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Bonding Requirements for a DSP

§ 19.151 - General.

(a) Bond required. Except as provided in paragraph (d) of this section, any person who plans to establish and operate a distilled spirits plant must provide TTB with one or more bonds on form TTB F 5110.56, Distilled Spirits Bond. TTB will not approve a registration or allow a person to operate a distilled spirits plant until the applicant has provided the necessary bonds. If a proprietor fails to pay any liability covered by a bond, TTB may seek payment from the proprietor, from the surety (see § 19.153) or from both the proprietor and the surety. The types and penal sums of bonds required will depend upon the type and size of the operations that the proprietor will conduct.

(b) Bond terms and conditions. The terms and conditions of a distilled spirits bond require that the proprietor comply with all provisions of law and regulations relating to activities covered by the bond, and to pay all taxes imposed by 26 U.S.C. chapter 51, including taxes on unexplained shortages of bottled distilled spirits. The bond will further specify that the proprietor will pay all penalties incurred, or fines imposed, for violations of law and regulations relating to activities covered by the bond. The specific terms of the required bond(s) are stated on TTB F 5110.56.

(c) Corporations and controlled subsidiaries. For purposes of this subpart, the term “corporation” includes a Limited Liability Company (LLC) or Limited Liability Partnership (LLP) in any jurisdiction where the law authorizes such a business organization to operate. Whenever used in this subpart, the term “controlled subsidiary” means a corporation (or LLC or LLP) in which more than 50 percent of the voting power is controlled by a parent corporation.

(d) Bonds covering distilled spirits for nonindustrial use and industrial use—(1) Nonindustrial use. A proprietor who pays tax on a deferred basis under § 19.235 is not required to provide a bond or bonds to cover operations and withdrawals of distilled spirits for nonindustrial use during any portion of a calendar year for which the proprietor is eligible to use an annual or quarterly return period under § 19.235(b) or (c). For purposes of the preceding sentence, a proprietor is considered to be paying tax on a deferred basis even if the proprietor does not pay tax during every return period as long as the proprietor intends to pay tax in a future period. See §§ 19.73 and 19.136 for rules governing applying for this bond exemption. See § 19.168(b) for rules governing when an existing proprietor who has not provided a bond under this paragraph must obtain bond coverage.

(2) Industrial use. A proprietor is required to provide one or more bonds to cover operations and withdrawals of distilled spirits for industrial use even if the proprietor pays tax on a deferred basis under § 19.235 and is eligible to use an annual or quarterly return period under § 19.235(b) or (c). In the case of a proprietor whose operations involve distilled spirits for both nonindustrial and industrial use, distilled spirits are considered to be for industrial use for purposes of this paragraph unless the proprietor designates the spirits as being solely for nonindustrial use either upon taking the production gauge (see § 19.304) or upon receiving the spirits and, in either case, does not thereafter mix the spirits with any spirits for industrial use.

(3) Nonindustrial use and industrial use defined. See § 19.472 for the provisions defining the nonindustrial and industrial uses of distilled spirits.

(26 U.S.C. 5173, 5551) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1120, Jan. 4, 2017]

§ 19.152 - Types of bonds.

(a) Basic Bonds. There are two basic types of bonds: the operations bond, and the withdrawal bond.

(1) Operations bond. An operations bond covers the tax liability for a variety of operations at a distilled spirits plant, along with any penalties incurred and fines imposed for violation of the law and regulations relating to activities covered by the bond.

(2) Withdrawal bond. A withdrawal bond covers the tax liability for tax determined distilled spirits withdrawn from the bonded premises on a tax deferred basis.

(b) Other bonds. In addition to the basic operations and withdrawal bonds, several variations of these bonds are available:

(1) An adjacent wine cellar bond covers operations at a distilled spirits plant and an adjacent bonded wine cellar;

(2) An area bond covers operations at two or more distilled spirits plant and any adjacent bonded wine cellars; and

(3) A unit bond covers both operations and withdrawals at one or more distilled spirits plants and operations at any adjacent bonded wine cellars.

(26 U.S.C. 5173)

§ 19.153 - Bond guaranteed by a corporate surety.

(a) Corporate surety. A company that issues bonds is called a “corporate surety.” Proprietors must obtain the surety bonds required by this subpart from a corporate surety approved by the Secretary of the Treasury.

