Frequently Asked Questions
Who is eligible for the Small Fuel Plant Bond Exemption?
The plant must produce distilled spirits exclusively for fuel use and production must not exceed 10,000 proof gallons per year.
How does the Small Fuel Plant Bond Exemption work?
Eligible small distilled spirits plants producing fuel-grade alcohol are exempt from the requirement to provide a surety bond, reducing administrative costs and capital requirements.
What law authorizes the Small Fuel Plant Bond Exemption?
The Small Fuel Plant Bond Exemption is authorized under IRC §5181(c) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §5181
Source: Internal Revenue Code, Title 26, United States Code
§ 5181. Distilled spirits for fuel use(a) In general(1) Purposes for which plant may be establishedOn such application and bond and in such manner as the Secretary may prescribe by regulation, a person may establish a distilled spirits plant solely for the purpose of—(A) producing, processing, and storing, and
(B) using or distributing,
distilled spirits to be used exclusively for fuel use.
(2) RegulationsIn prescribing regulations under paragraph (1) and in carrying out the provisions of this section, the Secretary shall, to the greatest extent possible, take steps to—(A) expedite all applications;
(B) establish a minimum bond; and
(C) generally encourage and promote (through regulation or otherwise) the production of alcohol for fuel purposes.
(b) Authority to exemptThe Secretary may by regulation provide for the waiver of any provision of this chapter (other than this section or any provision requiring the payment of tax) for any distilled spirits plant described in subsection (a) if the Secretary finds it necessary to carry out the provisions of this section.
(c) Special rules for small plant production(1) Applications(A) In generalAn application for an operating permit for an eligible distilled spirits plant shall be in such a form and manner, and contain such information, as the Secretary may by regulations prescribe; except that the Secretary shall, to the greatest extent possible, take steps to simplify the application so as to expedite the issuance of such permits.
(B) Receipt of applicationWithin 15 days of receipt of an application under subparagraph (A), the Secretary shall send a written notice of receipt to the applicant, together with a statement as to whether the application meets the requirements of subparagraph (A). If such a notice is not sent and the applicant has a receipt indicating that the Secretary has received an application, paragraph (2) shall apply as if a written notice required by the preceding sentence, together with a statement that the application meets the requirements of subparagraph (A), had been sent on the 15th day after the date the Secretary received the application.
(C) Multiple applicationsIf more than one application is submitted with respect to any eligible distilled spirits plant in any calendar quarter, the provisions of this section shall apply only to the first application submitted with respect to such plant during such quarter. For purposes of the preceding sentence, if a corrected or amended first application is filed, such application shall not be considered as a separate application, and the 15-day period referred to in subparagraph (A) shall commence with receipt of the corrected or amended application.
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