporting data, the payment
of special (occupational) tax (SOT) and the acquisition of bond
coverage. Once such registration requirements are met, the applicant is
issued a tax-free alcohol users permit and may commence conducting any
of the uses authorized under the law and regulations for tax-free
alcohol permittees. The permittee is allowed to purchase and acquire
alcohol from a registered distilled spirits plant (DSP) free of the
excise tax payments normally required to be made by the DSP proprietor.
For this reason, tax-free alcohol authorized uses and users are
limited or restricted under the law. Tax-free alcohol may not be
withdrawn and used for beverage purposes, in food products, or in any
preparation used in preparing beverage or food products. Tax-free
alcohol may not be sold, used in the manufacture of any product for
sale, or sold in any product resulting from the use of tax-free
alcohol. Finally, tax-free alcohol or products resulting from the use
of tax-free alcohol may not be removed from the permit premises.
Authorized users of tax-free alcohol include any State or political
subdivision of a State, or the District of Columbia acquiring the
alcohol for nonbeverage purposes. Tax-free alcohol may also be used by
any educational organization (exempt from income tax), scientific
university or college of learning, laboratory for use exclusively in
scientific research, hospital, blood bank, sanitarium, pathological
laboratory exclusively engaged in making analyses, or tests, for
hospitals or sanitariums, or clinic operated for charity and not for
profit. These permittees are unique in that they are not engaged in the
business of selling tax-free alcohol or any product manufactured from
or containing tax-free alcohol. Any permittee who uses tax-free alcohol
in a manner that violates the laws and regulations becomes liable for
the tax and other provisions of the Internal Revenue Code of 1986, 26
U.S.C. 5001(a)(4).
ATF believes that the present bond requirements are unnecessary and
the qualification requirements can be effectively streamlined.
Therefore, ATF is proposing to delete the bond requirements and revise
the qualification requirements for obtaining a permit to withdraw and
use tax-free alcohol and is soliciting public comments on them.
Bonds and Consents of Surety
Section 5272 of the Internal Revenue Code of 1986 provides that
bond coverage may be required as part of the tax-free alcohol permit
qualification process. Subpart E of the implementing regulations at 27
CFR Part 22, requires every applicant, with certain exceptions, to
obtain a bond prior to the issuance of a permit. In 1985, the tax-free
regulations were revised and the exemption from bond coverage was
expanded. See, T.D. ATF-199, 50 Fed. Reg. 9152 (March 6, 1985). Under
those revisions, the percentage of users of tax-free alcohol who were
exempt from filing a surety bond increased from 36 percent under the
prior regulations to 75 percent under the adopted regulations.
Based on the post-1985 experience in administering Part 22, ATF
believes that bond coverage should no longer be required of any
applicant for a tax-free alcohol permit.
Additionally, ATF believes that elimination of the bond requirement
under Subpart E will result in substantially reduced administrative and
financial burdens on the tax-free alcohol permittees.
Qualification
Section 5271 of the Internal Revenue Code of 1986 requires the
submission of an application before a permit may be issued to procure
and use tax-free alcohol. Current regulations require the submission of
a detailed application with supporting data by all applicants. The
regional director (compliance) is authorized to waive some of the
detailed data for applicants who are a State, political subdivisions
thereof or the District of Columbia or whose annual withdrawal and
usage of tax-free alcohol will not exceed 1,500 proof gallons.
ATF believes that this waiver should be available to all applicants
when the regional director (compliance) concludes that the revenue is
adequately protected with respect to the person submitting the
application. ATF is, therefore, proposing that regulatory provisions be
made that will allow the regional director (compliance) to waive
detailed applications with supporting data for all applicants. The
regulations will continue to recognize the current waiver category of
applicants who are governmental entities and the waiver category based
on the 1,500 proof gallon annual withdrawal and usage is encompassed by
the proposed amended regulation.
Public Participation
ATF requests written comments from all interested persons. All
comments received on or before the closing date will be carefully
considered. Comments received after that date will be given the same
consideration if it is practical to do so, but assurance of
consideration cannot be given except as to comments received on or
before the closing date.
ATF will not recognize any material as confidential. Any material
which the commenter considers to be confidential or inappropriate for
disclosure should not be included in the comment. The name of the
person submitting the comment is not exempt from disclosure.
Any interested person who desires an opportunity to comment orally
at a public hearing should submit his or her request, in writing, to
the Director within the 60-day comment period. The Director, however,
reserves the right to determine, in light of all circumstances, whether
a public hearing will be scheduled.
Written comments will be available for public inspection during
normal business hours at the following address: ATF Reading Room,
Office of Public Affairs and Disclosure, Room 6480, 650 Massachusetts
Avenue, NW, Washington, DC.