(b) How to find an approved surety. The Department of the Treasury publishes a list of approved corporate surety companies in Treasury Department Circular 570, Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies. Treasury Department Circular 570 is published in the Federal Register annually on the first business day in July, and supplemental changes are published periodically thereafter. The most recent circular and any supplemental changes to it may be viewed on the Bureau of the Fiscal Service Web site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.

(31 U.S.C. 9304, 9306) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1120, Jan. 4, 2017]

§ 19.154 - Bond guaranteed by deposit of securities or cash (including cash equivalents).

(a) Bond guaranteed by deposit of securities—(1) General. As an alternative to the corporate surety bond under § 19.153, a person can file a bond that guarantees payment of the liability by pledging one or more acceptable negotiable securities. These securities must have a par value (face amount) equal to or greater than the penal sums of the required bonds. The pledged securities are held in the Federal Reserve Bank in a safekeeping account with TTB as the pledgee. Should the proprietor fail to pay one or more of the guaranteed liabilities, TTB can take action to sell the deposited securities to satisfy the debt. Pledged securities will be released if there are no outstanding liabilities when the bond is terminated. (See § 19.170.)

(2) Acceptable securities. Only public debt obligations of the United States, the principal and interest of which are unconditionally guaranteed by the United States Government, are acceptable for the purpose described in paragraph (a)(1) of this section. The Department of the Treasury and certain other United States Government agencies issue debt instruments that are acceptable as collateral, such as Treasury notes and Treasury bills. Savings bonds, certificates of deposit and letters of credit are not acceptable. A list of securities acceptable as collateral in lieu of surety bonds is available from the Bureau of the Fiscal Service. Current information and guidance from the Bureau of the Fiscal Service Web site may be found at https://www.fiscal.treasury.gov.

(b) Bond guaranteed by deposit of cash or cash equivalent. As an alternative to the corporate surety bond under § 19.153, a person can file a bond that guarantees payment of the liability by submitting cash or its equivalent (including a money order, cashier's check, or personal check). Cash or its equivalent must be no less than the penal sums of the required bond. Cash equivalents must be payable to the Alcohol and Tobacco Tax and Trade Bureau. A bond described in this paragraph will be released if there are no outstanding liabilities when the bond is terminated. (See § 19.170.)

(31 U.S.C. 9301, 9303; 31 CFR part 380) [T.D. TTB–146, 82 FR 1120, Jan. 4, 2017]

§ 19.155 - Change of surety bond terms—consent of surety.

In order to change the terms of an approved bond, both the principal and the surety company that guaranteed the bond must agree to the change. TTB must also approve the change. All changes to the terms of a bond must be executed on form TTB F 5000.18, Change of Bond (Consent of Surety) by both the principal and the surety with the same formality and proof of authority as required for the original bond. The completed, executed TTB F 5000.18 must be submitted to the National Revenue Center.

(26 U.S.C. 5173)

§ 19.156 - Power of attorney for surety.

(a) Requirement for power of attorney. Every bond and every consent of surety filed with TTB in which an agent or officer executed the bond or consent on behalf of the surety must be supported by a power of attorney authorizing the agent or officer to execute the bond or consent of surety. The power of attorney assures TTB that the person who signed the bond on behalf of the surety has the legal authority to obligate the surety.

(b) Form of power of attorney and endorsement. A power of attorney will be prepared on the surety's own form, and must be executed under the surety's corporate seal. If the power of attorney submitted is other than a manually signed original, it must be accompanied by a certification from the surety that the power of attorney is valid.

(c) Additional documentation. The appropriate TTB officer authorized to approve and accept the bond may require additional evidence of the authenticity of signatures and the authority of persons signing on behalf of the surety to execute the bond or consent.

(31 U.S.C. 9304, 9306)

§ 19.157 - Disapproval of bonds and consents of surety.

(a) Grounds for disapproval. The appropriate TTB officer may disapprove any bond or consent of surety required by this part if the principal or any person having ownership, control or responsibility for actively managing the business of the surety has been previously convicted, in a court of competent jurisdiction of:

(1) Any fraudulent noncompliance with any provision of any law of the United States relating to internal revenue or customs taxation of spirits, wines, or beer, or if the offense was compromised by payment of penalties or otherwise, or

(2) Any felony under a law of any State or the District of Columbia, or the United States, prohibiting the manufacture, sale, importation, or transportation of spirits, wine, beer, or other intoxicating liquor.

