Small Brewers Bond Reduction and Requirement To File Tax Returns, Remit Tax Payments and Submit Reports Quarterly, 58674-58679 [2014-22964]

Agencies

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

[Federal Register Volume 79, Number 189 (Tuesday, September 30, 2014)]
[Rules and Regulations]
[Pages 58674-58679]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22964]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 25

[Docket No. TTB-2012-0006; T.D. TTB-123; Re: Notice No. 131 and T.D. 
TTB-109]
RIN 1513-AB94


Small Brewers Bond Reduction and Requirement To File Tax Returns, 
Remit Tax Payments and Submit Reports Quarterly

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

ACTION: Final rule; Treasury decision.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) is adopting 
as a permanent regulatory change a flat $1,000 penal sum for the 
brewer's bond for brewers whose excise tax liability is reasonably 
expected to be not more than $50,000 in a given calendar year and who 
were liable for not more than $50,000 in such taxes in the preceding 
calendar year. TTB originally set forth this change in a temporary rule 
issued on December 7, 2012. In addition, TTB is adopting as a final 
rule its proposal, also issued on December 7, 2012, to require small 
brewers to file Federal excise tax returns, pay tax, and submit reports 
of operations quarterly. TTB expects these amendments to reduce the 
regulatory burdens on such brewers, reduce their administrative costs, 
and create administrative efficiencies for TTB.

DATES: This final rule is effective on January 1, 2015.

FOR FURTHER INFORMATION CONTACT: Ramona Hupp, Regulations and Rulings 
Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., 
Box 12, Washington, DC 20005; telephone 202-453-1039, ext. 110, or 
email BeerRegs@ttb.gov.

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 the United States, or imported into the United States. 
The rate of the Federal excise tax on beer is $18 for every barrel 
containing not more than 31 gallons, and a like rate for any other 
quantity or for fractional parts of a barrel, with an exception that 
the rate of tax is $7 a barrel for the first 60,000 barrels of beer for 
a domestic brewer that does not produce more than 2 million barrels of 
beer in a calendar year. Section 5054 (26 U.S.C. 5054) provides that, 
in general, the tax imposed on beer under section 5051 shall be 
determined at the time the beer is removed for consumption or sale, and 
shall be paid by the brewer in accordance with section 5061 (26 U.S.C. 
5061).
    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 
$50,000 in alcohol excise taxes in a calendar year and who were liable 
for not more than $50,000 in the preceding calendar year. Under this 
provision, such taxpayers may pay the excise taxes on alcohol beverages 
withdrawn under bond on a quarterly basis.
    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 Tobacco Tax and Trade Bureau (TTB) administers 
chapter 51 of the IRC and its implementing regulations pursuant to 
section 1111(d) of the Homeland Security Act of 2002, codified at 6 
U.S.C. 531(d). The

[[Page 58675]]

Secretary has delegated various authorities through Treasury Department 
Order 120-01 (Revised), dated December 10, 2013, to the TTB 
Administrator to perform the functions and duties in administration and 
enforcement of these laws. Regulations that implement the provisions of 
sections 5051, 5054, 5061, 5401, and 5415 of the IRC, as they relate to 
beer, are set forth in part 25 of title 27 of the Code of Federal 
Regulations (27 CFR part 25).

Reducing Burdens on Regulated Industries

    Executive Order 13563, Improving Regulation and Regulatory Review 
(E.O. 13563), signed by the President on January 18, 2011, required 
Federal agencies to conduct retrospective analyses of rules that may be 
outmoded, ineffective, insufficient, or excessively burdensome, and to 
modify, streamline, expand, or repeal them as appropriate. E.O. 13563 
also required each agency to develop plans to review its regulations. 
The Department of the Treasury (Treasury) issued its Plan for 
Retrospective Analysis of Existing Rules (the Plan) on August 22, 2011. 
In developing the Plan, Treasury requested input from its Bureaus and 
Offices to help identify regulations that should be modified or 
updated. TTB identified a number of rulemaking proposals that were 
specifically included in the Plan, one of which concerned revision to 
the beer regulations contained in 27 CFR part 25. The proposal included 
in the Plan states:

