Time for Payment of Certain Excise Taxes, and Quarterly Excise Tax Payments for Small Alcohol Excise Taxpayers, 3502-3515 [2011-1142]

Agencies

• Alcohol and Tobacco Tax and Trade Bureau
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 76, Number 13 (Thursday, January 20, 2011)]
[Rules and Regulations]
[Pages 3502-3515]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1142]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 19, 24, 25, 26, 40, 41, and 70

[Docket No. TTB-2011-0001; T.D. TTB-89; Re: Notice No. 115; T.D. ATF-
365; T.D. TTB-41; ATF Notice No. 813 and TTB Notice No. 56]
RIN 1513-AB43


Time for Payment of Certain Excise Taxes, and Quarterly Excise 
Tax Payments for Small Alcohol Excise Taxpayers

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Temporary rule; Treasury decision.

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SUMMARY: This temporary rule updates and reissues Alcohol and Tobacco 
Tax and Trade Bureau regulations pertaining to the semimonthly payments 
of excise tax on distilled spirits, wine, beer, tobacco products, and 
cigarette papers and tubes, and also reissues temporary regulations 
regarding quarterly payment of excise tax for small alcohol excise 
taxpayers. The temporary regulations adopted in this document replace 
temporary regulations issued under T.D. ATF-365 and T.D. TTB-41, which 
were originally published in 1995 and 2006, respectively. TTB is 
soliciting comments from all interested parties on these regulatory 
provisions through a notice of proposed rulemaking, published elsewhere 
in this issue of the Federal Register.

DATES: Effective Dates: This temporary rule is effective on February 
22, 2011, through February 24, 2014.

FOR FURTHER INFORMATION CONTACT: For questions concerning tax payment 
procedures and quarterly filing procedures, contact Jackie Feinauer, 
National Revenue Center, Alcohol and Tobacco Tax and Trade Bureau (513-
684-3442); for questions concerning this document, contact Kara 
Fontaine, Regulations and Rulings Division, Alcohol and Tobacco Tax and 
Trade Bureau (202-453-2103 or Kara.Fontaine@ttb.gov).

SUPPLEMENTARY INFORMATION: 

Background

TTB Authority

    The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible 
for the administration and enforcement of chapters 51 and 52 of the 
Internal Revenue Code of 1986 (IRC). These

[[Page 3503]]

provisions of the IRC concern the taxation of distilled spirits, wine, 
beer, tobacco products, and cigarette papers and tubes. TTB's 
responsibilities include promulgating regulations to implement the 
statutory provisions pertaining to the time and method for payment of 
the applicable excise taxes. See 26 U.S.C. 5061 pertaining to distilled 
spirits, wine, and beer and 26 U.S.C. 5703 pertaining to tobacco 
products and cigarette papers and tubes. Prior to January 24, 2003, our 
predecessor agency, the Bureau of Alcohol, Tobacco and Firearms (ATF) 
administered these statutory provisions and the regulations thereunder. 
The regulations implementing the times and methods for payment of these 
Federal excise taxes are now found in the TTB regulations at 27 CFR 
parts 19, 24, 25, 26, 40, 41, and 70.

Semimonthly Reporting and Payment of Tax

    Generally, the Federal excise taxes on distilled spirits, wine, 
beer, tobacco products, and cigarette papers and tubes are paid on the 
basis of a semimonthly return. The semimonthly periods covered by the 
tax return are from the 1st day to the 15th day of each month and from 
the 16th day to the last day of that month. The return must be filed 
and the taxpayment must be made no later than the 14th day after the 
last day of each semimonthly period.

Accelerated Payment Requirements for the Second Semimonthly Period in 
September

Uruguay Round Agreements Act

    Section 712 of the Uruguay Round Agreements Act (the URAA), Pub. L. 
103-465, 108 Stat. 4809, enacted on December 8, 1994, amended sections 
5061(d) and 5703(b)(2) of the IRC to accelerate the time for payment of 
taxes for most of the second semimonthly period of September. These 
amendments were adopted in order to ensure receipt of these taxes 
during the fiscal year to which they relate.
    The amendments made by the URAA divided the second semimonthly 
period in September into two payment periods for distilled spirits, 
wine, beer, tobacco products, and cigarette papers and tubes. The first 
of these payment periods runs from September 16 through September 26, 
and the second of these payment periods runs from September 27 through 
September 30. The tax return and payment for the period September 16 
through September 26 are due on or before September 29 except that, for 
taxpayers who are not required to pay taxes through electronic funds 
transfer (EFT), this first payment period ends on September 25 and 
taxes are due on or before September 28. The statutory amendments did 
not include an accelerated payment deadline for the second payment 
period (September 27 through 30) and therefore payment for it is due 
according to the general semimonthly payment rule (that is, on October 
14).
    The amendments made by the URAA also included a ``safe harbor'' 
rule covering the first (accelerated) payment period for taxes due for 
distilled spirits, wine, beer, tobacco products, and cigarette papers 
and tubes, which permits the taxpayer to meet his or her obligation to 
pay tax for that payment period based on payment of a proportion (11/
15ths) of the tax liability incurred for the period September 1 through 
September 15. In addition to the above, the amendments made by the URAA 
added a special due date rule (that is, the following day) when the due 
date for the new first (accelerated) payment in September falls on a 
Sunday.

Temporary Rule T.D. ATF-365

    On June 28, 1995, ATF published a temporary rule (T.D. ATF-365) in 
the Federal Register at 60 FR 33665, to implement the changes to 
sections 5061 and 5703 of the IRC made by section 712 of the URAA. 
Specifically, T.D. ATF-365 amended 27 CFR parts 19, 24, 25, 250 (now 
part 26), 270 (now part 40), 285 (now part 40), 275 (now part 41), and 
70, primarily by adding various provisions to those parts relating to 
reporting and tax payment for alcohol products, tobacco products, and 
cigarette papers and tubes.
    In addition, T.D. ATF-365 made extensive amendments to the firearms 
and ammunition excise tax regulations in 27 CFR part 53. Subsequent 
legislation has substantially changed these provisions. For clarity, 
TTB will address the amendments to part 53 in a separate rulemaking 
document.

 Subsequent Regulatory Changes

    The following subsequent regulatory amendments adopted by ATF and 
TTB affected some of the sections of the regulations that were amended 
by T.D. ATF-365:
     T.D. ATF-384, published in the Federal Register (61 FR 
54084), on October 17, 1996, recodified part 285 into part 270. As part 
of this recodification, Sec.  285.25 was redesignated as Sec.  270.355.
     T.D. ATF-444, published in the Federal Register (66 FR 
13849) on March 8, 2001, amended Sec. Sec.  275.114 (b)(1) and (b)(2) 
by changing the referenced form number from 5000.24 to 5000.25.
     T.D. ATF-459, published in the Federal Register (66 FR 
38547) on July 25, 2001, recodified part 250 as part 26.
     T.D. ATF-460, published in the Federal Register (66 FR 
39091) on July 27, 2001, recodified part 270 as part 40.
     T.D. TTB-16, published in the Federal Register (69 FR 
52421) on August 26, 2004, recodified part 275 as part 41.