(b) Appeal. If the appropriate TTB officer disapproves a bond or consent of surety, the person giving the bond may appeal the disapproval to the Administrator, who will hear the appeal. The decision of the Administrator will be final.

(26 U.S.C. 5551)

Requirements for Operations and Withdrawal Bonds

§ 19.161 - Operations bond.

(a) General. Except as provided in § 19.151(d), any person who intends to establish a distilled spirits plant must furnish an operations bond (or a unit bond, see § 19.165) covering distilled spirits operations at such plant on TTB F 5110.56 with the original application to register the distilled spirits plant.

(b) Approval of bond. The appropriate TTB officer may require a statement, executed under the penalty of perjury, as to whether the principal, or any person owning, controlling, or managing the business of the applicant has been convicted of, or has compromised any offense listed in § 19.157(a)(1), or has been convicted of any offense listed in § 19.157(a)(2). If the above statement contains an affirmative answer, the applicant must provide an additional detailed statement describing the circumstances surrounding each conviction or compromise. The appropriate TTB officer will decide whether to approve or disapprove the bond.

(26 U.S.C. 5173, 5551) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1121, Jan. 4, 2017]

§ 19.162 - Operations bond for distilled spirits plant and adjacent bonded wine cellar.

(a) One bond satisfying two requirements. A proprietor who operates a bonded wine cellar that is adjacent to the proprietor's distilled spirits plant may file a single operations bond to cover the operations of the distilled spirits plant and the bonded wine cellar. A proprietor who files this type of bond satisfies the requirement in 26 U.S.C. 5173 for an operations bond covering the distilled spirits plant and the requirement in 26 U.S.C. 5354 for a bond covering wine and spirits possessed at, and in transit to, the bonded wine cellar. (The proprietor may still have to obtain a supplemental bond for the wine cellar to cover liabilities resulting from deferred payment of tax. See the second sentence of 26 U.S.C. 5354.)

(b) One bond combining terms and coverage of separate bonds. An operations bond filed under paragraph (a) of this section must contain the same terms and conditions that would be in separate bonds for the distilled spirits plant and for the bonded wine cellar. The proprietor may not allocate or divide the penal sum between the distilled spirits plant and the bonded wine cellar. The total amount of the bond must be available to satisfy any liability incurred under the terms of the bond at either facility.

(c) Persons qualified for a single bond. A proprietor may choose to file a single operations bond for a distilled spirits plant and adjacent bonded wine cellar only if:

(1) Such distilled spirits plant is qualified under subpart D of this part 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).

(26 U.S.C. 5173, 5351, 5354)

§ 19.163 - Area operations bond.

(a) Area operations bond covering multiple locations. A person who operates more than one distilled spirits plant within the geographical area serviced by the National Revenue Center may submit to TTB an area operations bond covering the operations of any two or more such plants and any bonded wine cellars that are adjacent to such plants and which otherwise could be covered by an operations bond. Area operations bonds filed under this section will be in lieu of the operations bond requirements for single distilled spirits plants under §§ 19.161 and 19.166 and must contain the same terms and conditions as those contained in separate bonds filed for single distilled spirits plants. Any person who files an area operations bond may not allocate or divide the penal sum of the area operations bond between the separate locations and the total penal sum of the bond must be available to satisfy liability incurred at any of the covered locations.

(b) Area operations bonds filed by corporations. An area operations bond may only cover distilled spirits plants and adjacent bonded wine cellars that are operated by the same person. For purposes of this section, a corporation and its controlled subsidiaries are considered to be one person. Further, a controlled subsidiary is a corporation in which more than 50 percent of the voting power is controlled by the parent corporation. Consequently, an area operations bond may cover distilled spirits plants and adjacent bonded wine cellars operated by a parent corporation and one or more of its controlled subsidiaries. The name of each corporation that operates a covered facility must appear on the bond as a principal, whether the operating corporation is the parent or a subsidiary. The bond must bear an authorized signature for each operating corporation appearing on the bond.

(26 U.S.C. 5173)

§ 19.164 - Withdrawal bond.

(a) Requirement for a withdrawal bond. Except as provided in § 19.151(d), a person must provide TTB with a withdrawal bond for a distilled spirits plant if the person intends to withdraw spirits from the distilled spirits plant upon determination of the taxes due on the spirits but before payment of the tax. The withdrawal bond must guarantee payment of any taxes due on distilled spirits withdrawn from bonded premises up to the amount of the bond. Such bond will be in addition to the operations bond, and if the distilled spirits are withdrawn under the withdrawal bond, the operations bond will no longer cover liability for payment of the tax on the spirits withdrawn. For purposes of this section, a person includes a corporation, together with all of its controlled subsidiaries, and a controlled subsidiary has the same meaning as in § 19.163(b).