    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 September 2011, TTB met with representatives and members of the 
Brewers Association, a trade organization that promotes the interests 
of small and independent brewers in the United States, to discuss 
reducing the regulatory burdens on smaller brewers. During this 
meeting, the representatives and members put forth a number of 
suggestions toward that goal. TTB also met with members of the Oregon 
Brewers Guild in February 2012 to discuss the current regulatory 
burdens imposed on smaller brewers.
    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 $50,000 in alcohol excise taxes in a 
calendar year, and who were liable for not more than $50,000 in such 
taxes in the preceding calendar year, there is, under section 
5061(d)(4) of the IRC, a quarterly tax return and tax payment exception 
to the semimonthly rule. TTB believes the requirements to qualify for 
the quarterly tax return and tax payment exception provide a reasonable 
standard for determining those brewers for which quarterly filing is 
appropriate for purposes of the IRC. In 2011, analysis of TTB data 
revealed that the vast majority of brewers qualified as quarterly 
taxpayers under this standard. Specifically, this data provided that 
2,026 brewers submitted Federal excise tax returns to TTB, and 1,846 of 
those brewers (91 percent) paid less than $50,000 in excise tax 
annually. In fact, the vast majority of those 1,846 brewers paid much 
less than $50,000, given that 1,616 of those brewers (87.5 percent) 
paid annual taxes of $7,000 or less. Hereafter, when used in this 
document, the term ``small brewers'' will refer to brewers who are 
eligible to file excise tax returns, remit tax payments, and submit 
operations reports on a quarterly basis.

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 Sec.  
25.164(c), a brewer must adhere to a semimonthly tax return period 
unless the brewer qualifies for, and chooses to use, a quarterly tax 
return period. A brewer has the option to choose to use a quarterly 
return period if the brewer reasonably expects to be liable for not 
more than $50,000 in taxes with respect to beer imposed by 26 U.S.C. 
5051 and 7652 in a calendar year and was liable for not more than 
$50,000 in such taxes in the preceding calendar year.
    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 December 7, 2012 (discussed 
later in this document), 27 CFR 25.93 provided that, for brewers who 
filed tax returns and remitted tax payments semimonthly, the penal sum 
of the brewer's bond had to be ``equal to 10 percent of the maximum 
amount of tax calculated at the rates prescribed by law which the 
brewer will become liable to pay during a calendar year'' (27 CFR 
25.93(a)(1)). For those small brewers who chose to file quarterly, the 
penal sum of the brewer's bond increased to 29 percent of the maximum 
amount of that tax (27 CFR 25.93(a)(2)). Under these previous 
regulatory provisions, a small brewer had to be aware of different 
eligibility standards regarding tax returns, tax payments, and 
reporting. TTB believed that these regulatory options, taken in their 
entirety, were difficult for small brewers to fully understand and use 
to their best advantage.

Temporary Rule and Notice of Proposed Rulemaking

    On December 7, 2012, TTB published in the Federal Register a 
temporary rule (T.D. TTB-109, 77 FR 72939) that provided for a flat 
$1,000 penal sum for a brewer's bond for small brewers who file excise 
returns and remit payments quarterly. TTB stated that it was issuing 
the temporary rule to encourage eligible brewers to file excise tax 
returns and pay taxes quarterly rather than semimonthly without being 
required to obtain a bond with a penal sum of more than $1,000. The 
rule was issued as a temporary rule without prior notice and comment, 
pursuant to authority under section 4(a) of the Administrative 
Procedure Act (5 U.S.C. 553(b)), because TTB expected the affected 
public would benefit from a lower bond amount.
    In the same issue of the Federal Register, TTB published Notice No. 
131 (77 FR 72999) proposing to amend the TTB regulations at Sec.  25.93 
and Sec.  25.297 to require that small brewers file tax returns, remit 
tax payments, and submit reports of operations quarterly.
    In Notice No. 131, TTB proposed to adopt as a final rule in Sec.  
25.93, the flat $1,000 penal sum for the bond for small brewers as 
outlined in the temporary rule, which would otherwise expire at the end 
of 3 years. In that proposed rule, TTB stated that it believed that 
lowering the required bond amount would

[[Page 58676]]

remove the disincentive for small brewers to file excise tax returns 
and remit tax payments quarterly, and that lessening the number of 
required excise tax returns and operations reports for small brewers 
would lessen costs and increase efficiencies for those businesses.
    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 February 5, 
2013.

