TTB Newsletter: April 2, 2010

In the TTB Newsletter, we compile the top TTB news of the week and other helpful information about the Bureau and the Federal alcohol and tobacco laws and regulations we enforce.

Please send any questions and/or comments to Executive Liaison for Industry Matters (industryliaison@ttb.gov) and/or State Liaison (stateliaison@ttb.gov).

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Message from TTB Administrator, John J. Manfreda

TTB has come a long way since it was established and has gained broad recognition as an effective and respected Federal agency responsible for regulating and collecting excise taxes on alcohol, tobacco, firearms, and ammunition in the United States. Because we have not had a criminal enforcement component in the past, our resources have been principally focused upon regulatory enforcement, although we have used all of the tools available to us to give effect to our criminal jurisdiction as well, where circumstances have indicated the need to do so. However, the lack of agents directly assigned to our criminal enforcement responsibility has made that task a challenge. Our fiscal year 2010 budget designates specific funding for the purpose of hiring, training, and equipping special agents to enforce the criminal provisions of our jurisdiction, thus completing an important component for our enforcement profile. The companion criminal provisions to our regulatory jurisdiction have been in place since the original statutes governing our industry were enacted, and Congress has now provided us the means to facilitate the enforcement of those provisions.

Congress' direction to hire criminal enforcement agents comes at a critical juncture in our organization's history-tobacco tax rates are at historic highs, a fact that traditionally precedes increased smuggling and diversion of products outside legal commercial channels. TTB's effectiveness in preventing and prosecuting those who engage in the diversion of tobacco products has significant implications for more than Government revenue; the health of consumers and the security of our Nation are also endangered by the illicit trade of tobacco products. The same issues are presented in the case of illicit alcohol trade, that is, revenue loss and threat to consumer safety, as well as potential unfair advantage by illegal operators against the law abiding industry.

Until now, our ability to address illicit activity in the alcohol and tobacco trade has been limited by the availability of other agencies, who have their own distinct missions, to partner with us in pursuing these criminal cases. We have been successful in ensuring that the intent of the law has been addressed by using other means, including partnership with other Federal and state agencies, to address illicit activity. Nevertheless, based upon our recently released study on the illicit tobacco trade, potential Federal revenue losses present up to $1.7 billion in lost revenue annually in the years leading up to the increased tax rate on tobacco products, it is clear that a more direct criminal enforcement approach is appropriate. By dedicating funding in the FY 2010 budget for agents, Congress clearly signaled its desire to adequately equip TTB to address this significant drain on the Federal budget, and related matters. With the funding we've received, we expect to hire 8 special agents who will work in partnership with our current program offices to detect and respond to tax evasion schemes and criminal activity.

Building a successful program to address diversion in the alcohol and tobacco industries, to protect consumers, and to ensure a level playing field in these industries, is a top priority for our Bureau, and will remain so. A TTB task force is working now to ensure we are successful in these initial stages of implementation. This task force is charged with developing a comprehensive plan for bringing the agents on board, designing a training program, and ensuring they are properly equipped.

As we move forward with this new enforcement capability, we will, of course, continue our focus upon our civil enforcement responsibilities, including our strong efforts to facilitate voluntary compliance within the legitimate industry. Our new criminal enforcement arm will complete our mission profile to ensure a fair and compliant marketplace within the industries we oversee.

SPECIAL OCCUPATIONAL TAXES RULE FINALIZED

This rule, T.D. TTB-84, Liquor Dealer Recordkeeping and Registration, and Repeal of Certain Special (Occupational) Taxes (SOTs), finalizes without change the SOT temporary rule published as T.D. TTB-79. TTB did not receive any comments on the temporary rule in response to the related notice of proposed rulemaking, Notice No. 96.