(b) One bond covering multiple plants. A person who operates more than one distilled spirits plant within the geographical area serviced by the National Revenue Center may submit to TTB a single withdrawal bond that covers withdrawals from all such distilled spirits plants within that geographic area.

(c) Penal sum of bonds—(1) Penal sum of a bond covering a single plant. A person who files a withdrawal bond for a single plant must compute the penal sum of such bond in accordance with § 19.166. If the penal sum of such bond is less than the maximum amount, withdrawals from the plant may not exceed the penal sum.

(2) Penal sum of bond covering multiple plants. A person who files one withdrawal bond to cover two or more distilled spirits plants must compute the required penal sum for each plant individually in accordance with § 19.166. The penal sum of the withdrawal bond must be equal to, or greater than, the total of the minimum amounts required for the individual plants. The bond must show the amount of coverage allocated to each individual plant as well as the total penal sum for all plants. If the portion of the penal sum allocated to a particular plant is less than the maximum amount prescribed in § 19.166 for a single plant, withdrawals from that plant must not exceed the amount of the penal sum allocated to that plant. The allocation of the penal sum notwithstanding, the entire penal sum of the bond must be available to satisfy all liability for tax on withdrawals from any and all of the covered plants.

(26 U.S.C. 5173) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1121, Jan. 4, 2017]

§ 19.165 - Unit bonds.

(a) Unit bond covering operations and withdrawals. If a person is otherwise required to file bonds for both operations at one or more distilled spirits plants and withdrawals from one or more distilled spirits plants, the person may instead submit a single unit bond that provides all of the guarantees that would otherwise be provided by separate operations and withdrawal bonds. The unit bond may also provide coverage for operations at adjacent bonded wine cellars. For purposes of this section, a person includes a corporation, together with all of its controlled subsidiaries, and a controlled subsidiary has the same meaning as in § 19.163(b).

(b) Required penal sum—(1) General. A person must determine the penal sum for the unit bond by separately calculating in accordance with § 19.166, and then totaling, the amounts needed to cover operations and withdrawals at each individual plant covered by the bond. The penal sum for the unit bond must not be less than the sum of the minimum penal sums that would be required if each of the plants had its own bond.

(2) Allocation between operations and withdrawals. A unit bond must show separately the amount of coverage provided for operations (including operations at each adjacent bonded wine cellar if applicable) and for withdrawals at each distilled spirits plant covered by the bond.

(3) Tax liability must not exceed allocated penal sum. If the amount of the penal sum allocated to operations at, or withdrawals from, a particular plant is less than the maximum amount prescribed in § 19.166 for a single plant, the tax liability for operations at, or withdrawals from, that plant must not exceed that allocated amount.

(4) Total penal sum available for each plant. Even when the penal sum of a unit bond is allocated among multiple plants, the bond must provide that the total penal amount of the bond will be available to satisfy any liability incurred under the terms and conditions of the bond at any plant covered by the bond.

(26 U.S.C. 5173)

§ 19.166 - Required penal sums.

A person must determine the penal sums for the various bonds required by this subpart according to the following table:

