History of TTB

A proud past . . . a focused future

On January 24, 2003, the Homeland Security Act of 2002 (the Act) established the Alcohol and Tobacco Tax and Bureau (TTB). Rendering the functions of the Bureau of Alcohol, Tobacco and Firearms (ATF) into two new organizations with separate functions, the Act created a new tax and trade bureau within the Department of the Treasury, and shifted certain law enforcement functions of ATF to the Department of Justice. The Act called for the tax collection functions to remain with the Department of the Treasury; and the new organization was called the “Alcohol and Tobacco Tax and Trade Bureau.”

In its present form, TTB’s mission is to collect taxes owed, and to ensure that alcohol beverages are produced, labeled, advertised and marketed in accordance with Federal law. Its objectives are to protect the revenue, protect the public and promote voluntary compliance. TTB’s history and the history of tax collection originate with the former ATF, and ATF’s origins began more than 200 years ago as one of the earliest tax collecting Treasury agencies.

In 1789, under the new Constitution of the United States, the first Congress imposed a tax on imported spirits to offset a portion of the Revolutionary War debt. Administration of this tax collection fell to the Department of the Treasury, whose secretary, AlexanderHamilton, had suggested them. Congressional lawmakers were favorably impressed by the results and by 1791, the imports tax was augmented by adding domestic production. Understandably, the sons and daughters of the Revolution, who had grumbled over import duties, greeted the domestic levy with political resistance, escalating in the short-lived Whiskey Rebellion of 1794. Although these particular taxes were eventually abolished, similar devices for revenue came and went as needed until 1862. By July 1, 1862, Congress created an Office of Internal Revenue within the Department of the Treasury, charging the commissioner with collection, among other things, of taxes on distilled spirits and tobacco products that, with amendments, still remain today. Because taxation often evoked resistance in the past, including criminal evasion, Congress authorized the hiring by the Office of Internal Revenue of "three detectives to aid in the prevention, detection and punishment of tax evaders" in 1863. Tax collecting and enforcement were now under one roof.

Although an enforcement team was now in place, bigger problems began to surface. In 1875, Federal investigators broke up the "Whiskey Ring", an association of grain dealers, politicians, and, alarmingly, revenue agents that had defrauded the government of millions of dollars in distilled spirits taxes. In response to the scandal, Congress undertook the first Civil Service reform acts, acknowledging formally that effectiveness of law depends on the quality of its administrators.

More changes were made and, as evidence, the commissioner's annual report in 1877 refers to his office as the Bureau of Internal Revenue, a title that it retained for the next seventy-five years. A decade later, a single employee from the Department of Agriculture came to the Bureau of Internal Revenue under authority of the Oleomargarine Act to establish a Revenue Laboratory. The first samples received in the laboratory on December 29 of that year, were of butter suspected of adulteration with oleomargarine. Today, TTB’s Alcohol and Tobacco Laboratory (Scientific Services Division) staff includes chemists, document analysts, and latent print specialists, who work in highly sophisticated facilities in Ammendale, Maryland, and Walnut Creek, California.

By the turn of the century, the Bureau continued to make improvements. Development of its enforcement team was also bolstered with help from the ratification of the Eighteenth Amendment to the Constitution in 1919. This, in combination with the Volstead Prohibition Enforcement Act of that year, brought to prominence officers—”revenoors”—charged with investigating criminal violations of the Internal Revenue law, including the illicit manufacturing of liquors. By 1920, the unit had coalesced into the Prohibition Unit. Evolution of this unit reflects the difficulty of enforcing a nation-wide ban on the "manufacture, sale or transportation of intoxicating liquors for beverage purposes." On April Fool's Day, 1927, Treasury elevated the Prohibition Unit to Bureau status within the Department. However, Congress was impatient with the results and on July 1,1930, it transferred "the penal provisions of the national prohibition act" from Treasury's Bureau of Prohibition (which then ceased to exist) to the Department of Justice's new Bureau of Prohibition—with an important exception: tax-related and regulatory activities, "the permissive provisions," remained at Treasury, under a new Bureau of Industrial Alcohol. The most illustrious enforcer during that tumultuous era was Eliot Ness, the "T[reasury]-man," who toppled Chicago's organized-crime king Al Capone on tax-evasion charges.

The Twenty-first Amendment to the Constitution, repealing Prohibition, achieved ratification with unanticipated speed by December 5, 1933, catching Congress in recess. As an interim measure to manage a burgeoning legitimate alcohol industry, by executive order under the National Industrial Recovery Act, President Franklin D. Roosevelt established the Federal Alcohol Control Administration (FACA). FACA, in cooperation with the Departments of Agriculture and Treasury, endeavored to guide wineries and distilleries under a system based on brewers' voluntary codes of fair competition. FACA was relieved of its burden and effectively vanished from history after just twenty months, when President Roosevelt signed the Federal Alcohol Administration (FAA) Act in August 1935 and Treasury once more found itself regulating the alcohol industry.

