Small Brewers Bond Reduction and Requirement To File Tax Returns, Remit Tax Payments and Submit Reports Quarterly
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Final rule; Treasury decision.
CFR Part: "27 CFR Part 25"
RIN Number: "RIN 1513-AB94"
Citation: "79 FR 58674"
Document Number: "Docket No. TTB-2012-0006; T.D. TTB-123; Re: Notice No. 131 and T.D. TTB-109"
Page Number: "58674"
"Rules and Regulations"
SUMMARY: The Alcohol and
EFFECTIVE DATE: This final rule is effective on
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
Background
TTB Authority
Chapter 51 of the Internal Revenue Code of 1986 (IRC) pertains to the taxation of distilled spirits, wines, and beer (see title 26 of the United States Code (U.S.C.), chapter 51 (26 U.S.C. chapter 51)). With regard to beer, IRC section 5051 (26 U.S.C. 5051) imposes a Federal excise tax on all beer brewed or produced, and removed for consumption or sale, within
Section 5061 pertains to the time and method for submitting tax returns and payment of the applicable excise taxes. Section 5061 states that Federal excise taxes on distilled spirits, wines, and beer shall be collected on the basis of a return, and that the Secretary of the Treasury (the Secretary) shall, by regulation, prescribe the period or event for which such return shall be filed. Section 5061(d)(1) generally requires that the excise taxes owed on alcohol beverages, including beer, withdrawn under bond be paid no later than the 14th day after the last day of the semimonthly period during which the withdrawal occurs. Under a special rule, September has three return periods (section 5061(d)(5)), resulting in a total of 25 returns due each year. Section 5061(d)(4) provides an exception to the semimonthly rule for taxpayers who reasonably expect to be liable for not more than
Section 5401(b) (26 U.S.C. 5401(b)) provides that all brewers shall obtain a bond to insure the payment of any taxes owed. The amount of such bond shall be "in such reasonable penal sum" as prescribed by the Secretary in regulations "as necessary to protect and insure collection of the revenue."
Section 5415 of the IRC (26 U.S.C. 5415) requires brewers to keep records and to make true and accurate "returns" of their brewing and associated operations at the times and for such periods as the Secretary prescribes by regulation. The implementing regulations refer to these "returns" as "reports" of operations.
The Alcohol and
Reducing Burdens on
Executive Order 13563, Improving Regulation and Regulatory Review (E.O. 13563), signed by the President on
Revisions to the Beer Regulations (Part 25): Under the authority of the Internal Revenue Code, TTB regulates activities at breweries. The regulations of Title 27 of the Code of Federal Regulations, Part 25, address the qualification of breweries, bonds and taxation, removals without payment of tax, and records and reporting. Brewery regulations were last revised in 1986 and need to be updated to reflect changes to the industry, including the increased number of small ("craft") brewers. In an advance notice of proposed rulemaking, TTB plans to solicit comments regarding potential ways to decrease the regulatory burden on industry members (including but not limited to streamlining and/or reducing the reporting and recordkeeping requirements for the industry, including small business members) and increase efficiency for both the industry and TTB. Upon consideration of comments received, TTB intends to develop and propose specific regulatory changes.
In
There is no specific statutory or regulatory definition as to who is a "small" brewer. However, for taxpayers who reasonably expect to be liable for not more than
Tax Return Filing, Tax Payment, Bond, and Reporting Requirements
Statutory requirements for brewers include filing tax returns, remitting excise tax payments, obtaining a brewer's bond, and submitting reports of operations. Under TTB's current regulations, there are options that a small brewer must consider. First, the regulations provide that a small brewer may file tax returns and pay taxes either semimonthly or quarterly (27 CFR 25.164(c)). Under
With regard to submitting reports of operations, the general regulatory rule is that monthly reports are required; but a brewer who produces less than 10,000 barrels of beer a year may opt to submit reports of operations quarterly (27 CFR 25.297). In addition, prior to the publication of the temporary rule on
Temporary Rule and Notice of Proposed Rulemaking
On
In the same issue of the
In Notice No. 131, TTB proposed to adopt as a final rule in
As TTB stated in Notice No. 131, simplifying the bond requirement, and creating consistencies between the tax return and remittance requirement and the operations reporting requirement, will make it easier for small brewers to understand and comply with the TTB regulations. These changes also make it easier for TTB to administer its regulatory program while providing adequate protection to the revenue.
