1513-0125 Law and Regs.

1513-0125 TTB F 5110.56 (Distilled Spirits Bond)

Sec. 5173. Bonds

(a) Operations at, and withdrawals from, distilled spirits plant must be covered by bond

(1) Operations

No person intending to establish a distilled spirits plant may

commence operations at such plant unless such person has furnished

bond covering operations at such plant.

(2) Withdrawals

No distilled spirits (other than distilled spirits withdrawn

under section 5214 or 7510) may be withdrawn from bonded premises

except on payment of tax unless the proprietor of the bonded

premises has furnished bond covering such withdrawal.

(b) Operations bonds

The bond required by paragraph (1) of subsection (a) shall meet the

requirements of paragraph (1), (2), or (3) of this subsection:

(1) One plant bond

The bond covers operations at a single distilled spirits plant.

(2) Adjacent wine cellar bond

The bond covers operations at a distilled spirits plant and at

an adjacent bonded wine cellar.

(3) Area bond

The bond covers operations at 2 or more distilled spirits plants (and adjacent bonded wine cellars) which--

(A) are located in the same geographical area (as

designated in regulations prescribed by the Secretary), and

(B) are operated by the same person (or, in the case of a

corporation, by such corporation and its controlled

subsidiaries).

(c) Withdrawal bonds

The bond required by paragraph (2) of subsection (a) shall cover

withdrawals from 1 or more bonded premises the operations at which could be covered by the same operations bond under subsection (b).

(d) Unit bonds

Under regulations prescribed by the Secretary, the requirements of

paragraphs (1) and (2) of subsection (a) shall be treated as met by a

unit bond which covers both operations at, and withdrawals from, 1 or

more bonded premises which could be covered by the same operations bond

under subsection (b).

(e) Terms and conditions

(1) In general

Any bond furnished under this section shall be conditioned that

the person furnishing the bond--

(A) will faithfully comply with all provisions of law and

regulations relating to the activities covered by such bond,

and

(B) will pay--

(i) all taxes imposed by this chapter, and

(ii) all penalties incurred by, or fines imposed on,

such person for violation of any such provision.

(2) Other terms and conditions

Any bond furnished under this section shall contain such other

terms and conditions as may be required by regulations prescribed

by the Secretary.

(f) Amount

(1) In general

The penal sum of any bond shall be the amount determined under

regulations prescribed by the Secretary.

(2) Maximum and minimum amount

The Secretary shall by regulations prescribe a minimum amount

and a maximum amount for each type of bond which may be furnished

under this section.

(g) Total amount available

The total amount of any bond furnished under this section shall be

available for the satisfaction of any liability incurred under the terms and conditions of such bond.

(h) Special rules

For purposes of this section--

(1) Withdrawal bonds

In the case of any bond furnished under this section which

covers withdrawals but not operations--

(A) such bond shall be in addition to the operations bond,

and

(B) if distilled spirits are withdrawn under such bond, the

operations bond shall no longer cover liability for payment of

the tax on the spirits withdrawn.

(2) Adjacent wine cellars

(A) Requirements

No wine cellar shall be treated as being adjacent to a

distilled spirits plant unless--

1. such distilled spirits plant is qualified under

this subchapter for the production of distilled spirits,

and

(ii) such wine cellar and the distilled spirits plant

are operated by the same person (or, in the case of a

corporation, by such corporation and its controlled

subsidiaries).

(B) Bond in lieu of wine cellar bond

In the case of any adjacent wine cellar, a bond furnished

under this section which covers operations at such wine cellar

shall be in lieu of any bond which would otherwise be required

under section 5354 with respect to such wine cellar (other than

supplemental bonds required under the second sentence of

section 5354).

(Added Pub. L. 85-859, title II, Sec. 201, Sept. 2, 1958, 72 Stat. 1349; amended Pub. L. 91-659, Sec. 4, Jan. 8, 1971, 84 Stat. 1966; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96-39, title VIII, Sec. 805(c), July 26, 1979, 93 Stat. 276.)