Quarterly Excise Tax Filing for Small Alcohol Excise Taxpayers

Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users

    Section 11127 of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (the SAFETEA), Public Law 
109-59, 119 Stat. 1144, enacted on August 10, 2005, amended IRC section 
5061(d) (26 U.S.C. 5061(d)) by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6), respectively, and adding a new paragraph (4), 
which allows certain Federal alcohol excise taxpayers to pay taxes 
quarterly rather than on a semimonthly basis as provided in section 
5061(d) before the amendment. Application of this new provision 
commenced with quarterly tax payment periods beginning on and after 
January 1, 2006.
    Paragraph (4) of section 5061(d) specifically references taxes 
imposed under subparts A, C, and D of part I of subchapter A of chapter 
51 of the IRC and section 7652 of the IRC (26 U.S.C. 7652). The taxes 
imposed under subparts A, C, and D involve gallonage taxes on distilled 
spirits (26 U.S.C. 5001), wines (26 U.S.C. 5041), and beer (26 U.S.C. 
5051). These taxes apply to spirits, wines, and beer produced in or 
imported into the United States. TTB collects these taxes from 
proprietors of domestic bonded premises pursuant to regulations 
contained in 27 CFR parts 19, 24, and 25; United States Customs and 
Border Protection (CBP) collects these taxes from importers of these 
products pursuant to regulations contained in title 19 of the CFR. 
Section 7652 of the IRC (26 U.S.C. 7652) imposes a tax on spirits, 
wines, and beer coming to the United States from Puerto Rico and the 
U.S. Virgin Islands. TTB collects these taxes from regulated premises 
in Puerto Rico under regulations in 27 CFR part 26, and CBP collects 
these taxes pursuant to title 19 of the CFR when the products in 
question come to the United States from the U.S. Virgin Islands.

[[Page 3504]]

    The quarterly tax payment provisions of paragraph (4) of section 
5061(d) apply to ``any taxpayer who reasonably expects to be liable for 
not more than $50,000 in taxes * * * for the calendar year and who was 
liable for not more than $50,000 in such taxes in the preceding 
calendar year.'' In such a case the taxpayer must pay the tax no later 
than the 14th day after the last day of the calendar quarter during 
which the action giving rise to the tax (that is, withdrawal, removal, 
entry, and bringing in from Puerto Rico) occurs. The statute defines a 
``calendar quarter'' as the three-month period ending on March 31, June 
30, September 30, or December 31.
    Paragraph (4) also provides that the quarterly tax payment 
procedure does not apply to a taxpayer for any remaining portion of the 
calendar year following the date on which the aggregate amount of tax 
due from the taxpayer exceeds $50,000. If at any point during the year 
the taxpayer's liability exceeds $50,000, any tax that has not been 
paid on that date becomes due on the 14th day after the last day of the 
semimonthly period in which that date falls. Thus, in effect, a 
taxpayer whose tax liability exceeds the $50,000 limit during the 
calendar year is required to revert to the semimonthly payment 
procedure for the remainder of the year.

Temporary Rule T.D. TTB-41

    On February 2, 2006, TTB published in the Federal Register (71 FR 
5598) a temporary rule, T.D. TTB-41, that amended 27 CFR parts 19, 24, 
25, 26, and 70 to implement the new quarterly tax payment procedures of 
section 5061(d)(4) of the IRC. This Treasury Decision revised or 
otherwise amended regulatory texts concerning return or payment periods 
that had been adopted in T.D. ATF-365. The affected provisions were: 
Paragraph (a) of Sec.  19.522, paragraph (a) of Sec.  19.523, paragraph 
(b) and the heading of paragraph (c) of Sec.  24.271, paragraphs (c) 
and (d) of Sec.  25.164, the section heading and paragraph (a)(1) of 
Sec.  25.164a, and paragraphs (b) and (d) of Sec.  250.112 (now Sec.  
26.112). Tax payments in connection with transactions that are subject 
to regulations administered by CBP were not dealt with in T.D. TTB-41. 
In the Supplementary Information section of the T.D. TTB-41 preamble, 
TTB included the above summary of the changes brought about by section 
11127 of the SAFETEA and also included discussions of the following: 
(1) Basic interpretive considerations; (2) effect on bond amounts; (3) 
effect on reporting requirements; and (4) other considerations.

Basic Interpretive Considerations

    The following basic interpretive considerations were discussed in 
the preamble, and incorporated in the regulatory texts, of T.D. TTB-41.
    1. We noted in T.D. TTB-41 that the longer deferral period allowed 
under section 5061(d)(4) would result in a larger unpaid tax liability, 
with a consequent impact on bonds. While we recognized that the intent 
of the statutory change was to ease the regulatory burden on small 
taxpayers, we also acknowledged the need to protect the revenue by 
ensuring that unpaid taxes are covered by appropriate bond amounts. If 
a taxpayer otherwise eligible for the new quarterly payment procedure 
does not wish to adjust the penal sum of its bond, that taxpayer should 
be allowed to continue to make payments and file returns on a 
semimonthly basis.
    Accordingly, we decided to treat the quarterly payment procedure as 
optional rather than mandatory in the implementing regulations in order 
to provide flexibility to those taxpayers. Looking at section 5061 as a 
whole, and noting the placement of the semimonthly payment procedure in 
subsection (d)(1) as a provision of general applicability, we continue 
to believe that this interpretation is permissible because it makes the 
semimonthly procedure available to any taxpayer eligible for deferred 
payment of taxes, even if the taxpayer is also eligible for the 
quarterly payment procedure. The Conference Report of the Committee of 
Conference on H.R. 3, Report 109-203 at page 1133, describes the 
statutory change as follows: ``[D]omestic producers and importers of 
distilled spirits, wine, and beer with excise tax liability of $50,000 
or less attributable to such articles in the preceding calendar year 
may file returns and pay taxes within 14 days after the end of the 
calendar quarter instead of semi-monthly.'' The use of the word ``may'' 
indicates Congress viewed the continued use of the semimonthly 
procedure as an option.
    2. Based on the wording of new paragraph (4) and of redesignated 
paragraph (5) of section 5061(d), we took the position that the 
``special rule for taxes due in September'' properly applies only to 
semimonthly return periods and therefore does not apply to quarterly 
payments under new paragraph (4). Further, the Conference Report of the 
Committee of Conference on H.R. 3, Report 109-203 at page 1134, states 
``special rules accelerating payments for taxes allocable to the second 
half of September do not apply to quarterly filers under the Senate 
amendment''. Accordingly, we changed the regulations referring to this 
payment to restrict its application to taxpayers who file semimonthly 
returns.
    3. In T.D. TTB-41 we expressed our understanding that a 
``taxpayer'' means an entity (including an individual, partnership or 
corporation) with a single taxpayer identification number, because the 
IRC controlled group rules generally do not apply to quarterly payment 
scenarios as explained below. For this reason we included in the 
regulatory texts an appropriate definition of this term.
    4. With regard to the reference in the statute to a taxpayer who 
reasonably expects to be liable for not more than $50,000 in a tax 
year, we concluded that it would be appropriate to define ``reasonably 
expects'' in the implementing regulations to mean both that the 
taxpayer was not liable for more than $50,000 in taxes the previous 
year and that there are no other existing or anticipated circumstances 
(such as an increase in production capacity) that would cause the tax 
liability to increase beyond $50,000.
    In addition, several other interpretative considerations were 
discussed in the preamble of T.D. TTB-41 and have been applied by TTB 
for purposes of administering section 5061(d)(4); however, they were 
not explicitly incorporated in the T.D. TTB-41 regulatory texts. The 
interpretative considerations in question were as follows:
     We noted that a single taxpayer could have multiple 
locations, and in such a case the combined liability for all locations 
for the same taxable commodity must be considered in determining 
eligibility for quarterly payments.
     Since the taxes imposed by 26 U.S.C. 5001, 5041, and 5051 
apply to commodities produced in or imported into the United States, a 
taxpayer who has both domestic operations and import transactions must 
combine the tax liability on the domestic operations and the imports to 
determine eligibility for the quarterly procedure.
     We noted that new paragraph (4) makes no mention of 
controlled groups. Accordingly, we concluded that it is appropriate to 
take into account only the taxpayer's own liability in determining 
eligibility for quarterly payments, even if the taxpayer is considered 
to be a member of a controlled group for other purposes under the IRC. 
We also noted that there may be some individual taxpayers who