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'' (https://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 Brewers 
Association (as described previously) and a surety agency. Forty-three 
of the comments supported the proposed amendments, and one comment 
pointed out an error in the preamble of the proposed rule regarding 
certain figures that TTB had cited, but the commenter expressed neither 
support for nor opposition to the proposed rule or the temporary rule. 
Many of the comments from brewers provided information regarding the 
amount of time they estimate spending to prepare and submit tax returns 
and operations reports and how the proposed amendments would result in 
time and cost savings. A detailed discussion of the comments follows.

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 $10.15 million) of 
the $180.6 million in total excise tax on beer collected in 2010 and, 
in 2011, small brewers paid just over 6 percent (approximately $11.5 
million) of the $177.8 million in excise tax collected on beer that 
year. The commenter also stated that because the total amount of excise 
taxes collected for each year was incorrect, the percentages attributed 
to small brewers were also incorrect.
    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 $3.2 
billion, and in 2011, the total amount was approximately $3.1 billion. 
However, the amount of those excise taxes contributed by small brewers 
(approximately $10.15 million in 2010 and approximately $11.5 million 
in 2011) was correctly stated in the previous documents. Thus, the 
amount of tax contributed by small brewers represents a far smaller 
percentage of the total amount of such excise taxes on beer than 
originally stated. These revised figures further support the statement 
that although small brewers make up more than 90 percent of the total 
number of U.S. brewers, they contribute a small amount (approximately 
0.3 percent in 2010 and 0.4 percent in 2011) of the total amount of 
excise taxes collected by TTB on beer.

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 $1,000. All 18 of 
these comments supported the proposal to permanently adopt the reduced 
penal sum as a way to reduce the financial burden on small brewers. The 
Brewers Association (Comment 43) supports the reduced bond amount, 
stating that it ``will most certainly ease the financial burden many of 
these businesses faced previously when choosing to file quarterly.'' 
Two other commenters described the positive effect that the reduced 
penal sum would have on newly-opened small breweries. One comment 
(Comment 1), submitted by a person ``working towards opening a nano-
brewery,'' stated that lessening the burden of any operations fees 
would ``support sustainable success'' for start-up ventures. Another 
commenter (Comment 25) described recently opening a small brewery and 
agreed that the reduced bond requirements ``would help out greatly on 
cash flow that is so desperately needed in these first few years of 
growth.'' Two additional commenters (Comments 4 and 27) indicated that 
small breweries do not have the ``economies of scale'' of a larger 
brewer, meaning, they often may pay more for raw materials than a 
large-scale brewery does, and added that any way that TTB can reduce 
overhead costs for small brewers is welcome.
    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 $1,000 bond amount, saying that the ``additional time of 
recordkeeping and adjusting bonds . . . is currently very time 
consuming'' (Comment 20), and the time and productivity lost 
calculating the current ``volume-based'' bond requirement ``is far more 
significant than the actual dollars involved'' (Comment 37).
    One other comment came from a surety company (Comment 21) that

[[Page 58677]]

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 December 7, 2012. The duration of the 
required bond is set forth in the IRC at 26 U.S.C. 5401(b) and in the 
implementing regulations at Sec.  25.91. That regulatory section states 
in paragraph (a), with regard to the duration of the bond and with 
exceptions not relevant here, that every brewer intending to continue 
the business of a brewer shall, once every 4 years execute and file a 
new bond. As a result, if the temporary rule had remained in effect for 
3 years and the regulation had then reverted back to its previous text, 
a small brewer who had obtained a $1,000 bond and whose quarterly tax 
liability required a bond higher than $1,000 would have had to obtain 
either a new bond at the higher amount or a strengthening bond (see 27 
CFR 25.94) or prepay the taxes due (see 27 CFR 25.174) when the 
temporary rule expired at the end of 3 years. However, because this 
final rule makes the flat $1,000 penal sum for the brewer's bond 
permanent for small brewers, such bonds obtained under the temporary 
rule will be valid for the standard term of 4 years.