Regulatory Flexibility Act
It is hereby certified that this proposed regulation will not have
a significant economic impact on a substantial number of small
entities. The regulations will give ATF specific regulatory authority
to relax and remove certain registration requirements. The regulations
will not increase recordkeeping or reporting requirements. Accordingly,
a regulatory flexibility analysis is not required because the proposal,
if promulgated as a final rule, will not have a significant economic
impact on a substantial number of small entities.
Executive Order 12866
It has been determined that this proposed regulation is not a
significant regulatory action as defined in
[[Page 30021]]
Executive Order 12866. Accordingly, this proposal is not subject to the
analysis required by this Executive Order.
Paperwork Reduction Act
The provisions of the Paperwork Reduction Act of 1980, Pub. L. 96-
511, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR Part
1320, do not apply to this notice because no new information collection
requirements are being proposed.
The existing collections of information contained in this notice of
proposed rulemaking have been previously reviewed and approved by the
Office of Management and Budget in accordance with the requirements of
the Paperwork Reduction Act of 1980 (44 U.S.C. 3504(h) under control
numbers 1512-0334 and 1512-0335.
Drafting Information: The principal drafter of this document is
Mary A. Wood of the Wine, Beer, and Spirits Regulations Branch,
Bureau of Alcohol, Tobacco, and Firearms.
List of Subjects in 27 CFR Part 22
Administrative practice and procedure, Advertising, Alcohol and
alcohol beverages, Authority delegations (Government agencies), Claims,
Excise taxes, Reporting and recordkeeping requirements, Surety bonds.
Authority and Issuance
ATF is proposing to amend Part 22 in Title 27 of the Code of
Federal Regulations as follows:
PART 22--DISTRIBUTION AND USE OF TAX-FREE ALCOHOL
Par. 1. The authority citation for Part 22 continues to read as
follows:
Authority: 26 U.S.C. 5001, 5121, 5142, 5143, 5146, 5206, 5214,
5271-5276, 5311, 5552, 5555, 6056, 6061, 6065, 6109, 6151, 6806,
7011, 7805; 31 U.S.C. 9304, 9306.
Sec. 22.21 [Amended]
Par. 2. Section 22.21(a) is amended by removing the word ``bonds,''
from the first sentence.
Sec. 22.25 [Removed]
Par. 3. Section 22.25 is removed.
Sec. 22.26 [Redesignated]
Par. 4. Section 22.26 is redesignated as Sec. 22.25.
Sec. 22.27 [Redesignated]
Par. 5. Section 22.27 is redesignated as Sec. 22.26.
Sec. 22.43 [Amended]
Par. 6. In Sec. 22.43, paragraphs (a)(2) and (b) are revised as
follows:
Sec. 22.43 Exceptions to application requirements.
(a) * * *
(2) Applications, Form 5150.22, filed by applicants where the
regional director (compliance) has determined that the waiver of such
requirements does not pose any jeopardy to the revenue or a hindrance
of the effective administration of this part.
(b) The waiver provided for in this section will terminate for a
permittee, other than States or political subdivisions thereof or the
District of Columbia, when the permittee files an application to amend
the permit and the regional director (compliance) determines that the
conditions justifying the waiver no longer exist. In this case, the
permittee will furnish the information in respect to the previously
waived items, as provided in Sec. 22.57(a)(2).
Sec. 22.59 [Amended]
Par. 7. In Sec. 22.59, the second sentence of the section is
removed.
Sec. 22.60 [Amended]
Par. 8. Section 22.60 is amended as follows:
1. Paragraph (b) is removed.
2. Paragraph (c) is redesignated as paragraph (b).
3. Paragraph (d) is redesignated as paragraph (c).
Sec. 22.62 [Amended]
Par. 9. Section 22.62 is amended by the removal of the last
sentence in the section.
Sec. 22.63 [Amended]
Par. 10. Section 22.63 is amended as follows:
1. Paragraph (b) is removed.
2. The paragraph letter and title ``(a) Permit.'' designation is
removed.
Sec. 22.68 [Amended]
Par. 11. Section 22.68 is amended as follows:
1. Paragraph (b) is removed.
2. The paragraph letter and title ``(a) Notice.'' designation is
removed.
Subpart E [Removed and Reserved]
Par. 12. Subpart E (Bonds and Consent of Surety) is removed and
reserved.
Sec. 22.152 [Amended]
Par. 13. Section 22.152 is amended as follows:
1. Paragraph (b) is removed.
2. Paragraph (c) is redesignated as paragraph (b).
Signed: May 8, 1996.
Bradley A. Buckles,
Acting Director.
Approved: May 24, 1996.
John P. Simpson.
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 96-14850 Filed 6-12-96; 8:45 am]
BILLING CODE 4810-13-U
