An AFP is a type of distilled spirits plant (DSP) that is authorized under 26 U.S.C. 5181 and established under 27 CFR, part 19, subpart X, solely for producing, processing, and storing, and using or distributing distilled spirits to be used exclusively for fuel use.
The TTB regulations (27 CFR, part 19, subpart X) define fuel alcohol as distilled spirits which have been made unfit for beverage use at an AFP as provided in 27 CFR, part 19, subpart X. The regulations authorize the use and required level of certain materials that may be used for making distilled spirits unfit for beverage use. See AFP7.
Since AFPs may not produce or use distilled spirits derived from petroleum, natural gas, or coal, as prescribed by Section 5181, fuel alcohol may not be produced with distilled spirits that were derived from petroleum, natural gas, or coal.
The TTB regulations (27 CFR, part 19, subpart X) define the phrase "make unfit for beverage use" as the addition to distilled spirits of materials which will preclude their beverage use without impairing their quality for fuel use as prescribed and authorized by the provisions of 27 CFR, part 19, subpart X. The term "render" is interchangeable with the term "make" and is used in some sections of 27 CFR, part 19, subpart X.
Yes, there are different AFP sizes depending on the amount of distilled spirits the AFP produces and receives per year. TTB has the authority to create guidelines for AFPs of different sizes. The statute (26 U.S.C. 5181) specifically refers to "small plants." Our regulations define small, medium, and large plants. The definitions of small, medium, and large plants are:
The above categories were established based on the potential tax liability associated with the varying levels of activity. (Although distilled spirits used for beverage purposes are subject to Federal excise tax, fuel alcohol that is lawfully withdrawn and used is not subject to such tax.)
Fuel alcohol and CDA 20 are both products that are authorized only for fuel use, but they are different in several key ways. The primary distinction between fuel alcohol and CDA 20 is that fuel alcohol is produced on AFP premises and CDA 20 is produced on DSP premises. A second significant difference is that fuel alcohol is produced under the formula prescribed in 27 CFR 19.746. Section 19.746 allows for the use of 2 gallons or more of authorized materials per 100 gallons of distilled spirits of any proof.
The formula for CDA 20 is set forth in 27 CFR 21.24. Section 21.24 requires that exactly 2 gallons of authorized material be added to every 100 gallons of distilled spirits of not less than 195 proof.
A third distinction between fuel alcohol and CDA 20 is the list of authorized materials for each. See AFP7 for a complete list of the approved fuel alcohol materials.
The regulation at 27 CFR 19.679 provides that an AFP permit is continuing unless automatically terminated under 27 CFR 19.684, suspended or revoked as provided in 27 CFR 19.697, or voluntarily surrendered.
In accordance with § 19.684, automatic termination of an AFP permit occurs when the lease, sale, or other transfer of business operations occurs. In the case of a corporation holding an AFP permit, if actual or legal control of the permittee corporation changes, directly or indirectly, whether by reason of change in stock ownership or control (in the permittee corporation or in any other corporation), by operation of law, or in any other manner, the permit may remain in effect until the expiration of 30 days after the change, whereupon the permit will automatically terminate. However, if operations are to be continued after the change in control, and an application for a new permit is filed within 30 days of the change, then the outstanding permit may remain in effect until final action is taken on the new application. When final action is taken on the application, the outstanding permit automatically terminates.
In accordance with § 19.697, the TTB may revoke or suspend an AFP permit if the appropriate TTB officer has reason to believe that the proprietor:
The Director of the TTB National Revenue Center has the authority to revoke or suspend an AFP permit if he/she has reason to believe that the proprietor has not engaged in any of the operations authorized by the permit for a period of more than 2 years.
AFPs must render spirits unfit for beverage use using materials listed in the TTB regulations or on TTB’s website. Section 19.746 of the TTB regulations lists authorized materials and related requirements for rendering spirits unfit for beverage use at AFPs. Authorized materials include automotive gasoline and natural gasoline. If an AFP proprietor wishes to use materials that are not listed in the regulations or on TTB’s website, the proprietor may apply for approval to use the materials under section 19.747 of the TTB regulations.
Distilled spirits are made (rendered) unfit for beverage use by mixing the distilled spirits with authorized materials at the prescribed level.