[[Page 3505]]

are eligible for the quarterly payment procedure but who are required 
to pay taxes by EFT because they are part of a controlled group that 
owes more than $5 million in distilled spirits, wine, or beer excise 
taxes per year. See 26 U.S.C. 5061(e). These individual taxpayers must 
transmit the quarterly payments via EFT.
     We noted that new taxpayers will be eligible to file 
quarterly returns in their first year of business simply if they 
reasonably expect to be liable for not more than $50,000 in taxes 
during that calendar year.
     Finally, we pointed out in T.D. TTB-41 that if a taxpayer 
filing quarterly exceeds $50,000 in tax liability during a taxable year 
and therefore must revert to the semimonthly return procedure, that 
taxpayer may resume quarterly payments only after a full calendar year 
has passed during which the taxpayer's liability did not exceed 
$50,000. This flows from the statutory provision, 26 U.S.C. 
5061(d)(4)(A), which states the eligibility requirement that a 
taxpayer's liability must not have exceeded $50,000 in the preceding 
calendar year.

Effect on Bond Amounts

    The bond regulations that apply to domestic producers of distilled 
spirits and wine at 27 CFR 19.245 and 24.148, and the regulations 
covering deferral bonds for proprietors bringing distilled spirits, 
wine, and beer to the United States from Puerto Rico at 27 CFR 26.66 
(for distilled spirits), 26.67 (for wine), and 26.68 (for beer), 
require proprietors to calculate the penal sum of their deferral bonds 
to cover the unpaid tax that is chargeable against the bond at any one 
time. We stated in T.D. TTB-41 that we do not believe section 
5061(d)(4) requires any changes to these regulatory provisions, the 
terms of which will clearly apply to taxpayers who use the quarterly 
payment procedure. However, we noted that it would be prudent for a 
taxpayer who uses the quarterly payment procedure to review the current 
deferral bond coverage, which in all likelihood is based on anticipated 
semimonthly taxes plus a 14-day deferral period. Such taxpayers may 
need to increase the deferral coverage for anticipated quarterly taxes 
because of the longer three-month plus 14-day deferral period.
    We noted in T.D. TTB-41 that the penal sum amount set by regulation 
at 27 CFR 25.93 for a brewer's bond is 10 percent of the maximum amount 
of annual tax liability, with a minimum amount of $1,000. This 10 
percent/minimum amount provides adequate bond coverage for small 
brewers who incur less than $50,000 of annual taxable liability each 
year and who file on a semimonthly basis. However, we also noted that 
the average maximum tax liability per return period for small brewers 
who pay quarterly will be approximately 29 percent of their annual 
liability. Our calculation indicated that the average maximum liability 
for a quarter of the year, plus the additional liability incurred 
during the 14 day period provided for payment, equals between 2.5 and 
3.0 times the amount of the bond coverage presently required. Thus we 
concluded that the required bond coverage under Sec.  25.93 is 
inadequate for small brewers who pay taxes quarterly. As a result, T.D. 
TTB-41 increased the required bond coverage for small brewers who pay 
excise taxes quarterly to 29 percent of the maximum amount of annual 
tax liability. We note that such increased bonding liability applies 
only to small brewers who pay excise taxes quarterly and not to other 
small brewers who continue to pay semimonthly.

Effect on Reporting Requirements

    We noted in T.D. TTB-41 that, in general, proprietors of distilled 
spirits plants, bonded wine cellars, and breweries must file monthly 
reports of operations. Since proprietors who are small taxpayers may be 
filing quarterly tax returns, in T.D. TTB-41 we discussed whether these 
proprietors should file quarterly reports of operations as well.
    When T.D. TTB-41 was published, the beer regulations at 27 CFR 
25.297(b) already allowed brewers to file quarterly reports if they 
produce less than 10,000 barrels of beer during a calendar year. This 
level of activity represents a tax liability of $70,000 per year at the 
reduced rate of tax for small brewers, so brewers eligible to file 
quarterly returns under section 5061(d)(4) were already eligible to 
file quarterly reports under the existing rule. Therefore, T.D. TTB-41 
did not make any change to the regulations regarding the brewers' 
report of operations.
    Prior to publication of T.D. TTB-41, the wine regulations at 27 CFR 
24.300(g)(2) allowed small proprietors to file an annual, rather than a 
monthly, report of operations if they are eligible to pay taxes on an 
annual basis and their total wine to be accounted for in a calendar 
month does not exceed 20,000 gallons. We continue to believe, as stated 
in T.D. TTB-41, that it is appropriate to allow wine premises 
proprietors to file quarterly reports of operations if they are 
eligible to make quarterly tax payments. Accordingly, T.D. TTB-41 
revised paragraph (g) of Sec.  24.300 to give quarterly taxpayers the 
option of filing quarterly reports of operations, and we set a maximum 
activity level of 60,000 gallons of wine to be accounted for in a 
calendar quarter in order to ensure that proprietors with very large 
production or storage capacity who pay little or no tax will continue 
to file monthly reports of operations. T.D. TTB-41 also made a 
corresponding conforming change to 27 CFR 24.313, Inventory records.
    In the case of distilled spirits plant proprietors, we noted in 
T.D. TTB-41 that there are four operational report forms and that there 
is no provision in the TTB regulations specifying a reporting interval 
less frequent than monthly. We determined that T.D. TTB-41 was not the 
appropriate vehicle for making a change in the timing for reports of 
operations.

Other Considerations

    The TTB regulations include provisions that allow TTB to require 
prepayment of taxes or to make a jeopardy assessment of taxes if we 
believe such action is necessary to protect the revenue. We reviewed 
those prepayment and jeopardy assessment provisions prior to the 
publication of T.D. TTB-41 and determined that no changes to the 
prepayment and jeopardy assessment provisions were needed in order for 
them to apply to taxpayers who pay on a quarterly basis. We remain of 
the view that such changes are not necessary.
    In T.D. TTB-41 we stated that we had considered whether to require 
the filing of a notice of intent by a taxpayer who chooses to make 
quarterly tax payments before the taxpayer begins the procedure. Since 
we can determine from records we already have that a taxpayer appears 
to be eligible for the quarterly payment procedure (in particular, that 
the taxpayer's liability for the previous calendar year did not exceed 
$50,000), and because advance notice would serve no other useful 
purpose, we decided not to require advance notice. We remain of the 
view that advance notice is not necessary.