Although Prohibition was officially over, the era's lingering effects continued to shape the federal policies for decades. On March 10, 1934, Justice’s Prohibition enforcement duties folded into the infant Alcohol Tax Unit (ATU), Bureau of Internal Revenue, Department of the Treasury. At the same time, Federal Alcohol Administration (FAA), functioning independently within Treasury, was carrying forward its mandate to collect data, to establish license and permit requirements, and define the regulations that ensure an open, fair marketplace for the alcohol industry and the American consumer. In 1940, FAA as an administration merged with the ATU, but the FAA Act continues today as part of the foundation of TTB’s enabling legislation.

The Bureau of Internal Revenue later became the Internal Revenue Service (IRS) that we know today. Acknowledging a portion of ATU's new burden, IRS renamed it the Alcohol and Tobacco Tax Division. This incarnation lasted until the 1968 passage of the Gun Control Act, which gave to the laboratory, among other things, responsibility for explosives. The division title shifted to the Alcohol, Tobacco and Firearms (ATF) Division. Title XI of the Organized Crime Control Act in 1970 (Title XI) formalized ATF Division explosives expertise. In the same year, moved by a growing perception that the IRS's revenue-collecting bias did not reflect ATF Division's enforcement skills, overtures began toward ATF independence.

Treasury Department Order No. 120-1 (originally No. 221), effective July 1,1972, transferred from IRS those functions, powers and duties related to alcohol, tobacco, firearms, and explosives to a new Treasury Department agency, the Bureau of Alcohol, Tobacco and Firearms (ATF). The taxation and regulatory control of the alcohol and tobacco industries remained a part of ATF until January of 2003, when as noted before, these functions were transferred to yet another new Treasury entity, the Alcohol and Tobacco Tax and Trade Bureau.

After more than two centuries of evolution, TTB, in its first year of existence, continues to move forward the federal government’s interest in ensuring a fair marketplace for its regulated industries, collecting the revenue they generate and, above all, protecting the American consumer. TTB’s dedicated and talented men and women who carry out this mission do so, fully aware of the legacy behind them and fully capable of weaving into the fabric of their work the vision left Alexander Hamilton. In doing so, these individuals build upon the foundation of their predecessors and take to new levels their own vision of creating a world-class organization that is intensely engaged and service-oriented. Afterall, TTB stands tall with “a proud past” and a “focused future.”

 

Statutory Authorities and Responsibilities

Homeland Security Act

The Homeland Security Act renders functions of the Bureau of Alcohol, Tobacco and Firearms (ATF) into two new organizations. This Act creates with the Department of the Treasury a new Alcohol and Tobacco Tax and Trade Bureau (TTB) and moves certain law enforcement functions of ATF to the Department of Justice.

Under the Act, the Alcohol and Tobacco Tax and Trade Bureau is responsible for administration and enforcement of:

The Act transfers enforcement of the National Firearms Act, 26 USC Chapter 53, to the Attorney General, who must coordinate this tax enforcement with the Secretary of the Treasury.

Internal Revenue Code

Chapters 51 and 52 provide for excise taxation and authorize operations of alcohol and tobacco producers and related industries. These provisions include:

• Classification of alcohol and tobacco products for excise tax purposes;

• Permits methods of operation for distilleries, wineries, breweries, industrial alcohol producers and users, and tobacco manufacturers importers and exporters;

• Regulation of the operations of distilleries, wineries, brewers, and of various industrial users of distilled spirits, including manufacturers of non-beverage products, tax-free, and denatured alcohols;

• Imposition of various occupational taxes;

• Regulation of the production, packaging, bottling, labeling and storage requirements related to these commodities;

• Issue permits and regulate operations for tobacco importers, tobacco manufacturing premises and export warehouses.

IRC sections 4181 and 4182 provide for excise taxes for firearms and ammunition.

Federal Alcohol Administration Act

The FAA Act provides for regulation of those engaged in the alcohol beverage industry, and for protection of consumers.

• To ensure the integrity of the industry, the FAA Act includes provisions to:

The Alcohol Beverage Labeling Act

The Alcohol Beverage Labeling Act mandates that a government warning statement appear on all alcohol beverages for sale or distribution in the United States.

The Webb-Kenyon Act

The Webb-Kenyon Act prohibits the shipment of alcohol beverages into a State in violation of the receiving State’s laws. This statute provides additional authority to enhance enforcement of FAA Act requirements.