Frequently Asked Questions
Who is eligible for the Area Bond Election?
Available to corporations and their controlled subsidiaries operating multiple facilities within a designated geographical area.
How does the Area Bond Election work?
Allows a single bond to cover operations at two or more distilled spirits plants and adjacent wine cellars in the same geographical area operated by the same person or controlled group.
What law authorizes the Area Bond Election?
The Area Bond Election is authorized under IRC §5173(b)(3) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §5173
Source: Internal Revenue Code, Title 26, United States Code
§ 5173. Bonds(a) Operations at, and withdrawals from, distilled spirits plant must be covered by bond(1) OperationsExcept as provided under section 5551(d), no person intending to establish a distilled spirits plant may commence operations at such plant unless such person has furnished bond covering operations at such plant.
(2) WithdrawalsExcept as provided under section 5551(d), no distilled spirits (other than distilled spirits withdrawn under section 5214 or 7510) may be withdrawn from bonded premises except on payment of tax unless the proprietor of the bonded premises has furnished bond covering such withdrawal.
(b) Operations bondsThe bond required by paragraph (1) of subsection (a) shall meet the requirements of paragraph (1), (2), or (3) of this subsection:(1) One plant bondThe bond covers operations at a single distilled spirits plant.
(2) Adjacent wine cellar bondThe bond covers operations at a distilled spirits plant and at an adjacent bonded wine cellar.
(3) Area bondThe bond covers operations at 2 or more distilled spirits plants (and adjacent bonded wine cellars) which—(A) are located in the same geographical area (as designated in regulations prescribed by the Secretary), and
(B) are operated by the same person (or, in the case of a corporation, by such corporation and its controlled subsidiaries).
(c) Withdrawal bondsThe bond required by paragraph (2) of subsection (a) shall cover withdrawals from 1 or more bonded premises the operations at which could be covered by the same operations bond under subsection (b).
(d) Unit bondsUnder regulations prescribed by the Secretary, the requirements of paragraphs (1) and (2) of subsection (a) shall be treated as met by a unit bond which covers both operations at, and withdrawals from, 1 or more bonded premises which could be covered by the same operations bond under subsection (b).
(e) Terms and conditions(1) In generalAny bond furnished under this section shall be conditioned that the person furnishing the bond—(A) will faithfully comply with all provisions of law and regulations relating to the activities covered by such bond, and
(B) will pay—(i) all taxes imposed by this chapter, and
(ii) all penalties incurred by, or fines imposed on, such person for violation of any such provision.
(2) Other terms and conditionsAny bond furnished under this section shall contain such other terms and conditions as may be required by regulations prescribed by the Secretary.
(f) Amount(1) In generalThe penal sum of any bond shall be the amount determined under regulations prescribed by the Secretary.
(2) Maximum and minimum amountThe Secretary shall by regulations prescribe a minimum amount and a maximum amount for each type of bond which may be furnished under this section.
(g) Total amount availableThe total amount of any bond furnished under this section shall be available for the satisfaction of any liability incurred under the terms and conditions of such bond.
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