Temporary Rule

Federal Register / Vol. 77, No. 236 / Friday, December 7, 2012 / Rules and Regulations
Tax and Trade Bureau, 550 Main Street,
Suite 8002, Cincinnati, OH 45202–5215;
telephone toll free 1–877–882–3277; or
by email at [email protected].

do not apply to any tax paid under
section 4191 (medical device tax).
*
*
*
*
*
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: November 30, 2012.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).

SUPPLEMENTARY INFORMATION:

Background
TTB Authority

[FR Doc. 2012–29628 Filed 12–5–12; 8:45 am]
BILLING CODE P

DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade
Bureau
27 CFR Part 25
[Docket No. TTB–2012–0006; T.D. TTB–109;
Re: Notice No. 131]
RIN 1513–AB94

Small Brewers Bond Reduction
Alcohol and Tobacco Tax and
Trade Bureau, Treasury.
ACTION: Temporary rule; Treasury
decision.
AGENCY:

The Alcohol and Tobacco Tax
and Trade Bureau (TTB) amends its
regulation that sets forth the penal sum
for a brewer’s bond where the excise tax
liability of the brewer is reasonably
expected to be not more than $50,000 in
the current calendar year and the brewer
was liable for not more than $50,000 in
such taxes in the preceding calendar
year. For a period of three years, the
penal sum of the required bond will be
$1,000 for such brewers who file excise
tax returns and remit taxes quarterly. In
a related proposed rule published
elsewhere in this issue of the Federal
Register, TTB is soliciting comments
from all interested parties on this
amended regulatory text, on whether
TTB should permanently adopt this
change, and on other proposed
regulatory changes.
DATES: Effective Dates: This temporary
rule is effective from December 7, 2012
through December 7, 2015.
FOR FURTHER INFORMATION CONTACT: For
questions concerning this document,
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 by
email at [email protected].
For questions concerning tax payment
procedures and quarterly filing
procedures, contact the National
Revenue Center, Alcohol and Tobacco

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SUMMARY:

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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 State
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 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 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).
IRC section 5061 pertains to the time
and method for filing 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 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 taxes with respect
to beer imposed by 26 U.S.C. 5051 and
7652 in a given calendar year and who
had an excise tax liability of not more
than $50,000 the previous calendar year.
Under this provision, such taxpayers
may pay the excise taxes on alcohol
beverages withdrawn under bond on a
quarterly basis.

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Throughout this preamble, TTB may
refer to brewers who are eligible to file
excise tax returns on a quarterly basis as
‘‘small brewers.’’ While there is no
specific statutory or regulatory
definition as to who is a ‘‘small brewer,’’
TTB believes that section 5061(d)(4) of
the IRC, which provides an exception to
the semimonthly rule for taxpayers
whose annual alcohol excise tax
liability is not expected to be more than
$50,000, and who were liable for not
more than $50,000 in such taxes in the
preceding calendar year, provides a
reasonable standard for determining
when a brewer may be considered
‘‘small’’.
Section 5401(b) of the IRC (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.’’
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
Secretary has delegated various
authorities through Treasury
Department Order 120–01 (Revised),
dated January 21, 2003, to the TTB
Administrator to perform the functions
and duties in administration and
enforcement of these laws. The TTB
regulations that implement the
provisions of sections 5051, 5054, 5061,
and 5401, of the IRC as they relate to
beer, are set forth in part 25 of title 27
of the Code of Federal Regulations
(CFR).
Penal Sum of the Brewer’s Bond
Penal sum amounts of the brewer’s
bond are set forth in 27 CFR 25.93. For
brewers filing tax returns and paying tax
semimonthly, the penal sum of the bond
must be equal to 10 percent of the
maximum amount of tax that the brewer
will become liable to pay during the
calendar year. For brewers filing tax
returns and paying tax quarterly, the
penal sum of the bond must be equal to
29 percent of the maximum amount of
tax which the brewer will become liable
to pay during the calendar year. Under
§ 25.93(c), the minimum bond amount is
set at $1,000 and the maximum bond
amount is $500,000.
TTB explained the rationale for the
bond amount for quarterly taxpayers in
a temporary rule, T.D. TTB–41,
published in the Federal Register on
February 2, 2006 (71 FR 5598), which
implemented the quarterly tax payment
procedures of section 5061(d)(4) of the

