Section 307 amends the various provisions of law relating to the bonded period for spirits and the loss allowance thereof by redeclaring those laws as they existed prior to wartime and national prohibition. The purpose of this section is to redeclare the bonded period for spirits to be 8 years and to redeclare the loss allowance to be for a period of 7 years. This is necessary because of the act of February 6, 1925, which extended the bonded period indefinitely and granted additional loss allowances for such time as the spirits remained in bond, for the reason that during prohibition spirits could not be freely withdrawn. The redeclaration makes those laws effective as of December 6, 1933, and provides that additional allowances for loss, between December 6, 1933, and the 30th day after the enactment of this act, shall not be invalidated. It further provides that distilled spirits 8 years of age or over which were in bonded warehouses on December 5, 1933, may remain in bond, and when withdrawn, may be given loss allowances up to and including the 30th day after the date of the enactment of this act.

Now the situation is simply this: Before prohibition the bonded period was 4 years. You could not sell liquor as bonded liquor until it had been in the charred keg for 4 years. Then you had an allowance. The Government granted you an allowance for losses of evaporation, and so forth and so on. Every few months you got a certain allowance. That allowance was given you up to 7 years and the allowance then stopped. At the end of 8 years you had to take the liquor out, you had to take your distilled spirits out and pay a tax on them. Because of prohibition, in February 1925, Congress passed an act which extended indefinitely the 8-year period. When, on December 6, 1933, the eighteenth amendment was repealed we were afraid that by this February 1925 act Congress had extended indefinitely the period when you could take your liquor out and have your allowances. This redeclares the law as of December 6, 1933. You get your ellowances up to 7 years, you must take your liquor out at the end of 8 years, but all liquor that was over the 8-year period on December 6, 1933, in warehouses is not affected by that provision, and you are allowed allowances, the allowances will continue although the liquor has been there over 8 years, up to 30 days after the enactment of this bill into the law. So your allowances will stop at that time, but you may continue to leave your liquor in. That only applies with respect to the liquor that has been in there 8 years.

Senator BAILEY. Then the whole idea is to set a time or period for the bonding of liquor spirits; you get no advantage by going beyond 8 years?

Mr. HESTER. That is right,

Senator BAILEY. What is your purpose?

Mr. HESTER. That simply is old law, and we are redeclaring the old law.

Senator BAILEY. I am not especially interested, but I would like to know why we should put a premium on 8-year-old liquor and not put a premium on 16-year-old liquor?

Mr. HESTER. Let me call upon Mr. Berkshire, who is the Deputy Commissioner of Internal Revenue in charge of the Alcohol Tax Unit. Mr. BERKSHIRE. There isn't any purpose in keeping it, so far as the quality of the liquor is concerned, more than 8 years. Senator BAILEY. It does not improve after that?

Mr. BERKSHIRE. It does not improve after that materially, if at all. The allowances run that long. Of course they may continue to keep the liquor 16 years.

Senator BAILEY. It might be some advantage?

Mr. BERKSHIRE. There may be a commercial advantage, but the Government is not interested in it. I think 8 years is long enough. Senator KING. May I ask one question for information. As I understand it, the bill which came over from the House, 9185, was. under consideration for a number of weeks by the Committee on Ways and Means?

Mr. HESTER. A number of months. I think they took up consideration in March.

Senator KING. Were the hearings extensive?

Mr. HESTER. Yes, they were extensive hearings.

Senator KING. And were distillers and those who are interested in this character of legislation permitted to appear and did they appear?

Mr. HESTER. Yes; I dare say every gentleman here this morning was present at those hearings.

Senator KING. In a general way did the bill which passed the House meet the valid objections which were offered?

Mr. HESTER. I think I can, with practically one or two exceptions, say that that is the case. The Ways and Means Committee, after the public hearings, considered it extensively in executive session and it seems to us when the bill was finally enacted by the House it met the objection of the industry. I would be surprised if some of the industry does not come up here and say they are in favor of the bill. There may be a few objections which perhaps we can iron out. Senator KING. Proceed.