(a) Operations bond for a single plant operating as a: Required penal sum represents: The penal sum must be: Not less than— and need not be more than— (1) DistillerThe amount of tax on spirits produced during a 15-day period$5,000$100,000 (2) Warehouseman, in generalThe amount of tax on spirits and wines deposited in, stored on, and in transit to, the bonded premises5,000200,000 (3) Warehouseman limited to storage of spirits in packages to a total of not over 50,000 proof gallonsThe amount of tax on spirits and wines deposited in, stored on, and in transit to, the bonded premises5,00050,000 (4) Distiller and warehousemanThe amount of tax on spirits produced during a period of 15 days, plus the tax on spirits and wines deposited in, stored on, and in transit to the bonded premises10,000200,000 (5) Distiller and processorThe amount of tax on spirits produced during a 15-day period, plus the amount of tax on spirits, denatured spirits, articles and wines deposited in, or stored on, and in transit to the bonded premises10,000200,000 (6) Warehouseman and processor in generalThe amount of tax on spirits, denatured spirits, articles, and wines deposited in, stored on, and in transit to, the bonded premises10,000250,000 (7) Warehouseman and processor, limited to storage of spirits or denatured spirits in packages to a total of not over 50,000 proof gallons, and processing of spirits or denatured spirits so storedThe amount of tax on spirits, denatured spirits, articles, and wines deposited in, stored on, and in transit to, the bonded premises10,00050,000 (8) Distiller, warehouseman and processorThe amount of tax on spirits produced during a 15-day period, plus the amount of tax on spirits, denatured spirits, articles and wines deposited in, stored on, and in transit to, the bonded premises15,000250,000 (9) Distiller with adjacent bonded wine cellarThe amount required for a distiller (see paragraph (a)(1). above) plus the amount of tax on wines and wine spirits possessed on, and in transit to, the adjacent wine cellar6,000150,000 (10) Distiller and warehouseman with adjacent bonded wine cellarThe amount required for a distiller & warehouseman (see paragraph (a)(4). above) plus the amount of tax on wines and wine spirits possessed on, and in transit to, the adjacent wine cellar11,000250,000 (11) Distiller and processor with adjacent bonded wine cellarThe amount required for a distiller & processor (see paragraph (a)(5). above) plus the amount of tax on wines and wine spirits possessed on, and in transit to, the adjacent wine cellar11,000250,000 (12) Distiller, warehouseman and processor with adjacent bonded wine cellarThe amount required for a distiller-warehouseman-processor (see paragraph (a)(8). above) plus the amount of tax on wines and wine spirits possessed on, and in transit to, the adjacent wine cellar16,000300,000
(b) Area operations bond for two or more plants whose combined required penal sums under paragraph (a) of this section: Required penal sum is: But need not be more than: (1) Do not exceed $300,000100%$300,000 (2) Exceed $300,000 but do not exceed $600,000$300,000 plus 70% of the amount over $300,000510,000 (3) Exceed $600,000 but do not exceed $1,000,000$510,000 plus 50% of the amount over $600,000710,000 (4) Exceed $1,000,000 but do not exceed $2,000,000$710,000 plus 35% of the amount over $1,000,0001,060,000 (5) Exceeds $2,000,000$1,060,000 plus 25% of the amount over $2,000,000
(c) Withdrawal bond for: Required penal sum represents: The penal sum must be: Not less than— and need not be more than— (1) One distilled spirits plantThe amount of tax which, at any one time, is chargeable against such bond, but has not yet been paid$1,000$1,000,000. (2) Two or more distilled spirits plantsSum of the penal sums for each plant calculated in paragraph (c)(1) of this section($1,000) × (number of plants)(Number of plants) × $1,000,000.
(d) Unit bond for: Required penal sum represents: The penal sum must be: Not less than— and need not be more than— (1) Operations at one distilled spirits plant (including any adjacent bonded wine cellar), and withdrawals from the bonded premises of the same plantAn amount equal to the sum of the required penal sums of an operations bond and a withdrawal bond for the plant, if such bonds were obtained separately. (See paragraphs (a) and (c)(1) in this section.)$6,000$1,300,000. (2) Operations at two or more distilled spirits plants (including any adjacent bonded wine cellars), and withdrawals from the bonded premises of the same plantsAn amount equal to the sum of the penal sums of an area operations bond and withdrawal bonds needed for all of the covered plants, if such bonds were obtained separately. (Total penal sums of paragraphs (b) and (c)(2) in this section.)Sum of the minimum penal sums for operations and withdrawal bonds required for each plant covered by the bondSum of the maximum penal sums for area operations bonds and withdrawal bonds required for the plants covered by the unit bond.
(26 U.S.C. 5173)

§ 19.167 - Increase of bond coverage.

(a) When required. If the penal sum of a bond is less than the maximum amount specified by § 19.166, and liabilities increase to the point where they exceed the bond coverage, the proprietor must increase the amount of the bond to cover the increased liability. The proprietor must increase the bond coverage either by replacing the existing bond with a new, larger bond that covers the entire liability, or by supplementing the existing bond with a separate strengthening bond in accordance with paragraph (b) of this section.

(b) Strengthening bonds. A strengthening bond is a second bond with the same surety as on the original bond which covers the increased liability. A strengthening bond must show both its execution date and its effective date. TTB will not accept a strengthening bond if it contains any term or condition that is a release, or could be interpreted as a release, from liability under any former bond, or that limits the liability of any bond to less than its full penal sum.