Though an AFP is a type of DSP, there are significant differences between the two types of plants. The main difference is the activities that are authorized at each; but there are also differences in qualification, bonding, and recordkeeping. The following table contains examples of some of the differences between an AFP and a typical DSP. This table is only intended to provide a broad overview of said differences. For more details on the differences, please see TTB G 2011-1.
| AFP | DSP | |
| Authorized activities |
|
|
| Bond requirements | An AFP that produces and/or receives not more than 10,000 proof gallons of distilled spirits per year is not required to obtain a bond. However, an AFP without production operations that receives less than 10,000 proof gallons of distilled spirits per year must furnish a bond in accordance with 27 CFR 19.699. AFPs that produce and/or receive more than 10,000 proof gallons of distilled spirits per year are required to obtain a bond. For more information see the FAQs pertaining to bonds. | Except as provided in 27 CFR 19.151(d), every person intending to establish a distilled spirits plant shall file a bond prescribed in 27 CFR part 19, subpart F. |
| Taxes | As long as fuel alcohol is produced in accordance with 27 CFR, part 19, subpart X, and used for fuel purposes, no taxes are due. | Unless the DSP withdraws the spirits on a non-taxpaid basis, a DSP owes taxes on distilled spirits withdrawn from bonded premises. Generally, the tax rate is $13.50 per proof gallon. |
As long as the fuel alcohol is withdrawn from an AFP under the provisions of 27 CFR, part 19, subpart X, taxes are not due. The statutory provisions of 26 U.S.C. 5181 allow the withdrawal of distilled spirits from AFP premises free of tax exclusively for fuel use, as provided in 26 U.S.C. 5214(a)(12).
As provided in 27 CFR 19.669, tax will be due if spirits are diverted to beverage use or other unauthorized dispositions.
Yes, there are bond requirements for AFPs, except for small AFPs with production operations.
Under 26 U.S.C. 5181, bonds are required for AFPs except AFPs that produce distilled spirits exclusively for fuel use and do not produce more than 10,000 proof gallons per year. TTB's regulations define a small AFP as a plant that produces (including receives) not more than 10,000 proof gallons of spirits per calendar year. Because 26 U.S.C. 5181 exempts certain AFPs from bond requirements only if they actually produce spirits, a bond is required for small AFPs without production operations. The penal sum of the bond is prescribed in 27 CFR 19.700.
Yes. Medium and large AFPs are required to obtain a bond. The bond amount is dependent on the quantity of spirits that the AFP will produce and/or receive in a calendar year.
In accordance with §§ 19.675 and 19.676, a bond of sufficient sum, as prescribed in § 19.700, is required for medium and large AFPs. The bond must be filed on TTB F 5110.56 and can be submitted with the application. The bond must be submitted and approved before a permit is issued. The permit application (including the bond form) may be completed using TTB’s Permits Online system.
The terms and conditions of a bond state that that the person furnishing the bond will faithfully comply with all provisions of law and regulations relating to the activities covered by the bond, and will pay all taxes imposed by the IRC and all penalties incurred or fines imposed for violations of any such provision of the IRC relating to the activity covered by the bond.
In accordance with § 19.700, the penal sum for a bond of a small plant that does not have production operations is $1,000.
As stated in § 19.700, to find the required amount of a bond for a medium AFP, estimate the total proof gallons of spirits to be produced and received in a calendar year. The amount of the bond is $1,000 for each 10,000 proof gallons (or fraction), subject to a minimum of $2,000 and a maximum of $50,000. The following table provides some examples:
| More than | But not over | Amount of Bond |
| 10,000 | 20,000 | $ 2,000 |
| 20,000 | 30,000 | 3,000 |
| 90,000 | 100,000 | 10,000 |
| 190,000 | 200,000 | 20,000 |
| 490,000 | 500,000 | 50,000 |
As stated in § 19.700, to find the required amount of a bond for a large AFP, estimate the total proof gallons of spirits to be produced and received in a calendar year. The amount of the bond is $50,000 plus $2,000 for each 10,000 proof gallons (or fraction) over 500,000. The maximum bond is $200,000. The following table provides some examples.
| More than | But not over | Amount bond |
| 500,000 | 510,000 | $ 52,000 |
| 510,000 | 520,000 | 54,000 |
| 740,000 | 750,000 | 100,000 |
| 990,000 | 1,000,000 | 150,000 |
| 1,240,000 | 200,000 |
Under 26 U.S.C. 5001, tax is imposed on distilled spirits as soon as the spirits are produced or imported. Therefore, though tax is not collected on distilled spirits lawfully produced and used for fuel use, section 5001 and other provisions of the Internal Revenue Code impose liability for tax on distilled spirits upon production of the spirits.
Bonds provide the Government with security against the possible loss of tax revenue.
In accordance with § 19.680, the description of stills on the approved alcohol fuel producer’s permit (TTB F 5110.74) application constitutes registration of stills. The permit application may be completed electronically using TTB’s Permits Online system.
