Alcohol Fuel Plant and Fuel Alcohol Questions and Answers

This webpage provides questions and answers to common questions pertaining to alcohol fuel plants (AFPs). The questions and answers are organized into the following groups:

General;
Authorized materials for making distilled spirits unfit for beverage use;
The differences between an AFP and a DSP;
Taxes;
Bonds;
Registration of stills;
Withdrawing and transferring alcohol fuel from AFP premises;
Records and reports;
Exportation of spirits produced or received by an AFP; and
Criminal penalties associated with the sale of distilled spirits that have been produced or received by an AFP but not made unfit for beverage use.

General

AFP1: What is an AFP?

As provided for by Title 26, Section 5181 of the United States Code (26 U.S.C. 5181), an AFP is a type of distilled spirits plant (DSP) that is qualified under 27 CFR, part 19, subpart X, solely for producing, processing, and storing, and using or distributing distilled spirits to be used exclusively for fuel use.

AFP2: What is fuel alcohol?

The TTB regulations (27 CFR, part 19, subpart X) define fuel alcohol as distilled spirits which have been made unfit for beverage use at an AFP as provided in 27 CFR, part 19, subpart X. The regulations authorize the use and required level of certain materials that may be used for making distilled spirits unfit for beverage use. (See AFP7).

Since AFPs may not produce distilled spirits derived from petroleum, natural gas, or coal, as prescribed by Section 5181, fuel alcohol may not be produced with distilled spirits that were derived from petroleum, natural gas, or coal.

AFP3: What does it mean to make distilled spirits unfit for beverage use?

The TTB regulations (27 CFR, part 19, subpart X) define the phrase "make unfit for beverage use" as the addition to distilled spirits of materials which will preclude their beverage use without impairing their quality for fuel use as prescribed and authorized by the provisions of 27 CFR, part 19, subpart X .

The term "render" is interchangeable with the term "make" and is used in some sections of 27 CFR, part 19, subpart X.

AFP4: Are there different AFP sizes? If so, what are they?

Yes, there are different AFP sizes depending on the amount of distilled spirits the AFP produces and receives per year. TTB has the authority to create guidelines for AFPs of different sizes. The statute (26 U.S.C. 5181) specifically refers to "small plants". When promulgating the regulations, our predecessor agency set forth definitions for small, medium, and large plants. The definitions of small, medium, and large plants are:

Small plants. A small alcohol fuel plant (small plant) is a plant which produces and/or receives not more than 10,000 proof gallons of spirits in one calendar year.
Medium plants. A medium alcohol fuel plant (medium plant) is a plant which produces and/or receives more than 10,000 but not more than 500,000 proof gallons of spirits per calendar year.
Large plants. A large alcohol fuel plant (large plant) produces and/or receives more than 500,000 proof gallons of spirits per calendar year.

The above categories were established based on the potential tax liability associated with the varying levels of activity. (Although distilled spirits used for beverage purposes are subject to Federal excise tax, fuel alcohol that is lawfully withdrawn and used is not subject to such tax.) As stated in Treasury Decision (TD) ATF-71, spirits received from another plant are considered additional production for determining the level of activity of a plant for purposes of bonding and qualification.

AFP5: What is the difference between fuel alcohol and completely denatured alcohol formula number 20 (CDA 20)?

Fuel alcohol and CDA 20 are both products that are authorized only for fuel use, but they are different in several key ways. The primary distinction between fuel alcohol and CDA 20 is that fuel alcohol is produced on AFP premises and CDA 20 is produced on DSP premises. A second significant difference is that fuel alcohol is produced under the formula prescribed in 27 CFR 19.746. Section 19.746 allows for the use of 2 gallons or more of authorized materials per 100 gallons of distilled spirits of any proof.

The formula for CDA 20 is set forth in 27 CFR 21.24. Section 21.24 requires that exactly 2 gallons of authorized material be added to every 100 gallons of distilled spirits of not less than 195 proof.

A third distinction between fuel alcohol and CDA 20 is the list of authorized materials for each. See AFP7 for a complete list of the approved fuel alcohol materials.

AFP6: How long does an AFP permit last, and can an AFP permit be revoked or suspended?

The regulation at 27 CFR19.679 provides that an AFP permit is continuing unless automatically terminated under 27 CFR 19.684, suspended or revoked as provided in 27 CFR 19.697, or voluntarily surrendered.

