The Tax and Trade Bureau has provided further guidance on terminating a bond under the provisions of the PATH Act. As a reminder, brewers who reasonably expect to be liable for not more than $50,000 in taxes for the calendar year, were liable for not more than $50,000 in such taxes in the preceding calendar year, and pay taxes on a semi-monthly, quarterly, or annual basis, are now exempt from the bond requirements. While previously published TTB Industry Circular 2016-2 addressed this issue, the following provides greater detail on the process.
An existing bond must remain in place until TTB approves an updated brewer’s notice for each eligible brewer.
The TTB brewer’s notice form and Permits Online have been updated to reflect the fact that eligible brewers can inform TTB that they are exempt from the bonding requirement. The actual process follows:
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A brewer that meets the eligibility requirements (federal excise tax of less than $50,000 in the prior year and not expected to exceed that in the current year) to operate without a bond in 2017 must complete a new brewer’s notice and check a box on Line 17 of the form, which asks the brewer to verify eligibility. The brewer must use Permits Online to submit the updated notice electronically if they have a Permits Online account (or the paper forms if the brewer has an old brewer’s notice and never transferred to Permits Online).
Note: Brewers must be in compliance with tax payments, tax returns, and operational reports. If they are not in compliance, their notice will be disapproved.
TTB must then approve the updated notice.
Once TTB approval is received via Permits Online or through the mail, the brewer can inform its surety company that it is no longer required to maintain the bond. The surety company policy will dictate how any reserve or excess premium is returned to the brewer.
The refund of Cash Bonds will be processed with the approved Brewer’s Notice.
Alternatively, brewers that have a collateral security bond (a federal treasury security held in a special Federal Reserve account to secure tax payment) will have to provide the approved brewer’s notice to the Federal Reserve to get the security released. The release process is described at TTB.gov. That information may be updated in the near future. In addition, details on redeeming the treasury bonds are provided below:
Brewers will not provide the Federal Reserve Bank (FRB) the approved notices directly. Rather, a TTB employee will receive the approved notices from the TTB employees who processed and approved them. Then, that TTB employee will correspond with the brewers and the FRB to coordinate the return of the bonds according to the brewers’ wishes.
TTB recommends that brewers wait until their securities mature (reach face value) before they retrieve them from the FRB. The FRB is able to transfer matured securities to the brewers’ bank accounts that the Bank already has on file for the purpose of interest payments.
If a brewer wishes to retrieve a security before its maturation date, the brewer must set up a special brokerage account capable of receiving a security from the FRB. Then, the brewer, the brewer’s bank for the brokerage account, the FRB, and TTB will work together to facilitate the security transfer.
The process is automatic in the sense that TTB will automatically initiate communication with the approved brewers and the FRB once TTB receives the approved notices.