Reissuance of T.D. ATF-365 and T.D. TTB-41 as a New Temporary Rule

    When T.D. ATF-365 was published, a notice of proposed rulemaking 
was published in the same issue of the Federal Register inviting public 
comments on that temporary rule; TTB has no record of comments received 
by ATF in response to this comment solicitation, and no action was 
taken by ATF to adopt the T.D. ATF-365 temporary regulations as a final 
rule. As

[[Page 3506]]

noted above, a number of subsequent changes to the ATF/TTB regulations 
were made that affected the texts adopted in T.D. ATF-365, the most 
substantively significant of which were the changes to the alcohol 
excise tax payment provisions made by T.D. TTB-41, which included some 
revisions of the provisions implementing the URAA section 712 special 
September rule to accommodate the SAFETEA section 11127 quarterly 
payment procedure. When T.D. TTB-41 was published, a notice of proposed 
rulemaking was published in the same issue of the Federal Register 
inviting public comments on that temporary rule; only one comment was 
received in response to that comment solicitation, and that commenter 
expressed support for the rulemaking. TTB has not taken final action on 
the temporary regulations contained in T.D. TTB-41.
    In view of the fact that the regulatory amendments adopted in T.D. 
TTB-41 in part involved a revision of, and thus depended on, amendments 
previously made by T.D. ATF-365, it would not be practical to take 
final action on the T.D. TTB-41 regulations without first finalizing 
those earlier regulatory amendments. However, we note both that a 
significant period of time has elapsed since T.D. ATF-365 was published 
and that the earlier rulemaking record is incomplete in that there is 
no record of comments received in response to the notice of proposed 
rulemaking published in connection with T.D. ATF-365. Given these 
circumstances, we believe that the best approach at this juncture would 
be to publish one new temporary rule that, in effect, reissues the 
regulatory texts adopted in T.D. ATF-365 and in T.D. TTB-41, with 
necessary changes to the T.D. ATF-365 texts to conform them to the 
later amendments noted above. The regulatory text amendments contained 
in this document are discussed in more detail below. In addition, in 
order to ensure a complete rulemaking record consistent with the 
requirements of 26 U.S.C. 7805(e)(1), we are publishing in the Proposed 
Rules section of this issue of the Federal Register a notice of 
proposed rulemaking inviting comments from the public on this new 
temporary rule.

Provisions of T.D. ATF-365 Reflected in This New Temporary Rule

    In addition to the provisions covering the basic URAA ``September 
rule,'' this temporary rule includes the following regulatory 
provisions (with appropriate section number changes to reflect the 
recodification of some parts of the regulations as mentioned above) 
regarding distilled spirits, wine, beer, tobacco products, and 
cigarette papers and tubes that were published in T.D. ATF-365:
    1. Safe harbor rule. The IRC as amended by the URAA specifically 
provides that, in the case of taxes on distilled spirits, wine, beer, 
tobacco products, and cigarette papers and tubes, the accelerated 
payment requirement will be met if the taxpayer pays not later than 
September 29 an amount equal to 11/15th (73.3 percent) of the 
taxpayer's liability for the first semimonthly period in September. 
This ``safe harbor'' provision is reflected in this temporary rule in 
27 CFR 19.523(c)(2), 24.271(c)(2), 25.164a(b), 26.112(d)(2), 40.164(b), 
40.355(g)(2), and 41.114(b)(2).
    2. Special rule for taxpayers not required to remit taxes by EFT. 
The URAA amendment provided special rules for taxpayers who are not 
required to remit taxes by EFT for the calendar year. For those 
taxpayers, payment of taxes for the period September 16 to September 25 
is due on or before September 28. The regulations relating to this 
requirement provide that the requirement to pay tax for this period is 
satisfied if the taxpayer pays an amount equal to \2/3\ (66.7 percent) 
of the taxpayer's liability for the first semimonthly period in 
September. These provisions are reflected in this temporary rule in 27 
CFR 19.523(c)(1)(ii), 19.523(c)(2)(ii), 24.271(c)(1)(ii), 
24.271(c)(2)(ii), 25.164a(a)(2), 25.164a(b)(2), 26.112(d)(1)(ii), 
26.112(d)(2)(ii), 40.164(a)(2), 40.164(b)(2), 40.355(g)(1)(ii), 
40.355(g)(2)(ii), 41.114(b)(1)(ii) and 41.114(b)(2)(ii).
    3. Last day for making payment. The URAA amendments revised, in 
part, the special rules for due dates falling on Saturday, Sunday, or 
legal holidays as defined in 26 U.S.C. 7503. The amendment relating to 
due dates falling on Sunday applies only to the accelerated return 
period in September. If the required due date for the accelerated 
payment period falls on a legal holiday or Saturday, taxpayment is due 
on the immediately preceding day, and if the required due date for the 
accelerated payment period falls on a Sunday, taxpayment is due on the 
following Monday. These provisions are reflected in this temporary rule 
in Sec. Sec.  19.523(c)(3), 24.271(c)(3), 25.164a(c), 26.112(d)(3), 
40.164(c), 40.355(g)(3), and 41.114(b)(3).
    Finally, as a result of our review of the regulatory texts 
published in T.D. ATF-365, we have made a number of nonsubstantive, 
editorial, or conforming changes to those texts to improve their 
clarity and readability. These include minor organizational and wording 
changes, inclusion of paragraph headings where appropriate to assist 
the reader in following the texts and inclusion of a revision of 
paragraph (b) of Sec.  40.355 to ensure consistency of paragraph 
heading usage within the section.

Provisions of T.D. TTB-41 Reflected in This New Temporary Rule

    The following regulatory amendments issued in T.D. TTB-41 
implementing 26 U.S.C. 5061(d)(4), some of which incorporate and 
therefore take the place of September rule amendments adopted in T.D. 
ATF-365, are being reissued in this temporary rule:
     27 CFR Part 19. The regulations at 27 CFR 19.11, 19.522, 
19.523, 19.565, and 19.703 were amended to accommodate the quarterly 
return procedure. The amendment of Sec.  19.565 includes a 
reorganization of the text for editorial purposes, as well as the 
removal of the word ``semimonthly.''
     27 CFR Part 24. To accommodate the quarterly procedure, 
Sec.  24.10, Sec.  24.271 (which prescribes the return periods 
available for proprietors who have deferral bonds), and Sec.  24.300(g) 
were amended in T.D. TTB-41.
    Prior to the publication of T.D. TTB-41, part 24 included Sec.  
24.273, which allowed certain wine premises proprietors to file annual 
tax returns and pay taxes annually. Because the wine bond's coverage is 
split between operations coverage and deferral coverage, when drafting 
T.D. TTB-41 we were not limited by the existing language of section 
5061 of the IRC, which specified semimonthly return periods for 
removals under a bond for deferred payment of taxes. Thus, we were able 
administratively to allow an annual return period for small proprietors 
who had no bond for deferred payment of taxes and who owed less than 
$1,000 per calendar year in taxes. Section 5061(d)(4) of the IRC does 
not affect the right of eligible proprietors to continue to pay taxes 
on an annual basis. T.D. TTB-41 revised Sec.  24.273 to show that it is 
an exception to both semimonthly and quarterly return filing and also 
reorganized the section for clarity.
     27 CFR Part 25. The regulations at 27 CFR 25.93 were 
amended by T.D. TTB-41 to change the bond penal sum for quarterly 
taxpayers. Provisions at Sec. Sec.  25.164 and 25.164a, which cover the 
tax return filing rules for brewers, were also amended to reflect the 
adoption of the quarterly return procedure.
     27 CFR Part 26. The regulations at 27 CFR 26.11 and 
26.112, which