Specifically, TTB estimated that filing tax returns quarterly would reduce a brewer's paperwork burden from 18.75 hours per year (based on an estimate of 45 minutes to prepare and submit a semimonthly return) to just 3 hours per year. If all small brewers file tax returns, remit tax payments, and submit operations reports quarterly, TTB will reduce the overall time it spends processing these submissions.
In Notice No. 131, TTB solicited comments from the public on these proposed amendments and on other changes TTB could make to the part 25 beer regulations that could further reduce the regulatory burden on brewers and at the same time meet statutory requirements and regulatory objectives. The comment period for Notice No. 131 closed
Comments Received
In response to Notice No. 131, TTB received 44 comments. In the following discussion of the comments, TTB provides a number in parentheses, such as "(Comment 1)," to refer to the number that was assigned to the individual comment when it was submitted through "Regulations.gov" (http://www.regulations.gov), an online system for individuals to submit comments on proposed regulations and related documents. One comment was sent directly to TTB and was added to the other comments received on this rulemaking action through Regulations.gov.
Forty-two of the 44 comments came from individuals associated with the brewing industry; the remaining two came from the
Correction to the Annual Beer Excise Tax Statistics
One of the commenters (Comment 44) stated that the figures TTB cited in both the proposed rule and temporary rule for excise tax collections on beer for 2010 and 2011 were incorrect according to TTB's monthly statistical reports. Specifically, TTB had stated that small brewers cumulatively paid 5.6 percent (approximately
TTB acknowledges that, in the proposed rule and the temporary rule, it printed incorrect numbers for the total amount of tax collections on beer in 2010 and 2011. TTB inadvertently printed the number of taxable barrels of beer that domestic brewers had reported producing for domestic consumption in 2010 and 2011 as if those numbers were the total amount of excise taxes TTB collected on domestically-produced beer in those years. In 2010, the actual total amount of excise taxes TTB collected on beer produced in the U.S. was approximately
Reduced Penal Sum for Brewer's Bond
Eighteen of the 44 comments specifically addressed the proposal to reduce the penal sum for a brewer's bond to a flat
Other commenters stated that the savings incurred from a reduced bond amount would allow them to reinvest in their businesses. For example, one self-identified small brewery owner (Comment 34) stated that the bond reduction would "save my company . . . thousands of dollars which will in turn allow us to hire the much needed additional employees to run the brewery." Two other commenters stated that the savings brought about by a reduced bond amount would go to "purchasing equipment that could further our ability to produce our beers" (Comment 35) and would also "be used to help offset labor and equipment costs" (Comment 39). Finally, other commenters supported the flat
One other comment came from a surety company (Comment 21) that asked for clarification regarding the relationship between the 4-year term of the required bond and the 3-year effective period of the temporary rule. Specifically, the commenter noted that the current required term for surety bonds is 4 years and asked what effect the temporary rule had on the 4-year term of the bond.
TTB notes that temporary rules are issued by TTB under the authority of the IRC at 26 U.S.C. 7805, which states at paragraph (e)(2) that any temporary regulation shall expire within 3 years after the date of issuance of such regulation. TTB stated in Notice No. 131 that the modified bond amount set forth in the temporary rule is effective for 3 years from
Requirement To File Tax Returns, Remit Tax Payments, and Submit Reports Quarterly
Thirty-six of the comments TTB received specifically mentioned the proposal to require small brewers to file excise tax returns, remit payments, and submit reports of operations quarterly. In general, all 36 of the comments supported the proposal as a way to increase efficiency and reduce administrative expenses and paperwork burdens for small brewers. Many of the commenters included projected financial savings as a result of filing quarterly, rather than semimonthly. For example, one commenter (Comment 2), who said his company produced about 2,600 barrels of beer in 2012, expected to save
Another commenter (Comment 29), who described his brewery as a "three person operation," said that the three of them "have our hands more than full just trying to make beer," and that filing quarterly will save much-needed time and approximately
One self-identified small brewer (Comment 17) supported the proposal to allow small brewers to submit taxes and operations reports quarterly because it would be "an incredible time savings" for his business. However, he also stated that he would prefer TTB to allow small brewers the option to submit their taxes and operations reports monthly because his State requires State taxes to be paid monthly, and submitting Federal and State taxes on the same schedule would be more efficient for him. In response to this commenter's proposal, TTB notes that the overwhelming response to the Notice No. 131 was that small brewers prefer to submit reports, file tax returns, and remit tax payments as infrequently as possible, with many respondents specifically supporting the quarterly schedule. Therefore, TTB has determined that requiring submissions four times a year will more effectively accomplish the goals of reducing the regulatory burden and creating administrative efficiencies for affected entities than either requiring or allowing more frequent submissions.