Sec. 5181. Distilled spirits for fuel use

(a) In general

(1) Purposes for which plant may be established

On such application and bond and in such manner as the

Secretary may prescribe by regulation, a person may establish a

distilled spirits plant solely for the purpose of--

(A) producing, processing, and storing, and

(B) using or distributing,

distilled spirits to be used exclusively for fuel use.

(2) Regulations

In prescribing regulations under paragraph (1) and in carrying

out the provisions of this section, the Secretary shall, to the

greatest extent possible, take steps to--

(A) expedite all applications;

(B) establish a minimum bond; and

(C) generally encourage and promote (through regulation or

otherwise) the production of alcohol for fuel purposes.

(b) Authority to exempt

The Secretary may by regulation provide for the waiver of any

provision of this chapter (other than this section or any provision

requiring the payment of tax) for any distilled spirits plant described

in subsection (a) if the Secretary finds it necessary to carry out the

provisions of this section.

(c) Special rules for small plant production

(1) Applications

(A) In general

An application for an operating permit for an eligible

distilled spirits plant shall be in such a form and manner, and

contain such information, as the Secretary may by regulations

prescribe; except that the Secretary shall, to the greatest

extent possible, take steps to simplify the application so as

to expedite the issuance of such permits.

(B) Receipt of application

Within 15 days of receipt of an application under

subparagraph (A), the Secretary shall send a written notice of

receipt to the applicant, together with a statement as to

whether the application meets the requirements of subparagraph

(A). If such a notice is not sent and the applicant has a

receipt indicating that the Secretary has received an

application, paragraph (2) shall apply as if a written notice

required by the preceding sentence, together with a statement

that the application meets the requirements of subparagraph

(A), had been sent on the 15th day after the date the Secretary

received the application.

(C) Multiple applications

If more than one application is submitted with respect to

any eligible distilled spirits plant in any calendar quarter,

the provisions of this section shall apply only to the first

application submitted with respect to such plant during such

quarter. For purposes of the preceding sentence, if a corrected

or amended first application is filed, such application shall

not be considered as a separate application, and the 15-day

period referred to in subparagraph (A) shall commence with

receipt of the corrected or amended application.

(2) Determination

(A) In general

In any case in which the Secretary under paragraph (1)(B)

has notified an applicant of receipt of an application which

meets the requirements of paragraph (1)(A), the Secretary shall

make a determination as to whether such operating permit is to

be issued, and shall notify the applicant of such

determination, within 45 days of the date on which notice was

sent under paragraph (1)(B).

(B) Failure to make determination

If the Secretary has not notified an applicant within the

time prescribed under subparagraph (A), the application shall

be treated as approved.

(C) Rejection of application

If the Secretary determines under subparagraph (A) that a

permit should not be issued--

(i) the Secretary shall include in the notice to the

applicant of such determination under subparagraph (A)

detailed reasons for such determination, and

(ii) such determination shall not prejudice any further

application for such operating permit.

(3) Bond

No bond shall be required for an eligible distilled spirits

plant. For purposes of section 5212 and subsection (e)(2) of this

section, the premises of an eligible distilled spirits plant shall

be treated as bonded premises.

(4) Eligible distilled spirits plant

The term ``eligible distilled spirits plant'' means a plant

which is used to produce distilled spirits exclusively for fuel use

and the production from which does not exceed 10,000 proof gallons

per year.

(d) Withdrawal free of tax

Distilled spirits produced under this section may be withdrawn free

of tax from the bonded premises (and any premises which are not bonded

by reason of subsection (c)(3)) of a distilled spirits plant exclusively for fuel use as provided in section 5214(a)(12).

(e) Prohibited withdrawal, use, sale, or disposition

(1) In general

Distilled spirits produced under this section shall not be

withdrawn, used, sold, or disposed of for other than fuel use.