(26 U.S.C. 5173)

§ 19.168 - Superseding bonds and new bonds for existing proprietors.

(a) Superseding bonds. A new bond that replaces another bond is called a superseding bond. The proprietor must replace an existing bond with a superseding bond in any of the following circumstances:

(1) Surety company no longer acceptable. The proprietor must file a superseding bond if the surety on the proprietor's current bond becomes insolvent or if the surety is removed from the list of approved sureties in Treasury Department Circular 570 (see § 19.153). TTB may also require the filing of a superseding bond if any other contingency affecting the validity or efficiency of the bond arises.

(2) Change of control. An executor, administrator, assignee, receiver, trustee, or other person acting in a fiduciary capacity, continuing or liquidating the business of the principal on a bond, must either provide TTB with a superseding bond, or obtain consent from the surety on each existing bond when assuming control of the business.

(3) Termination of bond by surety. If the surety applies to terminate a bond under § 19.171, and the proprietor wishes to continue the activity covered by the bond, the proprietor must file a superseding bond that becomes effective on or before the termination date of the existing bond. The superseding bond must show both its execution date and its effective date.

(b) New bonds for existing proprietors—(1) General. Subject to paragraph (b)(2) of this section, if an existing proprietor has not furnished a bond or bonds covering operations and withdrawals of distilled spirits for nonindustrial use because the proprietor was exempt from bond requirements under § 19.151(d), the proprietor must furnish a bond or bonds as provided in this subpart beginning in any portion of a calendar year following the first date on which the aggregate amount of tax due from the proprietor during the calendar year exceeds $50,000. When furnishing the bond or bonds, the proprietor must also file an amendment to TTB F 5110.41, Registration of Distilled Spirits Plant, as provided in § 19.136 to change the proprietor's bond status.

(2) Grace period for bonds covering operations. An existing proprietor who must furnish an operations bond as provided in paragraph (b)(1) of this section will be treated as having furnished the required bond if the proprietor submits the bond on TTB F 5110.56 no later than 30 days following the first date on which the aggregate amount of tax due from the proprietor during the relevant calendar year exceeds $50,000. The proprietor will be treated as having furnished the required operations bond for purposes of this paragraph until TTB approves or disapproves the bond.

(3) Bonds covering withdrawals. Paragraph (b)(2) of this section does not apply to withdrawal bonds. If an existing proprietor must furnish a withdrawal bond as provided in paragraph (b)(1) of this section, the proprietor may not withdraw distilled spirits from the bonded premises on a tax deferred basis until TTB approves the withdrawal bond.

(26 U.S.C. 5173, 5175, 5176, 5551) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1121, Jan. 4, 2017]

§ 19.169 - Effect of failure to furnish a superseding bond or a new bond.

(a) Operations bond. Except as provided in § 19.151(d), a person may not operate a distilled spirits plant without an operations bond. A person who does not submit an acceptable superseding operations bond when required to do so under § 19.168(a) must immediately discontinue the activities to which the lapsed bond coverage relates upon lapse of the existing bond coverage. If a proprietor must furnish an operations bond under § 19.168(b)(1) and does not submit an operations bond within the time prescribed in § 19.168(b)(2), the proprietor must immediately discontinue the activities required to be covered by the operations bond.

(b) Withdrawal bond. Except as provided in § 19.151(d), a person may not defer payment of taxes on spirits withdrawn from a distilled spirits plant upon determination of tax without a withdrawal bond. If a person is required to submit a new or superseding withdrawal bond under § 19.168, the person must submit the bond in accordance with that section. A person who does not submit and receive approval of an acceptable withdrawal bond when required to do so under § 19.168 may not withdraw distilled spirits from the bonded premises on a deferred basis. Upon lapse of the existing bond coverage, or upon the date a new bond is required under § 19.168(b), the person must pay the tax at the time of withdrawal, except in the case of distilled spirits withdrawn free of tax or withdrawn without payment of tax under 26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C. 7510.

(c) Unit bond. A person who does not provide an acceptable superseding unit bond when required to do so under § 19.168 must immediately discontinue the business or distilled spirits operations to which the lapsed bond coverage relates. Upon lapse of the existing bond coverage the person must also pay the tax at the time of withdrawal, except in the case of distilled spirits withdrawn free of tax or withdrawn without payment of tax under 26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C. 7510.

(26 U.S.C. 5173, 5175, 5176) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1121, Jan. 4, 2017]

§ 19.170 - Termination of bonds.