In accordance with § 19.684, automatic termination of an AFP permit occurs when the lease, sale, or other transfer of business operations occurs. In the case of a corporation holding a permit under this subpart, if actual or legal control of the permittee corporation changes, directly or indirectly, whether by reason of change in stock ownership or control (in the permittee corporation or in any other corporation), by operation of law, or in any other manner, the permit may remain in effect until the expiration of 30 days after the change, whereupon the permit will automatically terminate. However, if operations are to be continued after the change in control, and an application for a new permit is filed within 30 days of the change, then the outstanding permit may remain in effect until final action is taken on the new application. When final action is taken on the application, the outstanding permit automatically terminates.

In accordance with § 19.697, the Deputy Assistant Administrator for TTB Field Operations has the authority to revoke or suspend an AFP permit if he/she has reason to believe that the proprietor:

Has not in good faith complied with the applicable provisions of 26 U.S.C. Chapter 51, or 27 CFR, part 19, subpart X; or
Has violated conditions of the permit; or
Has made any false statements as to any material fact in the application thereof; or
Has failed to disclose any material information required to be furnished; or
Has violated or conspired to violate any law of the U.S. relating to intoxicating liquor or has been convicted of any offense under Title 26, U.S.C. punishable as a felony or of any conspiracy to commit such offense.

The Director, TTB National Revenue Center has the authority to revoke or suspend an AFP permit if he/she has reason to believe that the proprietor:

Has not engaged in any of the operations authorized by the permit for a period of more than 2 years.

Authorized materials for making distilled spirits unfit for beverage use

AFP7: Which materials are authorized for making distilled spirits unfit for beverage use?

Section 19.746 of the TTB regulations states:

(a) General. The appropriate TTB officer determines what materials make spirits unfit for beverage use but do not impair the quality of the spirits for fuel use. Spirits treated with materials authorized under this section will be considered rendered unfit for beverage use and eligible for withdrawal as fuel alcohol.

(b) Authorized materials. Subject to the specifications in paragraph (c) of this section, proprietors are authorized to render spirits unfit for beverage use by adding to each 100 gallons of spirits any of following materials in the quantities specified:

(1) Two gallons or more of—

Gasoline or automotive gasoline (for use in engines that require unleaded gasoline, the Environmental Protection Agency and manufacturers specifications may require that unleaded gasoline be used to render spirits unfit for beverage use);
Natural gasoline;
Kerosene;
Deodorized kerosene;
Rubber hydrocarbon solvent;
Methyl isobutyl ketone;
Mixed isomers of nitropropane;
Heptane;
Ethyl tertiary butyl ether (ETBE);
Raffinate;
Naphtha; or
Any combination of the materials listed in (b)(1)(i) through (xi) of this section; or

(2) Five gallons or more of Toluene; or

(3) One-eighth (1/8) of an ounce of denatonium benzoate N.F. and 2 gallons of isopropyl alcohol.

(c) Specifications. (1) Specifications for gasoline, unleaded gasoline, kerosene, deodorized kerosene, rubber hydrocarbon solvent, methyl isobutyl ketone, mixed isomers of nitropropane, heptane, toluene, and isopropyl alcohol are found in part 21, subpart E, of this chapter.

(2) Natural gasoline must meet the following specifications—

Natural gasoline (drip gas) is a mixture of butane, pentane, and hexane hydrocarbons extracted from natural gas; and
Distillation range: No more than 10 percent of the sample may distill below 97 degrees Fahrenheit; at least 50 percent shall distill at or below 156 degrees Fahrenheit; and at least 90 percent shall distill at or below 209 degrees Fahrenheit.

(3) Raffinate must meet the following specifications—

Octane (R+M/2): 66—70;
Distillation, in degrees Fahrenheit: 10 percent: 120—150 °F; 50 percent: 144—180 °F; 90 percent: 168—200 °F; end point: 216—285 °F;
API Gravity: 76—82; and
Reid Vapor Pressure: 5—11.

(4) Naphtha must meet the following specifications—

API Gravity @ 60/60 degrees Fahrenheit: 64—70 °F;
Lb/Gal: 5.845—6.025;
Density: 0.7022—0.7238;
Reid Vapor Pressure: 8 P.S.I.A. Max.;
Distillation in degrees Fahrenheit: I.B.P.: 85 °F Max.; 10 percent: 130 °F Max.; 50 percent: 250 °F Max.; 90 percent: 340 °F Max.; end point: 380 °F;
Copper Corrosion: 1; and
Sabolt Color: 28 Min.

