My most recent blog posts have been about the currently hot topic of TTB wine bonds. In today’s post I’m covering some in depth specifics on what the purpose of a TTB wine bond is all about: excise taxes. Within the topic of TTB excise taxes I’ll review the first part behind qualifying to pay those required TTB taxes under the Small Producer’s Tax Credit, or SPC. The majority of US wineries qualify for the SPC, however this credit is also very misunderstood and commonly misused on TTB excise tax returns. So this part 1 post is focused on “how to walk your winery permit” through determining the first step in qualifying for the SPC, which is whether or not your winery ownership qualifies.
This is a multi part question and answer process to determine if your answer is yes.
To start you first need to take a look at your TTB permit application file for your winery. If the ownership of your winery also owns other winery sites (this includes as an alternating proprietor at another site) you’ll need to reference those TTB permit application files as well. You will also need to make sure you reference the most current TTB permit application file (for all sites if applicable) that matches your current ownership details. (i.e. If you’ve changed from one entity type to another or if you’ve changed the ownership on your LLC for example) What you are looking at specifically in your TTB application file is all the individuals listed as the owners/officers. This is because the first qualification for filing under the SPC is that if any owner or officer above 50% ownership on your TTB permit is also listed as an owner/officer above 50% ownership on another TTB winery permit then the annual wine production gallons and the amount of tax paid wine removals per year must be summed together for both sites. This is what the IRS refers to as a control group. The total amount of annual production for all sites cannot be more than 150,000 gallons in order to qualify for the tax credit at the full 0.90 per gallon amount, and the credit can only be taken on up to 100,000 gallons for a year’s worth of wine removals from all sites on your TTB excise tax reports.
In layman’s terms what could this look like you ask? For example, if Sue Z. is listed as the CEO with 60% ownership of ABC Cellars LLC at a winery site in Napa, CA and ABC Cellars LLC also has a second TTB permit as an alternating proprietor (AP) at a site in Sonoma CA then they would need to be summing their wine production gallons and their wine removal amounts together each year to determine whether or not they qualify to file and pay their TTB excise taxes under the SPC.
Be aware this is just one example of a multi site ownership that is an example of a control group. There are other types as well so if you are wondering about your site please feel free to contact my office to discuss further.
If you are reading this and you know that your winery is owned by an individual, partnership, LLC or corporation and that none of the owners or officers are listed on any other TTB winery or wine cellar permits then you pass this first small producer’s tax credit qualification test. (Congratulations!)
Stay tuned next week for part 2: Does your wine qualify for the small producer’s tax credit?