[[Page 3507]]

concern taxes imposed under section 7652 of the IRC, were amended by 
T.D. TTB-41 to incorporate references to the quarterly taxpayment 
procedure.
     27 CFR Part 70. Paragraph (a) of 27 CFR 70.412, which 
summarizes alcohol tax return filing procedural rules, was amended by 
T.D. TTB-41 to include a reference to quarterly returns.
    This document also includes the following changes to the regulatory 
texts discussed above that were adopted in T.D. TTB-41:
     The definitions of ``taxpayer'' and ``reasonably expects'' 
are no longer included as such in Sec. Sec.  19.522, 24.271, 25.164, 
and 26.112 but rather are included within each section as rules that 
apply to the quarterly return period procedure. These changes do not 
affect the substance of the regulatory texts but rather are intended to 
lend more precision to the texts and to avoid textual redundancy. In 
addition, each paragraph that sets forth the basic quarterly rule has 
been modified for purposes of clarity but without substantive change.
     The interpretative considerations discussed above that had 
not been included in the T.D. TTB-41 regulatory texts have been 
incorporated into the texts set forth in this document. We have 
reviewed this matter and have concluded that inclusion of those 
considerations in the regulations as rules that apply to the quarterly 
procedure will provide enhanced regulatory transparency.
     Finally, we have made some nonsubstantive, editorial-type 
changes to the regulatory texts, including minor wording changes and 
insertion of paragraph headings where appropriate, to improve the 
clarity and readability of the texts.

Public Participation

    To submit comments on these regulations, please refer to the notice 
of proposed rulemaking published elsewhere in this issue of the Federal 
Register.

Regulatory Flexibility Act

    Pursuant to the requirements of the Regulatory Flexibility Act (5 
U.S.C. chapter 6), we certify that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
Any revenue effects of this rulemaking on small businesses flow 
directly from the underlying statutes. Likewise, any secondary or 
incidental effects, and any reporting, recordkeeping, or other 
compliance burdens flow directly from the statutes. Accordingly, a 
regulatory flexibility analysis is not required. Pursuant to 26 U.S.C. 
7805(f), the temporary regulations 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

    This is not a significant regulatory action as defined in E.O. 
12866. Therefore, it requires no regulatory assessment.

Paperwork Reduction Act

    The collections of information in the regulations contained in this 
reissued temporary rule have been previously reviewed and approved by 
the Office of Management and Budget (OMB) in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3506) and assigned control 
numbers 1513-0009, 1513-0053, 1513-0083, 1513-0090, and 1513-0104. 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 OMB. There is no new collection of 
information imposed by this temporary rule.
    Comments concerning suggestions for reducing the burden of the 
collections of information should be directed to Mary A. Wood, Alcohol 
and Tobacco Tax and Trade Bureau, at any of these addresses:
     P.O. Box 14412, Washington, DC 20044-4412;
     202-927-8525 (facsimile); or
     formcomments@ttb.gov (e-mail).

Inapplicability of Prior Notice and Comment

    Because this document implements provisions of law that were 
effective on January 1, 1995, and January 1, 2006, and because this 
temporary rule updates and reissues previously issued temporary rules 
implementing these provisions of law, TTB believes it is unnecessary 
and contrary to the public interest to issue this temporary decision 
with prior notice and public comment, and therefore, consistent with 5 
U.S.C. 553(b), good cause exists to take this action. That is, TTB has 
determined that good cause exists to provide the industry with this 
updated temporary rule because it reflects the statutory requirements 
that are already in effect and for which the industry continues to need 
immediate guidance. TTB is soliciting public comment on the regulatory 
provisions contained in this temporary rule in a concurrently issued 
notice of proposed rulemaking.

Drafting Information

    Kara T. Fontaine of the Regulations and Rulings Division, Alcohol 
and Tobacco Tax and Trade Bureau, drafted this document.

List of Subjects

27 CFR Part 19

    Caribbean Basin Initiative, Claims, Electronic funds transfers, 
Excise taxes, Exports, Gasohol, Imports, Labeling, Liquors, Packaging 
and containers, Puerto Rico, Reporting and recordkeeping requirements, 
Research, Security measures, Surety bonds, Vinegar, Virgin Islands, 
Warehouses.

27 CFR Part 24

    Administrative practice and procedure, Claims, Electronic funds 
transfers, Excise taxes, Exports, Food additives, Fruit juices, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Research, Scientific equipment, Spices and 
flavorings, Surety bonds, Vinegar, Warehouses, Wine.

27 CFR Part 25

    Beer, Claims, Electronic funds transfers, Excise taxes, Exports, 
Labeling, Packaging and containers, Reporting and recordkeeping 
requirements, Research, Surety bonds.

27 CFR Part 26

    Alcohol and alcoholic beverages, Caribbean Basin Initiative, 
Claims, Customs duties and inspection, Electronic funds transfers, 
Excise taxes, Packaging and containers, Puerto Rico, Reporting and 
recordkeeping requirements, Surety bonds, Virgin Islands, Warehouses.

27 CFR Part 40

    Cigars and cigarettes, Claims, Electronic fund transfers, Excise 
taxes, Labeling, Packaging and containers, Reporting and recordkeeping 
requirements, Surety bonds, Tobacco.

27 CFR Part 41

    Cigars and cigarettes, Claims, Customs duties and inspection, 
Electronic funds transfers, Excise taxes, Imports, Labeling, Packaging 
and containers, Puerto Rico, Reporting and recordkeeping requirements, 
Surety bonds, Tobacco, Virgin Islands, Warehouses.

27 CFR Part 70

    Administrative practice and procedure, Claims, Excise taxes, 
Freedom of Information, Law enforcement, Penalties, Surety bonds.

Amendments to the Regulations

    Accordingly, for the reasons set forth in the preamble, 27 CFR 
parts 19, 24, 25,

[[Page 3508]]

26, 40, 41, and 70 are amended as set forth below.

PART 19--DISTILLED SPIRITS PLANTS

0
1. The authority citation for part 19 continues to read as follows:

    Authority:  19 U.S.C. 81c, 1311; 26 U.S.C. 5001, 5002, 5004-
5006, 5008, 5010, 5041, 5061, 5062, 5066, 5101, 5121, 5122-5124, 
5171-5173, 5175, 5176, 5178-5181, 5201-5204, 5206, 5207, 5211-5215, 
5221-5223, 5231, 5232, 5235, 5236, 5241-5243, 5271, 5273, 5301, 
5311-5313, 5362, 5370, 5373, 5501-5505, 5551-5555, 5559, 5561, 5562, 
5601, 5612, 5682, 6001, 6065, 6109, 6302, 6311, 6676, 6806, 7510, 
7805; 31 U.S.C. 9301, 9303, 9304, 9306.


0
2. Section 19.11 is amended by revising the definition of ``calendar 
quarter and quarterly'' to read as follows:


Sec.  19.11  Meaning of terms.

* * * * *
    Calendar quarter and quarterly. These terms refer to the three-
month periods ending on March 31, June 30, September 30, or December 
31.
* * * * *

0
3. Section 19.522 is amended by revising paragraph (a) to read as 
follows:


Sec.  19.522  Taxes to be collected by returns.