AFP8: How are distilled spirits rendered unfit for beverage use?

Distilled spirits are made (rendered) unfit for beverage use by mixing the distilled spirits with authorized materials at the prescribed level.

The differences between an AFP and a DSP

AFP9: What are some of the main differences between an AFP and a DSP?

Though an AFP is a type of DSP, there are significant differences between the two types of plants. The main difference pertains to authorized activities; but other differences, pertaining to things such as those concerning qualification, bonding, and recordkeeping, exist as well. The following table is an example of some of the differences between and AFP and a typical DSP. This table is only intended to provide a broad overview of said differences.

	AFP	DSP
Authorized activities	Receive and produce distilled spirits for the purposes of rendering them unfit for beverage use for fuel use.	Receive and produce distilled spirits. Produce and warehouse beverage distilled spirits. Produce specially and completely denature distilled spirits for industrial use. Produce tax free distilled spirits. Manufacture articles. Receive wine on bonded premises. Receive beer/malt beverages on bonded premises.
Bond requirements	An AFP that produces and/or receives not more than 10,000 proof gallons or less of distilled spirits per year is not required to obtain a bond. However, an AFP that only receives less than 10,000 proof gallons of distilled spirits per year, must furnish a bond in accordance with 27 CFR 19.699. AFPs that produce and/or receive more than 10,000 proof gallons of distilled spirits per year are required to obtain a bond. For more information see the FAQs pertaining to bonds.	In accordance with 27 CFR 19.152, every person intending to establish a distilled spirits plant shall file an operations or unit bond prescribed in 27 CFR part 19, subpart F.
Taxes	As long as fuel alcohol is produced in accordance with 27 CFR, part 19, subpart X, and fuel used for fuel purposes, no taxes are due.	Unless the DSP withdraws the spirits on a non-taxpaid basis, a DSP owes taxes on distilled spirits withdrawn from bonded premises. Generally, the tax rate is $13.50 per proof gallon.

Taxes

AFP10: Are taxes due on fuel alcohol?

As long as the fuel alcohol is withdrawn from an AFP under the provisions of 27 CFR, part 19, subpart X , taxes are not due. The statutory provisions of 26 U.S.C. 5181 provide for the withdrawal of distilled spirits from AFP premises free of tax exclusively for fuel use as provided in 26 U.S.C. 5214(a)(12) . Section 5214(a)(12) states that distilled spirits on which the internal revenue has not been paid or determined, subject to such regulations as the secretary shall prescribe, may be withdrawn from bonded premises free of tax in the case of distilled spirits produced under Section 5181 .

The implementing regulations (27 CFR 19.669 ) provide that distilled spirits which have been rendered unfit for beverage use as prescribed by 27 CFR, part 19, subpart X , may be withdrawn free of tax from the premises of an AFP exclusively for fuel use.

Payment of tax will be required in the case of diversion of spirits to beverage use or other unauthorized dispositions. The provisions of 27 CFR part 19, subpart I , are applicable to distilled spirits for fuel use. Specifically:

The imposition of tax liability (27 CFR 19.21 — 19.25 );
The assessment of tax (27 CFR 19.253 and 19.254 ); and
Claims for tax (27 CFR 19.262 and 19.263 ).

Bonds

AFP11: Are there bond requirements for AFPs?

Yes, there are bond requirements for certain AFPs.

The statutory provisions of 26 U.S.C. 5181 state that no bond shall be required for an eligible distilled spirits plant. An "eligible distilled spirits plant" is an AFP that does not produce and receive more than 10,000 proof gallons of spirits per year.

The implementing TTB regulations define a small AFP as a plant which does not produce and/or receive more than 10,000 proof gallons of spirits in one calendar year. Hence, a bond is not required for small AFPs. However, in accordance with 27 CFR 19.673, AFP proprietors of small plants where there is no production, must furnish a bond in accordance with 27 CFR 19.699. The penal sum of the bond is prescribed in 27 CFR 19.700.

AFP12: Do AFPs of different sizes require bonds of different amounts?