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Federal Register / Vol. 77, No. 236 / Friday, December 7, 2012 / Rules and Regulations

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IRC. TTB permanently added the
temporary rule to the regulations in T.D.
TTB–94, published on August 24, 2011
(76 FR 52862). In T.D. TTB–41, TTB
stated that due to the longer deferral
period between the accrual of the tax
liability and the actual payment of tax,
the 10 percent bond coverage provided
for semimonthly filers would be
inadequate for small brewers who were
eligible and opted to pay taxes
quarterly.
Brewer’s Bond Amount and Its Effect
on Quarterly Filing
In recent meetings, beer industry
groups and individual brewers have
informed TTB that, for small brewers,
the increase of the penal sum amount to
29 percent of the brewer’s expected
maximum tax liability for the year has
deterred such brewers from filing
returns on a quarterly basis. A review of
TTB’s records provides data that
support this conclusion. At the end of
2011, 2,026 brewers submitted tax
returns to TTB, and 1,846 of those
brewers paid less than $50,000 in excise
tax annually and were eligible to file
returns quarterly. Further, the majority
of those 1,846 brewers paid much less
than $50,000 in excise tax, given that
1,616 of those brewers (87.5 percent)
paid annual taxes of $7,000 or less.
TTB’s records also show that of these
1,616 brewers, 841 (52 percent) filed
semimonthly rather than quarterly tax
returns.
The effect of § 25.93 is that a brewer
who files returns quarterly instead of
semimonthly may have to increase its
bond coverage. For example, a small
brewer with an annual Federal excise
tax liability of $40,000 per year who
files returns semimonthly must obtain
bond coverage of $4,000 (10 percent of
$40,000). If the same small brewer opts
to file its tax returns quarterly rather
than semimonthly, the brewer must
increase its bond coverage to 29 percent
of its maximum annual tax liability,
which would result in a bond amount
of $11,600.
The effect of § 25.93 also may mean
that small brewers who want to file
quarterly would be more than likely
ineligible to obtain the minimum bond
coverage under § 25.93(c). For example,
a small brewer with an annual Federal
excise tax liability of $7,000 would have
a semimonthly tax liability of less than
$300 and would need to obtain only the
minimum bond coverage of $1,000. If
the same brewer opted to file returns
quarterly rather than semimonthly, the
quarterly tax liability would be $1,750,
making the brewer ineligible for the
minimum bond. Instead, the brewer
must increase its bond coverage to 29

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percent of its maximum annual tax
liability, which would be $2,030.
In the case of brewers who are eligible
to file quarterly returns, TTB has
revisited the issue of whether requiring
a penal sum of at least 29 percent of a
small brewer’s maximum annual tax
liability is necessary to establish a
‘‘reasonable penal sum’’ that adequately
protects and insures collection of the
revenue. TTB’s tax return statistics
reveal that the total sum of Federal
excise tax collected from brewers who
are liable for not more than $50,000 in
taxes annually represents a small
amount of the total sum of excise tax
collected on beer each year. Small
brewers paid approximately $11.5
million, or just over six percent, of the
$177.8 million in Federal excise tax on
beer collected in 2011. Similar
collections occurred in 2010, with small
brewers paying approximately $10.15
million, or 5.6 percent, of the $180.6
million in excise tax collected that year.
The Proposed Regulatory Amendment
After discussions with beer industry
members and a review of excise tax
return data, TTB believes that given the
relatively low risk to the revenue, a
penal sum of $1,000 for bonds obtained
by small brewers is reasonably sufficient
to protect and insure collection of the
revenue. TTB also believes that
amending the regulatory requirements
regarding the penal sum of brewers
bonds may result in an increase in
quarterly filings and tax payments. In
addition, TTB believes an increase in
quarterly filings and tax payments will
lessen costs and increase efficiencies for
both TTB and industry members.
To encourage a greater number of
eligible small brewers to file excise tax
returns and pay taxes quarterly rather
than semimonthly, this temporary rule
amends 27 CFR 25.93(a) to add a threeyear exception to the current penal sum
of the brewer’s bond. During this threeyear period, for brewers who are eligible
to and choose to file their tax returns
quarterly, the penal sum of the brewer’s
bond will be a flat $1,000. The
temporary rule’s three-year period will
allow TTB to determine if the
adjustment to the bond amount results
in increased quarterly tax filing and
payment by eligible brewers, and also
will allow TTB to confirm the
presumption that a $1,000 penal sum of
the bond is sufficient to protect and
insure collection of the revenue. This
temporary rule does not prohibit
brewers who are eligible to file quarterly
from filing semimonthly or maintaining
their current bond amounts.