(2) Rendering unfit for use

For protection of the revenue and under such regulations as the

Secretary may prescribe, distilled spirits produced under this

section shall, before withdrawal from the bonded premises of a

distilled spirits plant, be rendered unfit for beverage use by the

addition of substances which will not impair the quality of the

spirits for fuel use.

(f) Definition of distilled spirits

For purposes of this section, the term ``distilled spirits'' does

not include distilled spirits produced from petroleum, natural gas, or

coal.

(Added Pub. L. 96-223, title II, Sec. 232(e)(1), Apr. 2, 1980, 94 Stat.

278.)

27 CFR

Sec. 19.231 Filing of operations or unit bonds.

Every person intending to establish a distilled spirits plant shall file an operations or unit bond as prescribed in this subpart, covering distilled spirits operations at such plant, with the appropriate TTB officer, at the time of filing the original application for registration of the plant, and at such other times as are required by this part. Such bond shall be conditioned that he shall faithfully comply with all provisions of law and regulations relating to activities covered by such bond, will pay all taxes imposed by 26 U.S.C. Chapter 51, and shall pay all penalties incurred or fines imposed for violation of any such provisions. The appropriate TTB officer may require, in connection with any operations or unit bond, a statement, executed under the penalties of perjury, as to whether the principal or any person owning, controlling, or actively participating in the management of the business of the principal has been convicted of or has compromised any offense set forth in Sec. 19.237(a)(1) or has been convicted of any offense set forth in Sec. 19.237(a)(2). In the event the above statement contains an affirmative answer, the applicant shall submit a statement describing in detail the circumstances surrounding such conviction or compromise. No person shall commence or continue distilled spirits operations at such plant unless he has a valid operations or unit bond (and consent of surety, if necessary), as required in respect of such operations by this part.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1394, as amended (26 U.S.C. 5551);

sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173))

[T.D. ATF-198, 50 FR 8464, Mar. 1, 1985; 50 FR 23410, June 4, 1985]

Sec. 19.241 Operations bond--distilled spirits plant and adjacent

bonded wine cellar.

(a) General. A wine cellar under the provisions of 27 CFR part 24 shall be treated as being adjacent to a distilled spirits plant if--

(1) Such distilled spirits plant is qualified under subpart G for the production of distilled spirits; and

(2) Such wine cellar and distilled spirits plant are operated by the same person (or in the case of a corporation, by such corporation and its controlled subsidiaries). For the purpose of this section a controlled subsidiary is a corporation where more than 50 percent of the voting power is controlled by the parent corporation.

(b) Bond in lieu of wine cellar bond. In the case of an adjacent bonded wine cellar, a bond furnished under this subpart which covers operations at such bonded wine cellar shall be in lieu of any bond which would otherwise be required under 26 U.S.C. 5354 with respect to such wine cellar (other than supplemental bonds required under the second sentence of 26 U.S.C. 5354) and the operations bond listed in Sec. 19.245(a)(1).

(c) Liability. Bonds given under this section shall contain the terms and conditions of the bonds in lieu of which they are given. The total amount of such operations bond shall be available for the satisfaction of any liability incurred under the terms or conditions of such bond.

(Sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173))

[T.D. ATF-198, 50 FR 8464, Mar. 1, 1985, as amended by T.D. ATF-299, 55

FR 24989, June 19, 1990]

Sec. 19.242 Area operations bond.

Any person (or, in the case of a corporation, a corporation and its controlled subsidiaries) operating more than one plant in a region may give an area operations bond covering the operation of any two or more of such plants, and any bonded wine cellars which are adjacent to such plants and which otherwise could be covered by an operations bond. For the purpose of this section, a controlled subsidiary is a corporation where more than 50 percent of the voting power is controlled by the parent corporation. Bonds given under this section shall be in lieu of the bonds which would be required under Sec. 19.245(a) and shall contain the terms and conditions of such bonds. If the area operations

bond covers the operations of more than one corporation, each corporation shall be shown as principal, and the bond shall be signed for each corporation. The total amount of the area operations bond shall be available for the satisfaction of any liability incurred under the terms or conditions of such bond.

(Sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173))

Sec. 19.243 Withdrawal bond.

Any person (or, in the case of a corporation, a corporation and its controlled subsidiaries) operating one or more distilled spirits plants within a region and who intends to withdraw spirits from bond on determination, but before payment, of the tax shall, before making any such withdrawal, furnish a withdrawal bond to secure payment of the tax on all spirits so withdrawn. Such bond shall be in addition to the operations bond, and if the distilled spirits are withdrawn under the

withdrawal bond, the operations bond shall no longer cover liability or payment of the tax on the spirits withdrawn. For the purpose of this section, a controlled subsidiary is a corporation where more than 50 percent of the voting power is controlled by the parent corporation. The bond, if it covers more than one plant, shall show as to each plant covered by the bond the part of the total sum which represents the penal sum (computed in accordance with Sec. 19.245) for each such plant. If the penal sum of the bond covering a plant, or the penal sum allocated to any plant (where the bond covers more than one plant), is in an amount less than the maximum prescribed in Sec. 19.245, withdrawals from such plant shall not exceed the quantity permissible, as reflected by the penal sum in the bond for such plant. Such withdrawal bond shall be conditioned that the total amount of the bond shall be available for satisfaction of any liability incurred under the terms and conditions of such bond.

(Sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173))

Sec. 19.244 Unit bond.

Any person (or, in the case of a corporation, a corporation and its controlled subsidiaries) who would otherwise be required to give bonds for both operations at one or more distilled spirits plants (and any adjacent bonded wine cellars) and withdrawals from one or more distilled spirits plants within a reigon may, in lieu of furnishing separate bonds for operations and withdrawals, furnish a unit bond containing the terms and conditions of the bonds in lieu of which it is given. For the purpose of this section, a controlled subsidiary is a corporation where more than 50 percent of the voting power is controlled by the parent corporation. The unit bond shall show as to each plant covered by the bond the part of the total sum which represents the penal sum (computed in accordance with Sec. 19.245) for operations at and withdrawals from each plant. If the penal sum of the bond covering a plant, or the penal sum allocated to any plant (if the bond covers more than one plant), is in an amount less than the maximum prescribed in Sec. 19.245, operations at and/or withdrawals from such plant shall not exceed the quantity permissible as reflected by the penal sum in the bond for such plant. The unit bond shall be conditioned that the total amount of the bond shall be available for satisfaction of any liability incurred under the terms and conditions of such bond.

(Sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173))

Sec. 19.246 Strengthening bonds.

In all cases when the penal sum of any bond becomes insufficient, the principal shall either give a strengthening bond with the same surety to attain a sufficient penal sum, or give a new bond to cover the entire liability. Strengthening bonds will not be approved where any notation is made thereon which is intended, or which may be construed, as a release of any former bond, or as limiting the amount of any bond to less than its full penal sum. Strengthening bonds shall show the current date of execution and the effective date.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1394, as amended (26 U.S.C. 5551);

sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173))

Sec. 19.955 Bonds.

An operations bond is required for medium and large plants. The bond will be executed, in duplicate, on Form 5110.56. Surety bonds may be given only with corporate sureties holding certificates of authority from, and subject to the limitations prescribed by, the Secretary as set forth in the current revision of Treasury Department Circular 570. However, in lieu of corporate surety the proprietor may pledge and deposit as surety for his bond, securities which are transferable and are guaranteed as to both interest and principal by the United States, in accordance with the provisions of 31 CFR part 225. The appropriate TTB officer will not release such securities until liability under the bond for which they were pledged has been terminated.

(Sec. 805(c), Pub. L. 96-39, 93 Stat. 276 (26 U.S.C. 5173); CH. 390, Pub. L. 80-280, 61 Stat. 648, 650 (31 U.S.C. 9301, 9303, 9304, 9306); sec. 232, Pub. L. 96-223, 94 Stat. 278 (26 U.S.C. 5181))