Yes. Medium and large AFPs are required to obtain a bond. The bond amount is dependent on the quantity of spirits that the AFP will produce and or receive in a calendar year.

In accordance with §§ 19.675 and 19.676, a bond of sufficient sum, as prescribed in § 19.700, is required for medium AFPs. The bond must be filed on TTB F 5110.56 and can be submitted with the application. The bond must be submitted before a permit is issued.

As provided in §19.699, a bond shall be conditioned on payment of all taxes (including any penalties and interest) imposed by 26 U.S.C. Chapter 51, on compliance with all requirements of law and regulations, and on payment of all penalties incurred or fines imposed for violations of any such provisions.

AFP13: What is the bond amount for a small AFP that does not have production operations?

In accordance with § 19.700 , the penal sum for a bond of a small plant that does not have production operations is $1,000.

AFP14: How do I calculate a sufficient bond for a medium AFP?

As stated in § 19.700 , to find the required amount of a bond for a medium AFP, estimate the total proof gallons of spirits to be produced and received in a calendar year. The amount of the bond is $1,000 for each 10,000 proof gallons (or fraction), subject to a minimum of $2,000 and a maximum of $50,000. The following table provides some examples:

More than	But not over	Amount of Bond
10,000	20,000	$ 2,000
20,000	30,000	3,000
90,000	100,000	10,000
190,000	200,000	20,000
490,000	500,000	50,000

AFP15: How do I calculate a sufficient bond for a large AFP?

As stated in § 19.700, to find the required amount of a bond for a large AFP, estimate the total proof gallons of spirits to be produced and received in a calendar year. The amount of the bond is $50,000 plus $2,000 for each 10,000 proof gallons (or fraction) over 500,000. The following table provides some examples.

More than	But not over	Amount bond
500,000	510,000	$ 52,000
510,000	520,000	54,000
740,000	750,000	100,000
990,000	1,000,000	150,000
1,240,000		200,000

AFP16: What is the point of bonds? Why are they required for medium and large plants?

The statutory provisions of 26 U.S.C. 5001 provide that tax attaches to distilled spirits as soon as the substance is in existence. Therefore, though tax is not collected on distilled spirits lawfully produced and used for fuel use, liability for tax on distilled spirits still attaches upon creation of the substance.

This tax liability makes bonds necessary. Bonds provide the Government with security against the possible loss of tax revenue.

Registration of stills

AFP17: How does an AFP proprietor register a still?

In accordance with § 19.680, the description of stills on the approved alcohol fuel producer’s permit (TTB F 5110.74) application constitutes registration of stills.

AFP18: Does an AFP proprietor have to amend his/her permit if he/she relocates the still listed on the permit?

Yes. A change in type or location of a still constitutes amendment of the permit. Permits can be amended on TTB F 5110.74.

Withdrawing and transferring fuel alcohol from AFP premises

AFP19: Can distilled spirits that are not rendered unfit for beverage use be legally withdrawn from an AFP.

No. The provisions of 27 CFR 19.728 require that before spirits may be withdrawn from an AFP, they must be made unfit for beverage use as provided in 27 CFR, part 19, subpart X. Specifically, § 19.746 lists the authorized materials for rendering distilled spirits unfit for beverage use. Further, 27 CFR 19.726 states that no person shall withdraw, use, sell, or otherwise dispose of distilled spirits (including fuel alcohol) produced under 27 CFR, part 19, subpart X for other than fuel use.

As discussed in AFP23 below, criminal penalties apply to persons who withdraw, use, sell or otherwise dispose of distilled spirits (including fuel alcohol) produced under 27 CFR, part 19, subpart X for uses other than fuel use.

AFP20: Can distilled spirits that have not been rendered unfit for beverage use be transferred from an AFP to a DSP or another AFP? If so, how?

Yes, with certain restrictions provided for in 27 CFR 19.733, distilled spirits that have not been rendered unfit for beverage use may be transferred from an AFP to a DSP or another AFP. In contrast to fuel alcohol that is withdrawn tax-free from the bonded premises of an AFP, the tax liability of spirits that are "transferred in bond" to a DSP or another AFP is at all times covered by the bond of a TTB permittee. Such transfers are not considered to be withdrawals.

