Due to a change in law, effective Jan. 1, 2023, importers of alcohol will need to apply to TTB directly to claim reduced rates or refunds of alcohol excise tax. The TTB issued guidance sets forth the procedures for implementation of the new changes. Specifically, the guidance (1) requires foreign producers to register with TTB prior to assigning tax benefits to importers; (2) establishes the information foreign producers must submit in order to register and assign those benefits; and (3) establishes the information that importers must provide to claim a refund based on the foreign producer’s assignment of tax benefits to them.
The US Department of Treasury Alcohol and Tobacco Tax and Trade Bureau (“TTB”) recently issued temporary regulations that implement certain changes to the Internal Revenue Code (“Code”) made by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Tax Relief Act), which amended the Craft Beverage Modernization Act (CBMA) provisions of the Tax Cuts and Jobs Act of 2017.
Beginning on Jan. 1, 2023, based on the amendments made by the Tax Relief Act, importers will pay the full tax rate at entry and subsequently submit refund claims to TTB to receive the lower rates. The temporary regulations establish procedures for foreign producers to claim the statutory reduced rates of excise tax or excise tax credits (collectively, tax benefits) for certain quantities of beer, wine, and distilled spirits produced in or imported into the United States beginning on Jan. 1, 2023. The temporary regulations also establish procedures outlining how foreign producers may assign the tax benefits to importers and the procedures by which such importers may receive the assignments and submit refund claims to TTB.
Generally, the temporary regulations set forth provisions that: (1) require foreign producers to register with TTB prior to assigning tax benefits to importers; (2) establish the information foreign producers must submit in order to register and assign those benefits; and (3) establish the information that importers must provide to claim a refund based on the foreign producer’s assignment of tax benefits to them. The information the importers must provide includes information the importer will generally submit through U.S. Customs and Border Patrol (CBP)’s Automated Commercial Environment (ACE) as part of the entry summary, as well as information the importer submits directly to TTB with the claim.
The temporary regulations also include provisions to implement statutory limitations on the CBMA tax benefits, such as attestation regarding controlled group limitations and revocation of eligibility of foreign producers to assign tax benefits to importers.
TTB will administer the CBMA import refund program through two components of an online system, ‘‘myTTB,’’. Using the online system, foreign producers will register, receive a TTB-issued Foreign Producer ID, and assign the CBMA tax benefits to importers. The importers will use the online system to elect to receive CBMA tax benefits assigned to them by foreign producers, and to submit refund claims based on those assignments and the information submitted by the importers themselves through ACE in connection with entries that are subject to CBMA claims.
Proposed regulations have also been issued which would clarify that a foreign producer may not assign CBMA tax benefits to U.S. importers in cases where the foreign producer has not produced the product.
Washington National Tax takeaways
The TTB guidance sets forth procedures for implementing changes to the CBMA made by the Tax Relief Act. Under current law, importers of alcohol who have an assignment from the foreign producer receive the excise tax benefit upon import. Under the changes in law, importers are no longer eligible to apply for the CBMA tax benefits when paying taxes to the CBP. Instead, importers must pay the full tax rate initially to the CBP and subsequently submit refund claims to the TTB.
Foreign producers will need to act in the next few months to register with the TTB in order to claim or assign the benefits beginning in January. Importers should be aware of the new procedures as they may create a cash float issue because the tax benefit will no longer be automatic. They should familiarize themselves with the new procedures to ensure that they are not missing any opportunities to claim the tax benefits.
Any affected party may submit comments to the TTB on these rules.
For more information, please consult with your tax advisor.