    (a)(1) Deferred payment of taxes. The tax on spirits to be 
withdrawn from bond for deferred payment of tax shall be paid pursuant 
to a return on TTB F 5000.24, Excise Tax Return. The return shall be 
executed and filed for each return period notwithstanding that no tax 
is due for payment for such period. The proprietor of each bonded 
premises shall include, for payment, on his return on TTB F 5000.24, 
the full amount of distilled spirits tax determined in respect of all 
spirits released for withdrawal from the bonded premises on 
determination of tax during the period covered by the return (except 
spirits on which tax has been prepaid).
    (2) Return periods. (i) Semimonthly return period. Except in the 
case of a taxpayer who qualifies for, and chooses to use, quarterly 
return periods as provided in paragraph (a)(2)(ii) of this section, all 
taxpayers shall use semimonthly return periods for deferred payment of 
tax. The semimonthly return periods run from the 1st day through the 
15th day of each month, and from the 16th day through the last day of 
each month, except as otherwise provided in Sec.  19.523(c).
    (ii) Quarterly return period. A taxpayer may choose to use a 
quarterly return period if the taxpayer was not liable for more than 
$50,000 in taxes with respect to distilled spirits imposed by 26 U.S.C. 
5001 and 7652 in the preceding calendar year and if that taxpayer 
reasonably expects to be liable for not more than $50,000 in such taxes 
during the current calendar year. In such a case the last day for 
paying the tax and filing the return shall be the 14th day after the 
last day of the calendar quarter. However, the taxpayer may not use the 
quarterly return period procedure for any portion of the calendar year 
following the first date on which the aggregate amount of tax due from 
the taxpayer during the calendar year exceeds $50,000, and any tax that 
has not been paid on that date shall be due on the 14th day after the 
last day of the semimonthly period in which that date occurs. The 
following additional rules apply to the quarterly return period 
procedure under this section:
    (A) A ``taxpayer'' is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
as defined in 26 CFR 301.7701-12;
    (B) ``Reasonably expects'' means that there is no existing or 
anticipated circumstance known to the taxpayer (such as an increase in 
production capacity) that would cause the taxpayer's tax liability to 
exceed the prescribed limit;
    (C) A taxpayer with multiple locations must combine the distilled 
spirits tax liability for all locations to determine eligibility for 
the quarterly return procedure;
    (D) A taxpayer who has both domestic operations and import 
transactions must combine the distilled spirits tax liability on the 
domestic operations and the imports to determine eligibility for the 
quarterly return procedure;
    (E) The controlled group rules of 26 U.S.C. 5061(e), which concern 
treatment of controlled groups as one taxpayer, do not apply for 
purposes of determining eligibility for the quarterly return procedure. 
However, a taxpayer who is eligible for the quarterly return procedure, 
and who is a member of a controlled group that owes $5 million or more 
in distilled spirits excise taxes per year, is required to pay taxes by 
electronic fund transfer (EFT). Quarterly payments via EFT shall be 
transmitted in accordance with section 5061(e);
    (F) A new taxpayer is eligible to file quarterly returns in the 
first year of business simply if the taxpayer reasonably expects to be 
liable for not more than $50,000 in distilled spirits taxes during that 
calendar year; and
    (G) If a taxpayer filing quarterly exceeds $50,000 in tax liability 
during a taxable year and therefore must revert to the semimonthly 
return procedure, that taxpayer may resume quarterly payments only 
after a full calendar year has passed during which the taxpayer's 
liability did not exceed $50,000.
* * * * *

0
4. Section 19.523 is amended by revising paragraphs (a), (c), and (d) 
to read as follows:


Sec.  19.523  Time for filing returns.

    (a) Payment pursuant to semimonthly return. Except when payment is 
pursuant to a quarterly return as provided in paragraph (d) of this 
section, where the proprietor of bonded premises has withdrawn spirits 
from those premises on determination and before payment of tax, the 
proprietor must file a semimonthly tax return covering those spirits on 
TTB F 5000.24, and remittance, as required by Sec.  19.524 or Sec.  
19.525, not later than the 14th day after the last day of the return 
period, except as otherwise provided in paragraph (c) of this section. 
If the due date falls on a Saturday, Sunday, or legal holiday, the 
return and remittance are due on the immediately preceding day that is 
not a Saturday, Sunday, or legal holiday, except as otherwise provided 
in paragraph (c)(3) of this section.
* * * * *
    (c) Special rule for taxes due for the month of September. (1) 
Division of second semimonthly period. (i) General. Except as otherwise 
provided in paragraph (c)(1)(ii) of this section, the second 
semimonthly period for the month of September is divided into two 
payment periods, from the 16th day through the 26th day, and from the 
27th day through the 30th day. The proprietor shall file a return on 
TTB F 5000.24, and make remittance, for the period September 16-26, no 
later than September 29. The proprietor shall file a return on TTB F 
5000.24, and make remittance, for the period September 27-30, no later 
than October 14.
    (ii) Taxpayment not by electronic fund transfer. In the case of 
taxes for which remittance by electronic fund transfer (EFT) is not 
required by Sec.  19.524, the second semimonthly period of September is 
divided into two payment periods, from the 16th day through the 25th 
day, and from the 26th day through the 30th day. The proprietor shall 
file a return on TTB F 5000.24, and make remittance, for the period 
September 16-25, no later than September 28. The proprietor shall file 
a return on TTB F 5000.24, and make remittance, for the period 
September 26-30, no later than October 14.
    (2) Amount of payment--Safe harbor rule. (i) General. Taxpayers are

[[Page 3509]]

considered to have met the requirements of paragraph (c)(1)(i) of this 
section if the amount paid no later than September 29 is not less than 
11/15ths (73.3 percent) of the tax liability incurred for the 
semimonthly period beginning on September 1 and ending on September 15, 
and if any underpayment of tax is paid by October 14.
    (ii) Taxpayment not by EFT. Taxpayers are considered to have met 
the requirements of paragraph (c)(1)(ii) of this section if the amount 
paid no later than September 28 is not less than 2/3rds (66.7 percent) 
of the tax liability incurred for the semimonthly period beginning on 
September 1 and ending on September 15, and if any underpayment of tax 
is paid by October 14.
    (3) Weekends and holidays. If the required taxpayment due date for 
the period September 16-25 or September 16-26, as applicable, falls on 
a Saturday or legal holiday, the return and remittance are due on the 
immediately preceding day. If the required due date falls on a Sunday, 
the return and remittance are due on the immediately following day.
    (4) Example: Payment of tax for the month of September. (i) Facts. 
X, a distilled spirits plant proprietor required to pay taxes by 
electronic fund transfer, incurred tax liability in the amount of 
$30,000 for the first semimonthly period of September. For the period 
September 16-26, X incurred tax liability in the amount of $45,000, and 
for the period September 27-30, X incurred tax liability in the amount 
of $2,000.
    (ii) Payment requirement. X's payment of tax in the amount of 
$30,000 for the first semimonthly period of September is due no later 
than September 29 (Sec.  19.522(a)). X's payment of tax for the period 
September 16-26 is also due no later than September 29 (Sec.  
19.523(c)(1)(i)). X may use the safe harbor rule to determine the 
amount of payment due for the period of September 16-26 (Sec.  
19.523(c)(2)). Under the safe harbor rule, X's payment of tax must not 
be less than $21,990.00, that is, 11/15ths of the tax liability 
incurred during the first semimonthly period of September. 
Additionally, X must pay the tax in the amount of $2,000 for the period 
September 27-30 no later than October 14 (Sec.  19.523(c)(1)(i)). X 
must also pay the underpayment of tax, $23,010.00, for the period 
September 16-26, no later than October 14 (Sec.  19.523(c)(2)).
    (d) Payment pursuant to quarterly return. Where the proprietor of 
bonded premises has withdrawn spirits from those premises on 
determination and before payment of tax, and the proprietor uses 
quarterly return periods as provided in Sec.  19.522(a)(2)(ii), the 
proprietor shall file a quarterly tax return covering such spirits on 
TTB F 5000.24, and remittance, as required by Sec.  19.525, not later 
than the 14th day after the last day of the quarterly return period. If 
the due date falls on a Saturday, Sunday, or legal holiday, the return 
and remittance are due on the immediately preceding day that is not a 
Saturday, Sunday, or legal holiday.
* * * * *

0
5. Section 19.565 is revised to read as follows:


Sec.  19.565  Shortages of bottled distilled spirits.