Yes. A change in type or location of a still constitutes amendment of the permit. Permits can be amended on TTB F 5110.74. You may also consult TTB’s Permits Online webpage for more information about whether the permit can be amended electronically.
No. The provisions of 27 CFR 19.728 require that before spirits may be withdrawn from an AFP, they must be made unfit for beverage use as provided in 27 CFR, part 19, subpart X. Specifically, § 19.746 lists the authorized materials for rendering distilled spirits unfit for beverage use. Further, 27 CFR 19.726 states that no person shall withdraw, use, sell, or otherwise dispose of distilled spirits (including fuel alcohol) produced under 27 CFR, part 19, subpart X for other than fuel use.
As discussed in AFP23 below, criminal penalties apply to persons who withdraw, use, sell or otherwise dispose of distilled spirits (including fuel alcohol) produced under 27 CFR, part 19, subpart X for uses other than fuel use.
Yes, with certain restrictions provided for in 27 CFR 19.733, distilled spirits that have not been rendered unfit for beverage use may be transferred from an AFP to a DSP or another AFP. In contrast to fuel alcohol that is withdrawn tax-free from the bonded premises of an AFP, the tax liability of spirits that are "transferred in bond" to a DSP or another AFP is at all times covered by the bond of a TTB permittee. Such transfers are not considered to be withdrawals.
Distilled spirits that have not been rendered unfit for beverage use may be transferred in bond from an AFP to a DSP or another AFP. However, after the transfer, the spirits must be rendered unfit for beverage use prior to withdrawal and may only be used for fuel purposes after withdrawal. In addition, each DSP or AFP that wishes to receive spirits under a transfer in bond from an AFP must obtain a one-time approval using TTB F 5100.16 ("Application for Transfer of Spirits and/or Denatured Spirits in Bond") in order to receive spirits from that AFP. Other requirements relating to transfers in bond from AFPs are contained in 27 CFR 19.726, 19.734, 19.735, and 19.736.
Yes, there are required records and reports for AFPs. The regulations pertaining to records and reports for AFPs are located in:
Section 19.720 requires the proprietor of an AFP to submit an annual report on TTB F 5110.75 for each calendar year ending on December 31. This report must be sent to the following address by January 30 of the year following the reporting period.
National Revenue Center
Alcohol and Tobacco Tax and Trade Bureau
550 Main Street, Room 8970
Cincinnati, Ohio 45202
Yes, but only under certain specific circumstances. Under 26 U.S.C. 5181(e), spirits from an AFP must be both rendered unfit for beverage use and used only for fuel purposes upon withdrawal from any AFP or DSP. Therefore, spirits produced or received by an AFP may be subsequently withdrawn for exportation only if the spirits are first rendered unfit for beverage use prior to the withdrawal and only if the resulting product is used for fuel purposes after the withdrawal.
The prohibition on withdrawing spirits from an AFP that have not been rendered unfit for beverage use cannot be circumvented by transferring said spirits to a distilled spirits plant in bond and then withdrawing the spirits (without being rendered unfit for beverage use) from the DSP. This is true because 26 U.S.C. 5181(e)(1) requires that spirits from an AFP must be used for fuel purposes after withdrawal and because 26 U.S.C. 5181(e)(2) specifically uses the term "distilled spirits plant" (which includes AFPs and DSPs) when setting forth the requirement that spirits must be rendered unfit for beverage use prior to withdrawal from the bonded premises.
No. For the same reason that distilled spirits that have not been rendered unfit for beverage use cannot be withdrawn from an AFP for domestic sale, such spirits cannot be withdrawn from an AFP for exportation.
The provisions of § 19.728 require that spirits be rendered unfit for beverage use as provided in 27 CFR, part 19, subpart X. Please see AFP7 for a complete list of the authorized materials for rendering distilled spirits unfit for beverage use.
No. There are no prescribed forms for the exportation of fuel alcohol; however, the AFP must maintain records as prescribed in 27 CFR 19.709 through 19.720.
The regulations in 27 CFR Part 28, Exportation of Alcohol, do not pertain to fuel alcohol.
No. Distilled spirits that have been produced or received by an AFP but not rendered unfit for beverage use cannot be transferred to a DSP and be withdrawn from that DSP for exportation without being rendered unfit for beverage use.
Yes. In accordance with 27 CFR 19.663, provisions dealing with penalty, seizure, or forfeiture which are applicable to distilled spirits apply to AFPs. Such provisions include those found in Subchapter J of Chapter 51 of the Internal Revenue Code.