Use of the Term "Small Brewer"
The Brewers Association (Comment 43) supported the proposed quarterly requirement for submitting reports and paying taxes, as well as the proposed flat
In response, TTB notes that, in Notice No. 131, it proposed adopting the same eligibility standards for reporting operations quarterly on Form 5130.26 as apply to filing Federal excise tax returns and remitting tax payments quarterly. TTB made this proposal in order to make it easier for small brewers to understand and comply with the TTB regulations. The "reasonably expects to be liable for not more than
Suggested Regulatory and Other Actions
Consistent with the intent of the advanced notice of proposed rulemaking described in the Plan, as discussed earlier in this preamble, TTB also sought comments on other changes regarding part 25 regulations that brewers and other interested parties believe TTB should consider.
With respect to the association's request for TTB to eliminate the requirement for TTB approval of formulas for "non-controversial products", TTB notes that it issued TTB Ruling 2014-4, Ingredients and Processes Used in the Production of Beer Not Subject to Formula Requirements on
With respect to the association's request for TTB to clarify the Certificate of Label Approval requirements for malt beverages intended for sale only within a State, TTB notes that it issued TTB Ruling 2013-1, Malt Beverages Sold Exclusively in Intrastate Commerce, on
TTB Finding
Based on the comments received in response to Notice No. 131, TTB has determined that the proposed regulations contained in that notice should be adopted as final, with a correction to a typographical error in
Delayed Effective Date
Although TTB did not receive any comments that discussed concerns regarding the amount of time brewers may need to adjust to quarterly filing and reporting, TTB has decided this final rule will become effective on
Regulatory Flexibility Act
Pursuant to the requirements of the Regulatory Flexibility Act (5 U.S.C. chapter 6), TTB certifies that this final rule will not have a significant economic impact on a substantial number of small entities. As discussed below in the Paperwork Reduction Act section of this document, the changes in this final rule will have the effect of lessening current reporting requirements on small businesses. TTB estimates that the amendment requiring small brewers to submit their excise tax returns quarterly rather than semimonthly will reduce their current reporting burden per respondent from 18.75 hours per year to 3 hours per year and that the requirement that small brewers submit their report of operations quarterly will reduce current reporting burdens per respondent from 12 hours per year to 4 hours. Accordingly, a regulatory flexibility analysis is not required.
Pursuant to section 7805(f) of the Internal Revenue Code, TTB submitted the temporary rule (T.D. TTB-109, 77 FR 72939,
Executive Order 12866
It has been determined that this document is not a significant regulatory action as defined in E.O. 12866. Therefore, a regulatory assessment is not necessary.
Paperwork Reduction Act
There are two collections of information approved by the
OMB Control Number 1513-0083
TTB bases the estimated reporting burdens submitted to OMB for the Excise Tax Return (OMB Control Number 1513-0083) on the total number of all TTB-regulated industry members who pay taxes, including beverage alcohol producers and tobacco products manufacturers. In order to estimate the burden-hour savings specific to brewers, TTB based the estimates below solely on the current number of individuals holding Brewer's Notices. TTB estimates that it takes, on average, 45 minutes to complete TTB Form 5000.24. The requirement that small brewers submit their excise tax returns quarterly is estimated to reduce their current reporting burden per respondent from 18.75 hours per year to 3 hours per year. In addition, it would reduce the estimated total annual reporting burden for brewers to 8,913 hours; this represents an estimated savings of 15,777 hours.