    (a) Determination of shortage. Unexplained shortages shall be 
determined by comparing the spirits recorded to be on hand with the 
results of the quantitative determination of the spirits found to be on 
hand by actual count during the physical inventory required by Sec.  
19.402. When the recorded quantity is greater than the quantity 
determined by the physical inventory, the difference is an unexplained 
shortage. The records shall be adjusted to reflect the physical 
inventory.
    (b) Payment of tax on shortage. An unexplained shortage of bottled 
distilled spirits shall be taxpaid:
    (1) Immediately on a prepayment return on TTB F 5000.24, or
    (2) On the return on TTB F 5000.24 for the return period during 
which the shortage was ascertained.


(Sec. 201, Pub. L. 85-859, 72 Stat. 1323, as amended (26 U.S.C. 5008))

0
6. Section 19.703 is amended by revising paragraph (a) to read as 
follows:


Sec.  19.703  Taxpayment of samples.

* * * * *
    (a) If the proprietor is qualified to defer payment of tax, the tax 
shall be included in the proprietor's next deferred payment of tax on 
TTB F 5000.24.
* * * * *

PART 24--WINE

0
7. The authority citation for 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, 5121, 5122-5124, 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, 7302, 7342, 7502, 7503, 7606, 7805, 7851; 31 
U.S.C. 9301, 9303, 9304, 9306.

0
8. Section 24.10 is amended by revising the definition of ``calendar 
quarter and quarterly'' to read as follows:


Sec.  24.10  Meaning of terms.

* * * * *
    Calendar quarter and quarterly. These terms refer to the three-
month periods ending on March 31, June 30, September 30, or December 
31.
* * * * *

0
9. Section 24.271 is revised to read as follows:


Sec.  24.271  Payment of tax by return with remittance.

    (a) General. The tax on wine is paid by an Excise Tax Return, TTB F 
5000.24, which is filled with remittance (check, cash, or money order) 
for the full amount of tax due. Prepayments of tax on wine during the 
period covered by the return are shown separately on the Excise Tax 
Return form. If no tax is due for the return period, the filing of a 
return is not required.
    (b) Return periods and due dates. (1) Return periods. (i) 
Semimonthly return period. Except in the case of a taxpayer who 
qualifies for, and chooses to use, the annual return period as provided 
in Sec.  24.273 or the quarterly return period as provided in paragraph 
(b)(1)(ii) of this section, all taxpayers who have filed a bond for 
deferred payment of taxes must use semimonthly return periods. The 
semimonthly return periods run from the 1st day through the 15th day of 
each month, and from the 16th day through the last day of each month, 
except as otherwise provided in paragraph (c) of this section.
    (ii) Quarterly return period. A taxpayer who has filed a bond for 
deferred payment of taxes may choose to use a quarterly return period 
if the taxpayer was not liable for more than $50,000 in taxes with 
respect to wine imposed by 26 U.S.C. 5041 and 7652 in the preceding 
calendar year and if that taxpayer reasonably expects to be liable for 
not more than $50,000 in such taxes during the current calendar year. 
In such a case the last day for paying the tax and filing the return 
shall be the 14th day after the last day of the calendar quarter. 
However, the taxpayer may not use the quarterly return period procedure 
for any portion of the calendar year following the first date on which 
the aggregate amount of tax due from the taxpayer during the calendar 
year exceeds $50,000, and any tax that has not been paid on that date 
shall be due on the 14th day after the last day of the semimonthly 
period in which that date occurs. The following additional

[[Page 3510]]

rules apply to the quarterly return period procedure under this 
section:
    (A) A ``taxpayer'' is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
as defined in 26 CFR 301.7701-12;
    (B) ``Reasonably expects'' means that there is no existing or 
anticipated circumstance known to the taxpayer (such as an increase in 
production capacity) that would cause the taxpayer's tax liability to 
exceed the prescribed limit;
    (C) A taxpayer with multiple locations must combine the wine tax 
liability for all locations to determine eligibility for the quarterly 
return procedure;
    (D) A taxpayer who has both domestic operations and import 
transactions must combine the wine tax liability on the domestic 
operations and the imports to determine eligibility for the quarterly 
return procedure;
    (E) The controlled group rules of 26 U.S.C. 5061(e), which concern 
treatment of controlled groups as one taxpayer, do not apply for 
purposes of determining eligibility for the quarterly return procedure. 
However, a taxpayer who is eligible for the quarterly return procedure, 
and who is a member of a controlled group that owes $5 million or more 
in wine excise taxes per year, is required to pay taxes by electronic 
fund transfer (EFT). Quarterly payments via EFT shall be transmitted in 
accordance with section 5061(e);
    (F) A new taxpayer is eligible to file quarterly returns in the 
first year of business simply if the taxpayer reasonably expects to be 
liable for not more than $50,000 in wine taxes during that calendar 
year; and
    (G) If a taxpayer filing quarterly exceeds $50,000 in tax liability 
during a taxable year and therefore must revert to the semimonthly 
return procedure, that taxpayer may resume quarterly payments only 
after a full calendar year has passed during which the taxpayer's 
liability did not exceed $50,000.
    (2) Semimonthly and quarterly tax return due dates. The taxpayer 
shall file the semimonthly or quarterly return, with remittance, for 
each return period not later than the 14th day after the last day of 
the return period. If the due date falls on a Saturday, Sunday, or 
legal holiday, the return and remittance are due on the immediately 
preceding day that is not a Saturday, Sunday, or legal holiday, except 
as otherwise provided in paragraph (c)(3) of this section.
    (c) Special September rule for taxes due by semimonthly return. (1) 
Division of second semimonthly period. (i) General. Except as otherwise 
provided in paragraph (c)(1)(ii) of this section, the second 
semimonthly period for the month of September is divided into two 
payment periods, from the 16th day through the 26th day, and from the 
27th day through the 30th day. The proprietor shall file a return on 
TTB F 5000.24, and make remittance, for the period September 16-26, no 
later than September 29. The proprietor shall file a return on TTB F 
5000.24, and make remittance, for the period September 27-30, no later 
than October 14.
    (ii) Taxpayment not by electronic fund transfer. In the case of 
taxes for which remittance by electronic fund transfer (EFT) is not 
required by Sec.  24.272, the second semimonthly period of September is 
divided into two payment periods, from the 16th day through the 25th 
day, and from the 26th day through the 30th day. The proprietor shall 
file a return on TTB F 5000.24, and make remittance, for the period 
September 16-25, no later than September 28. The proprietor shall file 
a return on TTB F 5000.24, and make remittance, for the period 
September 26-30, no later than October 14.
    (2) Amount of payment--Safe harbor rule. (i) General. Taxpayers are 
considered to have met the requirements of paragraph (c)(1)(i) of this 
section if the amount paid no later than September 29 is not less than 
11/15ths (73.3 percent) of the tax liability incurred for the 
semimonthly period beginning on September 1 and ending on September 15, 
and if any underpayment of tax is paid by October 14.
    (ii) Taxpayment not by EFT. Taxpayers are considered to have met 
the requirements of paragraph (c)(1)(ii) of this section if the amount 
paid no later than September 28 is not less than 2/3rds (66.7 percent) 
of the tax liability incurred for the semimonthly period beginning on 
September 1 and ending on September 15, and if any underpayment of tax 
is paid by October 14.
    (3) Weekends and holidays. If the required taxpayment due date for 
the period September 16-25 or September 16-26, as applicable, falls on 
a Saturday or legal holiday, the return and remittance are due on the 
immediately preceding day. If the required due date falls on a Sunday, 
the return and remittance are due on the immediately following day.
    (4) Example: Payment of tax for the month of September. (i) Facts. 
X, a proprietor required to pay taxes by electronic fund transfer, 
incurred tax liability in the amount of $30,000 for the first 
semimonthly period of September. For the period September 16-26, X 
incurred tax liability in the amount of $45,000, and for the period 
September 27-30, X incurred tax liability in the amount of $2,000.
    (ii) Payment requirement. X's payment of tax in the amount of 
$30,000 for the first semimonthly period of September is due no later 
than September 29 (Sec.  24.271(b)). X's payment of tax for the period 
September 16-26 is also due no later than September 29 (Sec.  
24.271(c)(1)(i)). X may use the safe harbor rule to determine the 
amount of payment due for the period of September 16-26 (Sec.  
24.271(c)(2)). Under the safe harbor rule, X's payment of tax must not 
be less than $21,990.00, that is, 11/15ths of the tax liability 
incurred during the first semimonthly period of September. 
Additionally, X must pay the tax in the amount of $2,000 for the period 
September 27-30 no later than October 14 (Sec.  24.271(c)(1)(i)). X 
must also pay the underpayment of tax, $23,010.00, for the period 
September 16-26, no later than October 14 (Sec.  24.271(c)(2)).

