S. 1938: To amend the Internal Revenue Code of 1986 to modify the cover over of certain distilled spirits taxes.

The bill S. 1938 aims to amend the Internal Revenue Code, specifically concerning taxes on distilled spirits. Here’s a breakdown of what the bill proposes:

Changes to Distilled Spirits Tax Regulations

The bill focuses on modifying certain regulations related to the cover over of distilled spirits taxes to U.S. territories, particularly Puerto Rico and the Virgin Islands.

Repeal of Existing Limitations

Specifically, the bill proposes to:

• Remove an existing limitation on the cover over of distilled spirits taxes paid to Puerto Rico and the Virgin Islands. This means these territories would receive more direct funding from taxes collected on distilled spirits.
• Make necessary adjustments to associated provisions in the tax code to reflect this repeal.

Funding for Puerto Rico Conservation Trust Fund

The bill stipulates that:

• A portion of the taxes collected on rum transported to the United States must be transferred to the Puerto Rico Conservation Trust Fund if the tax rate is above a specified threshold ($10.50 per proof gallon).
• The required transfer amount is determined based on a defined formula that considers the difference between the standard rate and the actual rate applied.
• This fund is dedicated to conservation efforts, including sustainable agriculture and habitat restoration in Puerto Rico.

Effective Dates

The provisions in the bill would generally apply to distilled spirits brought into the United States after December 31, 2021. This means they would have retroactive effect concerning spirits taxed after this date.

Apply Changes Retroactively

Finally, the bill includes provisions for retroactive application of certain rules regarding the determination of the cover over, allowing the amendments to take effect as if they had been included in previous legislation affecting tax regulations.

Relevant Companies

• DIS (The Walt Disney Company) - Potentially affected due to its operations related to spirits in theme parks or events.
• DEO (Diageo plc) - A major player in the spirits market, which could experience changes in tax liabilities affecting profit margins or pricing strategies.