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Public Participation
To submit comments on these
regulations, please refer to Notice No.
131, the notice of proposed rulemaking
on this subject published in the
Proposed Rules section of this issue of
the Federal Register.
Regulatory Flexibility Act
Because this regulation does not
impose a collection of information on
small entities, the provisions of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.) do not apply. Pursuant to
section 7805(f) of the Internal Revenue
Code, TTB will submit this temporary
rule to the Chief Counsel for Advocacy
of the Small Business Administration
for comment on the impact of the
temporary regulations.
Executive Order 12866
It has been determined that this
temporary rule is not a significant
regulatory action as defined in E.O.
12866. Therefore, a regulatory
assessment is not necessary.
Paperwork Reduction Act
There is no new collection of
information imposed by this Treasury
decision. There is no change in the
reporting or recordkeeping burden
resulting from a reduced penal sum for
certain small taxpayers.
Inapplicability of Prior Notice and
Comment and Delayed Effective Date
Procedures
TTB is issuing this temporary final
rule without prior notice and comment
pursuant to authority under section 4(a)
of the Administrative Procedure Act (5
U.S.C. 553(b)). This provision
authorizes an agency to issue a rule
without prior notice and comment when
the agency for good cause finds that
those procedures are ‘‘impracticable,
unnecessary, or contrary to the public
interest.’’ We believe prior notice and
comment is unnecessary because we
expect the affected public will benefit
immediately from a reduced bond
amount and be encouraged to lessen
their reporting burdens. TTB does not
believe there will be any objection to
this rule since it is optional and reduces
regulatory burdens.
Pursuant to the provisions of 5 U.S.C.
553(d)(1) and (d)(3), TTB is issuing this
regulatory amendment without a
delayed effective date. As provided for
in section 553(d)(1), this amendment
lowers the bond requirement for small
brewers, thereby relieving a restriction
which may have prevented such
brewers from choosing to pay their taxes
quarterly. TTB also has determined that
good cause exists to provide industry

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Federal Register / Vol. 77, No. 236 / Friday, December 7, 2012 / Rules and Regulations
members with immediate relief from the
penal sum requirements under the
existing regulations, in accordance with
section 553(d)(3).
Drafting Information
Gerald M. Isenberg and Ramona Hupp
of the Regulations and Rulings Division,
Alcohol and Tobacco Tax and Trade
Bureau, drafted this document.
List of Subjects in 27 CFR Part 25

[FR Doc. 2012–29488 Filed 12–6–12; 8:45 am]
BILLING CODE 4810–31–P

DEPARTMENT OF DEFENSE

Beer, Excise taxes, Reporting and
recordkeeping requirements, Surety
bonds.

Office of the Secretary
32 CFR Part 68

Amendments to the Regulations

[Docket No. DOD–2009–OS–0034]

Accordingly, for the reasons set forth
in the preamble, TTB amends 27 CFR,
chapter I, part 25 as set forth below.

RIN 0790–AI50

PART 25—BEER

AGENCY:

1. The authority citation for part 25
continues to read as follows:

Authority: 19 U.S.C. 81c; 26 U.S.C. 5002,
5051–5054, 5056, 5061, 5121, 5122–5124,
5222, 5401–5403, 5411–5417, 5551, 5552,
5555, 5556, 5671, 5673, 5684, 6011, 6061,
6065, 6091, 6109, 6151, 6301, 6302, 6311,
6313, 6402, 6651, 6656, 6676, 6806, 7342,
7606, 7805; 31 U.S.C. 9301, 9303–9308.

2. Amend § 25.93 by:
a. Amending paragraph (a)(2) by
removing the word ‘‘For’’ in the first
sentence after the heading and replacing
it with the words ‘‘Except as provided
in paragraph (a)(3) of this section, for’’;
and
■ b. Adding a new paragraph (a)(3) to
read as follows:
■
■

§ 25.93

Penal sum of bond.

(a) * * *
(3) Exception. For a period of three
years beginning December 7, 2012 for
brewers filing tax returns and remitting
taxes quarterly under § 25.164(c)(2), the
penal sum of the brewer’s bond is
$1,000 on beer:
(i) Removed for transfer to the
brewery from other breweries owned by
the same brewer;
(ii) Removed without payment of tax
for export or for use as supplies on
vessels and aircraft;
(iii) Removed without payment of tax
for use in research, development, or
testing; and
(iv) Removed for consumption or sale.
*
*
*
*
*

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Voluntary Education Programs
Office of the Under Secretary of
Defense for Personnel and Readiness,
DoD.
ACTION: Final rule.

■

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Signed: September 18, 2012.
John J. Manfreda,
Administrator.
Approved: September 28, 2012.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and
Tariff Policy).

In this final rule, the
Department of Defense (DoD)
implements policy, assigns
responsibilities, and prescribes
procedures for the operation of
voluntary education programs within
DoD. Several of the subject areas in this
final rule include: procedures for
Service members participating in
education programs; guidelines for
establishing, maintaining, and operating
voluntary education programs
including, but not limited to, instructorled courses offered on-installation and
off-installation, as well as via distance
learning; procedures for obtaining onbase voluntary education programs and
services; minimum criteria for selecting
institutions to deliver higher education
programs and services on military
installations; the establishment of a DoD
Voluntary Education Partnership
Memorandum of Understanding (MOU)
between DoD and educational
institutions receiving tuition assistance
payments; and procedures for other
education programs for Service
members and their adult family
members. The new requirement for a
signed MOU with DoD from
participating educational institutions
will be effective 60 days following the
publication of this final rule in the
Federal Register.
DATES: This rule is effective January 7,
2013.
FOR FURTHER INFORMATION CONTACT: For
specific information on the new DoD
Voluntary Education Partnership MOU,
go to the DoD MOU site at http://
www.dodmou.com. There is a ‘‘feedback
SUMMARY:

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button’’ where questions and concerns
can be emailed from Service members,
education centers, and institutions.
Every email received through the
automated feedback button will be
recorded, tracked, and resolved by the
appropriate DoD official. For general
information concerning DoD Voluntary
Education Programs, send a written
inquiry to Ms. Kerrie Tucker, at the
Office of the Under Secretary of Defense
(Personnel & Readiness), Military
Community & Family Policy, State
Liaison and Educational Opportunities,
4800 Mark Center Drive, Suite 14E08,
Alexandria, Virginia 22350–2300 or
email: [email protected].
SUPPLEMENTARY INFORMATION:
Executive Summary
This final rule implements Voluntary
Education Programs for Military Service
members. This rule includes
educational programs that enable
Service members to earn a degree on
their off-duty time. Congress has held
that men and women serving in the
Armed Forces should have at least the
same opportunity to advance
academically as do civilians who
remain outside the military.
Funding for Voluntary Education
Programs is authorized by law and is
subject to the availability of funds from
each Service. Voluntary education
programs include tuition assistance
(TA) (per 10 U.S.C. 2007), which is
administered uniformly across the
Services. Subject to appropriations, each
Service pays no more than $250.00 per
semester-unit for tuition and fees
combined. Each Service member
participating in off-duty, voluntary
education is eligible for up to $4,500.00,
in aggregate, for each fiscal year. TA can
only be used for courses offered by
postsecondary institutions accredited by
a national or regional accrediting body
recognized by the U.S. Department of
Education.
A March 2011 Government
Accountability Office report on the DoD
TA program recommended the
Department take steps to enhance its
oversight of schools receiving TA funds.
As a result, a DoD Memorandum of
Understanding (MOU) requirement was
included in this rule, which is
designated not only to improve
Departmental oversight but also to
account for our Service members’
unique lifestyle requirements. The
purpose of the DoD MOU is to establish
a partnership between the Department
and institutions to improve educational
opportunities while protecting the
integrity of each institution’s core
educational values. This partnership
serves to ensure a quality, viable

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