Federal Tax Incentives:
Distilled Spirits Credit
Distilled Spirits Credit (§ 5011): Overview
The Distilled Spirits Credit under IRC § 5011 is part of the general business credit (§ 38) and equals the product of:
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(i) the number of eligible cases of bottled distilled spirits; and
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(ii) the average tax‑financing cost per case for the most recent calendar year. See § 5011(a).
“Distilled spirits” includes ethyl alcohol, ethanol, or spirits of wine in any form, including all dilutions and mixtures, per § 5002(a)(8). Proof affects the calculation of “cases” for non‑standard lots, not the statutory credit rate. Instructions for Form 8906, Internal Revenue Service. See also § 5011(a).
Who qualifies
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Eligible Wholesaler: any person holding a permit under the Federal Alcohol Administration Act as a wholesaler of distilled spirits, not a state or political subdivision. See § 5011(b).
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Others Subject to § 5005: distillers/importers storing bottled spirits in state‑operated warehouses without unconditional title transfer. See §§ 5005, § 5011(a)(1)(B).
Statutory Formula:
IRC § 5011(a) provides the credit equals:
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(1) Number of cases—for eligible wholesalers, cases of bottled distilled spirits bottled in the U.S. and purchased directly from the bottler; for others subject to § 5005 (distillers/importers), cases stored in a state‑operated warehouse without unconditional title transfer. § 5011(a)(1)(A)–(B).
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A “case” = 12 bottles of 80‑proof, 750 ml each.
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For non‑standard lots (proof adjustments; any lot of distilled spirits that does not consist of cases of 80-proof 750-milliliter bottles):
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Divide liters by 9, then multiply by (proof ÷ 80).
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Example:
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You purchased a lot of ninety 500-milliliter bottles of 150-proof rum. The number of liters in the lot is 45 (0.5 liters x 90). Divide 45 by 9 and the result is 5. Multiply 5 by 150/80 (1.875). The result is 9.375, which is the number of cases in the lot. See Instructions for Form 8906, IRS.
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(2) Average tax‑financing cost per case for the most recent calendar year. § 5011(a)(2), supra.
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Average Tax‑Financing Cost: amount of interest which would accrue for 60 days at the deemed financing rate on $25.68 deemed excise tax per case. See IRC § 5011(c).
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The deemed financing rate = average corporate overpayment rate under § 6621(a) for the calendar year. See § 5011(c)(1)–(3).
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