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 $4,000 a year by filing 
quarterly. A second commenter (Comment 5), who said his company 
produces 700 to 750 barrels of beer annually, stated that, ``[t]he 
amount of time necessary to piece together the necessary info, sign and 
copy the documents, and write the check and mail the forms, usually 
takes up the brunt of the day for our brewer,'' and switching to the 
quarterly schedule would save his company approximately $1,000 a year. 
A third commenter (Comment 9), who reports producing 1,300 barrels of 
beer a year, believed that the proposal would save her company 9.3 man 
hours and $558 dollars a year; the savings in time and money, she 
continued, would ``be spent on improving our operations.'' That 
commenter stated that her company had previously not even considered 
filing quarterly ``since that would increase our bond amount.'' Another 
commenter (Comment 11) stated that his company would ``save over $2,000 
in labor cost[s]'' by filing quarterly, money which ``could be 
otherwise used on new equipment and/or job creation.''
    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 $1,350 a year. A 
person who identified himself as the owner and head brewer of a small 
craft brewery (Comment 41) estimated that the annual administrative 
costs of filing semimonthly for his business are approximately $3,000, 
but filing quarterly would save $2,000 a year, which is ``a substantial 
amount for our budget.'' A person who identified himself as co-owner of 
a small brewery (Comment 42) with a projected production of 500 barrels 
of beer this year estimated that filing quarterly would save his 
company $2,160 annually, which ``represents a significant amount of 
money given our narrow margins as a startup brewery.'' Finally, the 
Brewers Association (Comment 43) estimated that, based on information 
gathered from a sample of its members that would be eligible for 
quarterly filings and tax payments, ``the average annual individual 
brewery savings derived from moving to quarterly filings of tax returns 
and operational reports is approximately 26 hours and $1,200.''
    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 $1,000 penal sum. The association also noted that 
there is ``no general agreement on the meanings of the terms `small 
brewery' and `small brewer''' in statutes, regulations, forms, and 
proposed legislation, and these terms ``are commonly applied to a 
variety of businesses that vary considerably in size.'' For example, 
the association pointed out that the IRC provides for a reduced rate of 
tax for brewers who produce not more than 2 million barrels of beer 
annually. The association also pointed out that, under a then-proposed 
change to a TTB form, brewers producing less than 10,000 barrels of 
beer a year would have been eligible to submit reports of operations 
quarterly, while the proposed reduction in the brewer's bond amount 
uses yet another standard of an annual tax liability of $50,000 or less 
to determine eligibility, a tax liability that equates to only 7,142 
barrels of beer a year. The association expressed concern that one of 
these ``competing'' definitions might become codified as the official 
definition of the term ``small'' and requested that TTB refrain from 
using the term in subsequent rulemaking and, instead, use alternate 
terminology.
    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 $50,000 in taxes with respect to beer imposed by 26 U.S.C. 5051 
and 7652 in a calendar year

[[Page 58678]]

and was liable for not more than $50,000 in such taxes in the preceding 
calendar year'' standard applicable to quarterly tax payment is set by 
law in section 5061(d)(4) of the IRC and therefore cannot be changed by 
regulation. Consequently, TTB chose to adopt this standard for 
submitting operational reports quarterly and for determining 
eligibility to use TTB Form 5130.26. With regard to the use of the term 
``small brewers,'' and where its meaning is specifically set forth, 
such as in the preamble to this rulemaking document, TTB uses the 
phrase only for simplicity. The term does not appear in the text of the 
TTB regulations, and TTB does not intend to use the term in regulatory 
text in the future. Additionally, TTB is removing the phrase ``small 
brewers'' from the proposed new title of Form 5130.26.

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. The Brewers Association (Comment 43) made several 
suggestions. One suggestion was to eliminate the requirement for TTB 
approval of formulas for ``non-controversial products.'' Another 
suggestion was to simplify mandatory label information for bulk 
containers, such as kegs, and clarify the Certificate of Label Approval 
requirements for malt beverages intended for sale only within a State. 
The association also recommended changes to the TTB regulations to 
allow breweries to begin operation upon the filing of a Brewer's 
Notice, without requiring prior approval of the notice, and to require 
``only persons, not facilities,'' to obtain permits under the Federal 
Alcohol Administration Act. Finally, the association suggested that TTB 
revise the current method of ``calculating taxable production.''
    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 June 5, 2014 (see  https://www.ttb.gov/rulings/2014-4.pdf).
    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 March 28, 
2013 (see https://www.ttb.gov/rulings/2013-1.pdf). TTB also is 
considering the Brewers Association's comments to determine if TTB 
should propose additional regulatory changes or undertake other 
actions.