Distilled spirits that have not been rendered unfit for beverage use may be transferred in bond from an AFP to a DSP or another AFP. However, after the transfer, the spirits must be rendered unfit for beverage use prior to withdrawal and may only be used for fuel purposes after withdrawal. In addition, each DSP or AFP that wishes to receive spirits under a transfer in bond from an AFP must obtain a one-time approval using TTB F 5100.16 ("Application for Transfer of Spirits and/or Denatured Spirits in Bond") in order to receive spirits from that AFP. Other requirements relating to transfers in bond from AFPs are contained in 27 CFR 19.726, 19.734, 19.735, and 19.736.

Records and reports

AFP21: Are there required records and reports for AFPs?

Yes, there are required records and reports for AFPs. The regulations pertaining to records and reports for AFPs are located in:

Section 19.720 requires the proprietor of an AFP to submit an annual report on TTB F 5110.75 for each calendar year ending on December 31. This report must be sent to the following address by January 30 of the year following the reporting period.

Group Supervisor
Alcohol and Tobacco Tax and Trade Bureau
National Revenue Center
550 Main Street, Suite 8002
Cincinnati, Ohio 45202

Exportation of spirits produced or received by an AFP

AFP22: Can distilled spirits produced or received by an AFP be exported?

Yes, but only under certain specific circumstances. Under 26 U.S.C. 5181(e), spirits from an AFP must be both rendered unfit for beverage use and used only for fuel purposes upon withdrawal from any AFP or DSP. Therefore, spirits produced or received by an AFP may be subsequently withdrawn for exportation only if the spirits are first rendered unfit for beverage use prior to the withdrawal and only if the resulting product is used for fuel purposes after the withdrawal.

The statutory provisions in 26 U.S.C. 5214(a)(12) and the implementing regulations in 27 CFR 19.728 provide for the withdrawal of fuel alcohol free of tax from AFP premises exclusively for fuel use. Further, § 19.728 states that prior to the withdrawal of spirits from an AFP, spirits must be rendered unfit for beverage use. Therefore, distilled spirits withdrawn from the premises of an AFP for export must have been rendered unfit for beverage use in order to meet the definition of fuel alcohol. The prohibition on withdrawing spirits from an AFP that have not been rendered unfit for beverage use cannot be circumvented by transferring said spirits to a distilled spirits plant in bond and then withdrawing the spirits (without being rendered unfit for beverage use) from the DSP. This is true because 26 U.S.C. 5181(e)(1) requires that spirits from an AFP must be used for fuel purposes after withdrawal and because 26 U.S.C. 5181(e)(2) specifically uses the term "distilled spirits plant" (which includes AFPs and DSPs) when setting forth the requirement that spirits must be rendered unfit for beverage use prior to withdrawal from the bonded premises.

AFP23: Can distilled spirits that have not been rendered unfit for beverage use, and that were produced at or received by an AFP, be withdrawn from an AFP for exportation?

No. For the same reason that distilled spirits that have not been rendered unfit for beverage use cannot be withdrawn from an AFP for domestic sale, such spirits cannot be withdrawn from an AFP for exportation.

The provisions of § 19.728 require that spirits be rendered unfit for beverage use as provided in 27 CFR, part 19, subpart X. Please see AFP7 for a complete list of the authorized materials for rendering distilled spirits unfit for beverage use.

AFP24: Are there any exportation forms for an AFP?

No. There are no prescribed forms for the exportation of fuel alcohol; however, the AFP must maintain records as prescribed in 27 CFR 19.709 through 19.720.

The regulations in 27 CFR Part 28, Exportation of Alcohol, do not pertain to fuel alcohol.

AFP25: Can distilled spirits that are produced or received by an AFP but not rendered unfit for beverage use be transferred to a DSP and then exported without being rendered unfit for beverage use?

No. Distilled spirits that have been produced or received by an AFP but not rendered unfit for beverage use cannot be transferred to a DSP and be withdrawn from that DSP for exportation without being rendered unfit for beverage use.

Criminal penalties associated with the sale of distilled spirits that have been produced or received by an AFP but not rendered unfit for beverage use

AFP26: Are there criminal penalties associated with withdrawing distilled spirits from an AFP which have not been rendered unfit for beverage use?

Yes. In accordance with 27 CFR 19.663, provisions dealing with penalty, seizure, or forfeiture which are applicable to distilled spirits apply to AFPs. Specifically, 26 U.S.C.: