
The Alcohol & Tobacco Tax & Trade Bureau ("TTB") has many roles and responsibilities, one of which is to monitor the industry and ensure compliance with alcohol laws and regulations.
Within TTB's organizational structure, is the Tax Audit Division ("TAD"), which is comprised of a team of auditors who audit and enforce the collection of Federal Excise Taxes. When identifying industry members for a potential audit, TAD uses a "risk-based approach", which focuses on identified risk indicators, but the agency also incorporates random audits to ensure every industry member is susceptible to an audit. In addition to auditing Federal Excise Taxes, TTB's Trade Investigations Division ("TID") is a separate team which is comprised of investigators who focus on ensuring the industry complies with trade practice laws and regulations.
If a TTB audit or investigation leads to potential civil or criminal penalties, Titles 26 and 27 of the United States Code allow for the compromise of certain civil and criminal cases. In this context, a "Compromise" is an agreement made between the TTB and an industry member facing civil proceedings or criminal prosecution, and an "Offer in Compromise" is the industry member's offer to resolve such proceedings or prosecution.
Although it is not an exact indicator of TTB audit and investigation activity, the TTB publishes accepted Offers in Compromise on its website, which the agency periodically updates.
Ten months into the calendar year of 2023, fifteen Offers in Compromise have been accepted by the TTB so far, which is just shy of the sixteen accepted offers for all of calendar year 2022.
Although both 2023 and 2022 are still well below the twenty-one Offers in Compromise accepted by TTB in 2021, that year appears to be a bit of a misnomer, as the prior year (2020) only saw nine accepted offers, likely due to disruption from the COVID-19 pandemic.
What is the takeaway? It appears that TTB continues to ramp up audits and investigations after a brief lull in 2020. Additionally, the Biden Administration issued a report in February 2022, signaling an increased focus on competition in the beer, wine, and spirits industries. The combination of both factors could account for an increase in TTB audits and investigations generally.
Although the 2023 calendar year is far from over, the current trend appears to indicate that TTB will continue to maintain a strong focus on audits and investigations for the near future.
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