Liability under operations bonds, withdrawal bonds, and unit bonds may be terminated for future withdrawals, future production, or future deposits as set forth below:

(a) On application by the surety. A surety may terminate a bond by filing a notice as provided in § 19.171;

(b) By replacement of the bond. A principal may terminate an existing bond by replacing it with a superseding bond approved by TTB;

(c) By discontinuing withdrawals. A principal may terminate a withdrawal bond by notifying TTB that the principal has stopped making withdrawals covered by the bond, if the bond was filed solely as a withdrawal bond;

(d) By discontinuing the business. A principal may terminate a bond by notifying TTB that the principal has discontinued business; and

(e) On application by an existing proprietor who becomes exempt from bond requirements. If a proprietor has held a bond or bonds covering operations or withdrawals of distilled spirits for nonindustrial use and becomes exempt from those bond requirements as provided under § 19.151(d), the proprietor may apply to TTB to terminate the bond or bonds covering such operations or withdrawals. To apply, the proprietor must file an amendment to TTB F 5110.41, Registration of Distilled Spirits Plant, as provided in § 19.136. The proprietor must accurately state in the submission that the proprietor:

(1) Will withdraw distilled spirits for deferred payment of tax as provided in § 19.235;

(2) Reasonably expects to be liable for not more than $50,000 in taxes with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652 for the current calendar year (see definition of “Reasonably expects” in § 19.235(e)); and

(3) Was liable for not more than $50,000 in such taxes in the preceding calendar year.

(26 U.S.C. 5173) [T.D. TTB–92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB–146, 82 FR 1121, Jan. 4, 2017]

§ 19.171 - Surety notice of relief from bond liability.

(a) Notice to principal. A surety on a bond may, at any time, notify the principal in writing that the surety desires to be relieved of liability under the bond.

(b) Notice to TTB. A surety on a bond may, at any time, notify the appropriate TTB officer in writing that the surety desires to be relieved of liability under the bond. The notice must specify the date after which the surety desires to be relieved of liability. In the case of a withdrawal bond, the date specified in the notice must be at least ten days after the notice is received by the appropriate TTB officer. In the case of an operations bond or unit bond, the date specified in the notice must be at least 90 days after the notice is received by the appropriate TTB officer. When a surety files a termination notice with TTB, the surety must include either an acknowledgement from the principal that the principal is aware that the surety is terminating the bond or proof that the surety has served the principal with notice of its intent to terminate the bond.

(c) Effect of notice. The bond coverage will end as of close of business on the date specified in the notice, provided the surety timely filed a proper and complete termination notice, and the surety does not withdraw its termination notice in writing prior to the termination date. The surety will be released from future liability under the bond to the extent set forth in § 19.172.

(26 U.S.C. 5173, 5175, 5176)

§ 19.172 - Relief of surety from bond liability.

A surety that has provided proper notice under § 19.171 will be relieved from liability under the bond in question as set forth below:

(a) Operations or unit bond. When a superseding bond is submitted, the surety will be relieved of future liability related to production and deposits that take place after the effective date of the superseding bond. However, the surety remains liable for the tax on all distilled spirits or wines produced, or for other liabilities incurred, during the term of the bond. Further, if a superseding bond is not submitted, the surety will remain liable under the bond for all spirits or wines that are on hand or in transit to the bonded premises or bonded wine cellar on the date specified in the notice. The liability of the surety will continue until all such spirits or wines have been lawfully disposed of, or until a new bond has been submitted by the principal covering the spirits or wine.

(b) Withdrawal or unit bonds. The surety will be relieved from liability for withdrawals made after the date specified in the notice, or upon the effective date of a new bond if one is given.

(26 U.S.C. 5173, 5176)

§ 19.173 - Release of pledged securities.

Securities that are pledged and deposited with TTB under § 19.154 will only be released by TTB in accordance with the provisions of 31 CFR Part 225, Acceptance of Bonds Secured by Government Obligations in Lieu of Bonds with Sureties. The appropriate TTB officer will not release pledged securities prior to termination of the liability under the bond for which they were pledged. When the appropriate TTB officer is satisfied that the pledged securities may be released, the official will set a date or dates on which a part or all of the securities may be released. At any time prior to the release of the securities, the appropriate TTB officer may extend the date of release for any additional length of time deemed necessary.

(31 U.S.C. 9301, 9303)