TTB estimates that, as a result of the regulatory amendments (and reflecting the estimated number of semimonthly and quarterly tax return filers), the total annual burden for tax return submissions will be as follows:
* Estimated number of respondents: 2,026 (180 filing semimonthly; 1,846 filing quarterly).
* Estimated annual frequency of responses: 25 for semimonthly reporting; 4 for quarterly reporting.
* Estimated total annual reporting burden: 8,913 hours (3,375 hours filing semimonthly and 5,538 hours filing quarterly).
* Estimated annual burden hours per respondent: 18.75 hours for semimonthly filing; 3 hours for quarterly filing.
OMB Control Number 1513-0007
TTB estimates that it takes an average of one hour to complete either TTB Form 5130.9 or TTB Form 5130.26. Therefore, the requirement that small brewers submit their report of operations quarterly will reduce their current reporting burdens per respondent from 12 hours to 4 hours per year. That is a savings of 8 hours for each small brewer not currently filing these reports quarterly. In addition, it will reduce the estimated total annual reporting burden to 9,544 hours, which is an estimated savings of 2,608 hours.
Based on the current number of individuals holding Brewer's Notices, TTB estimates that, as a result of the regulatory amendments (and reflecting the estimated number of brewers submitting monthly and quarterly operations reports), the total annual burden for the brewers operations reporting will be as follows:
* Estimated number of respondents: 2,026 (180 reporting monthly; 1,846 reporting quarterly).
* Estimated annual frequency of responses: 12 for monthly reporting; 4 for quarterly reporting.
* Estimated total annual reporting burden: 9,544 hours (2,160 hours for monthly reporting; 7,384 hours for quarterly reporting).
* Estimated annual burden hours per respondent: 12 hours for monthly reporting; 4 hours for quarterly reporting.
Drafting Information
Karen A. Thornton of the Regulations and Rulings Division, Alcohol and
List of Subjects in 27 CFR Part 25
Beer, Excise taxes, Reporting and recordkeeping requirements, Surety bonds.
Amendments to the Regulations
Accordingly, for the reasons set forth in the preamble, TTB amends 27 CFR, chapter I, part 25 as set forth below.
PART 25--BEER
1. The authority citation for part 25 continues to read as follows:
Authority: 19 U.S.C. 81c; 26 U.S.C. 5002, 5051-5054, 5056, 5061, 5121, 5122-5124, 5222, 5401-5403, 5411-5417, 5551, 5552, 5555, 5556, 5671, 5673, 5684, 6011, 6061, 6065, 6091, 6109, 6151, 6301, 6302, 6311, 6313, 6402, 6651, 6656, 6676, 6806, 7342, 7606, 7805; 31 U.S.C. 9301, 9303-9308.
2. In
(a) * * *
(2) Brewers filing quarterly tax returns. For brewers who were liable for not more than
(i) Beer removed for transfer to the brewery from other breweries owned by the same brewer;
(ii) Beer removed without payment of tax for export or for use as supplies on vessels and aircraft;
(iii) Beer removed without payment of tax for use in research, development, or testing; and
(iv) Beer removed for consumption or sale.
* * * * *
3. In
a. The first sentence in paragraph (c)(1) is amended by removing the words ", and chooses to use,"; and
b. The first sentence in paragraph (c)(2) is amended by removing the words "may choose to" and adding, in their place, the word "shall".
4. In
* * * * *
(b) Quarterly report of operations. (1) For calendar quarters commencing on or after
(2) If a brewer determines that it will be liable for more than
(3) The appropriate TTB officer may at any time require a brewer who is filing Form 5130.9 or Form 5130.26 quarterly to file such report monthly on Form 5130.9 if there is a jeopardy to the revenue.
(c) Retention. The brewer shall retain a copy of Form 5130.9 or Form 5130.26 (or any successor form) as part of the brewery records.
Signed:
Administrator.
Approved:
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. 2014-22964 Filed 9-29-14;
BILLING CODE 4810-31-P
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