0
10. Section 24.273 is revised to read as follows:


Sec.  24.273  Exception to filing semimonthly or quarterly tax returns.

    (a) Eligibility for annual filing. A proprietor may file the Excise 
Tax Return, TTB F 5000.24, and remittance within 30 days after the end 
of the calendar year instead of semimonthly or quarterly as provided in 
Sec.  24.271, if the proprietor has not given a bond for deferred 
payment of wine excise tax and if the proprietor:
    (1) Paid wine excise taxes in an amount less than $1000 during the 
previous calendar year, or
    (2) Is the proprietor of a newly established bonded wine premises 
and expects to pay less than $1000 in wine excise taxes before the end 
of the calendar year.
    (b) Loss of eligibility for annual filing. (1) If before the close 
of the current calendar year the wine excise tax owed will exceed the 
amount of the coverage under the proprietor's operations bond for wine 
removed from bonded wine premises on which tax has been determined but 
not paid, the proprietor will file an Excise Tax Return with the total 
remittance on the date the wine excise tax owed will exceed such amount 
and file an aggregate Excise Tax Return within 30 days after the close 
of the calendar year showing the total wine tax liability for such 
calendar year. If before the close of the current calendar year the 
wine excise tax liability (including any amounts paid or owed) equals 
$1000 or more, the proprietor will commence semimonthly or quarterly 
filing of the wine Excise Tax

[[Page 3511]]

Returns and making of payments as required by Sec.  24.271.
    (2) If there is a jeopardy to the revenue, the appropriate TTB 
officer may at any time require the proprietor to file Excise Tax 
Returns on a semimonthly or quarterly basis.
    (c) Other rules apply. A proprietor who files on a calendar year 
basis under this section is subject to the failure to pay or file 
provisions of Sec.  24.274.

0
11. Section 24.300 is amended by revising paragraph (g) to read as 
follows:


Sec.  24.300  General.

* * * * *
    (g) TTB F 5120.17, Report of Bonded Wine Premises Operations. A 
proprietor who conducts bonded wine premises operations must complete 
and submit TTB F 5120.17 in accordance with the instructions on the 
form.
    (1) Monthly report. The proprietor must submit TTB F 5120.17 on a 
monthly basis, except as otherwise provided in paragraph (g)(2) or 
(g)(3) of this section.
    (2) Quarterly or annual report. (i) General. A proprietor may file 
a completed TTB F 5120.17 on a quarterly or annual basis if the 
proprietor meets the criteria in paragraph (g)(2)(ii) or (g)(2)(iii) of 
this section. To begin the quarterly or annual filing of a report of 
bonded wine premises operations, a proprietor must state the intent to 
do so in the ``Remarks'' section when filing the prior month's TTB F 
5120.17. A proprietor who is commencing operations during a calendar 
year and expects to meet these criteria may use a letter notice to the 
appropriate TTB officer and file TTB F 5120.17 quarterly or annually 
for the remaining portion of the calendar year. If a proprietor becomes 
ineligible for quarterly or annual filing by exceeding the applicable 
tax liability or activity limit, the proprietor must file TTB F 5120.17 
for that month and for all subsequent months of the calendar year. If 
there is jeopardy to the revenue, the appropriate TTB officer may at 
any time require any proprietor otherwise eligible for quarterly or 
annual filing of a report of bonded wine premises operations to file 
such report monthly.
    (ii) Eligibility for quarterly report filing. In order to be 
eligible to file TTB F 5120.17 on a quarterly basis, the proprietor 
must be filing quarterly tax returns under Sec.  24.271, and the 
proprietor must not expect the sum of the bulk and bottled wine to be 
accounted for in all tax classes to exceed 60,000 gallons for any one 
quarter during the calendar year when adding up the bulk and bottled 
wine on hand at the beginning of the month, bulk wine produced by 
fermentation, sweetening, blending, amelioration or addition of wine 
spirits, bulk wine bottled, bulk and bottled wine received in bond, 
taxpaid wine returned to bond, bottled wine dumped to bulk, inventory 
gains, and any activity written in the untitled lines of the report 
form which increases the amount of wine to be accounted for.
    (iii) Eligibility for annual report filing. In order to be eligible 
to file TTB F 5120.17 on an annual basis, the proprietor must be filing 
annual tax returns under Sec.  24.273, and the proprietor must not 
expect the sum of the bulk and bottled wine to be accounted for in all 
tax classes to exceed 20,000 gallons for any one month during the 
calendar year when adding up the bulk and bottled wine on hand at the 
beginning of the month, bulk wine produced by fermentation, sweetening, 
blending, amelioration or addition of wine spirits, bulk wine bottled, 
bulk and bottled wine received in bond, taxpaid wine returned to bond, 
bottled wine dumped to bulk, inventory gains, and any activity written 
in the untitled lines of the report form which increases the amount of 
wine to be accounted for.
    (3) No reportable activity. A proprietor who files a monthly TTB F 
5120.17 and does not expect an inventory change or any reportable 
operations to be conducted in a subsequent month or months may attach 
to the filed TTB F 5120.17 a statement that, until a change in the 
inventory or a reportable operation occurs, a TTB F 5120.17 will not be 
filed.
* * * * *

PART 25--BEER

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12. 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,