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 Sec.  25.93(a)(2), as well as minor editorial changes to Sec.  
25.297(b)(1) and (c) so that a new regulation will not have to be 
issued if only a form number or a heading on a form changes. TTB also 
revised Sec.  25.297(b)(2) to clarify that if a brewer who had been 
eligible to file quarterly reports becomes liable for more than $50,000 
in taxes for the current calendar year, it must commence filing monthly 
reports beginning with the first month that it will be liable for more 
than $50,000 in taxes for the current calendar year. The brewer must 
also concurrently file a report for any previous month of that quarter. 
These minor changes are for clarity only and do not change the 
substance of the regulation.

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 January 1, 2015. Therefore, affected brewers will be 
required to file tax returns, remit tax payments, and submit reports of 
operations on a quarterly basis for the quarter that begins January 1, 
2015.

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, December 7, 
2012) and related notice of proposed rulemaking (Notice No. 131, 77 FR 
72999, December 7, 2012) to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA) for comment on the impact of these 
regulations. The SBA had no comment on either the temporary rule or the 
proposed rule.

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 Office of 
Management and Budget (OMB) that are affected by the adoption of these 
regulatory changes. These collections of information, approved in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506), 
are the Excise Tax Return (TTB Form 5000.24), associated with OMB 
control number 1513-0083, and the Brewer's Report of Operations and the 
Quarterly Brewers Report of Operations (TTB Form 5130.9 and TTB Form 
5130.26), which are both associated with OMB control number 1513-0007. 
Under the Paperwork Reduction Act, 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 OMB control number.

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.

[[Page 58679]]

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 Tobacco Tax and Trade Bureau, drafted this document.

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

0
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.


0
2. In Sec.  25.93, paragraph (a)(2) is revised to read as follows:


Sec.  25.93  Penal sum of bond.

    (a) * * *
    (2) Brewers filing quarterly tax returns. For brewers who were 
liable for not more than $50,000 in taxes with respect to beer imposed 
by 26 U.S.C. 5051 and 7652 in the preceding calendar year, who 
reasonably expect to be liable for not more than $50,000 in such taxes 
during the current calendar year, and who file tax returns and remit 
taxes quarterly under Sec.  25.164(c)(2), the penal sum of the brewer's 
bond is $1,000 and covers:
    (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.
* * * * *


Sec.  25.164  [Amended]

0
3. In Sec.  25.164:
0
a. The first sentence in paragraph (c)(1) is amended by removing the 
words ``, and chooses to use,''; and
0
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''.

0
4. In Sec.  25.297, revise the section heading and paragraphs (b) and 
(c) to read as follows:


Sec.  25.297  Report of Operations, Form 5130.9 or Form 5130.26.

* * * * *
    (b) Quarterly report of operations. (1) For calendar quarters 
commencing on or after January 1, 2015, a brewer who was liable for not 
more than $50,000 in taxes with respect to beer imposed by 26 U.S.C. 
5051 and 7652 in the preceding calendar year and reasonably expects to 
be liable for not more than $50,000 in such taxes during the current 
calendar year shall file quarterly Form 5130.9 or Form 5130.26 (or any 
successor forms). For purposes of this section, ``reasonably expects'' 
means that the brewer was liable for not more than $50,000 in taxes the 
previous calendar year and that there is no other existing or 
anticipated circumstance known to the brewer (such as an increase in 
production capacity) that would cause the brewer's liability to 
increase beyond that level in the current calendar year.
    (2) If a brewer determines that it will be liable for more than 
$50,000 in taxes with respect to beer imposed by 26 U.S.C. 5051 and 
7652 during the current calendar year, the brewer shall file Form 
5130.9 monthly beginning with the first month during which the tax 
liability exceeds $50,000, and shall concurrently file Form 5130.9 for 
any previous month of that quarter. When filing the first monthly 
report, a brewer shall state on the form that it will be liable for 
more than $50,000 in taxes for the current calendar year and will 
henceforth submit monthly filings. The brewer shall then continue to 
file Form 5130.9 for each subsequent month of that calendar year.
    (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: July 22, 2014.
John J. Manfreda,
Administrator.
    Approved: August 15, 2014.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. 2014-22964 Filed 9-29-14; 8:45 am]
BILLING CODE 4810-31-P