Mr. HESTER. Section 602 of the Revenue Act of 1918 provided for the removal of alcohol and other high-proof spirits from registered distilleries for the purpose therein stated. At that time alcohol and other high-proof spirits of 160° or more were produced at whisky distilleries. At the present time alcohol and other high-proof spirits of 160° and more may legally be produced and warehoused only in industrial alcohol plants established under title III of the National Prohibition Act and regulations thereunder. By section 308 it is intended so to amend the law as to extend the privileges of producing and warehousing spirits of less than 160° of proof at whisky distilleries, and granting the privileges thereunder.

Section 3293 of the Revised Statutes is amended by section 309 so as to permit the Secretary of the Treuasury to accept monthly or annual warehousing bonds from distillers in the penal sum of not less than 50 percent of the tax on the distilled spirits on deposit in the warehouse at any one time, or such higher sums as the Secretary of the Treasury may prescribe. Under the present law, distillers' warehousing bonds are required to be in sum equal to the total tax on spirits on deposit. It is believed, however, that a bond under this section would afford adequate protection since surreptitious removals of spirits would be discovered before the losses were such as to reach the maximum of the bond required under this section. simply reduces the premium on these bonds.

It

Section 310 amends section 3302 of the Revised Statutes so as to relieve the storekeeper-gager of the necessity of recording certain.

data relating to the operations of the distillery which is deemed unnecessary. The section further authorizes the Secretary of the Treasury to relieve storekeepers-gagers of the duty of recording the time when any fermenting tub is emptied of any ripe mash or beer when the survey is waived.

Senator BAILEY. Let me ask you there, the provision for a daily account is merely a provision whereby the distillery may be checked, is it not?

Mr. HESTER. That is right.

Senator BAILEY. Are you satisfied with that provision?

Mr. HESTER. We are not waiving that provision. The only thing we are waiving is this: The keeping of a record of all fuel used and from whom purchased, of all repairs made on said distillery and by whom and when made, the names and places of residence of all persons employed in or about the distillery, that is all we are taking out there. They are obsolete provisions.

Section 311 amends section 3303 of the Revised Statutes by relieving distillers of the necessity of recording certain data required under existing law but no longer considered necessary. The section further provides that whenever the Secretary of the Treasury shall relieve the distiller of the survey, he may likewise relieve the distiller from the requirements of the section relating or incidental to the survey.

Section 312 amends section 3831 of the Revised Statutes to provide for the operation of a distillery or distilling apparatus, under bond, after seizure. The existing statute provides that seized distilleries and apparatus may be so operated under bond only when cattle are being fed with the spent grain therefrom, and this section amends the law with a view to permitting the continuance of the employment of the workers in the distillery.

Senator KING. Under whose jurisdiction?

Mr. HESTER. The receiver of the court.

Section 313 accomplishes two major purposes: First, it amends certain provisions of law which by implication would permit the use of containers other than hogsheads, barrels, and kegs as original stamped packages for fermented malt liquors, so as to confine such packaging to hogsheads, barrels, and kegs; secondly, it permits the Commissioner of Internal Revenue to authorize the use of such tapping devices or faucets as will permit the fixing and destruction of stamps on hogsheads, barrels, and kegs containing fermented malt liquors in a manner consistent with the protection of the revenues. The purpose of the first amendment is to prevent the shipment of fermented malt liquor in bulk containers to depots and warehouses, there to be further manipulated, which would increase the danger of frauds upon the revenue, and increase the cost of supervision without any corresponding benefit to the Government. The amendment does not prohibit the packaging of beer in cans when run from the brewery to the bottling house by pipe line or barrel. In this respect canned beer is treated in the same fashion as bottled beer. The purpose of the second amendment is to permit the use of such tapping devices, to be approved by the Commissioner, as may be consistent with the protection of the revenue.

Senator BAILEY. On that point, why did you allow the brewer to tap in either one or two bung holes? One will carry the stamp and the other will not. In the event it does not go through the one

that carries the stamp it requires that you shall cancel the stamp by writing or printing thereon. What is the necessity of the two bungholes in the barrel?

Mr. HESTER. It simply is a matter of convenience.

Senator BAILEY. I do not get that. It might be or might not be a matter of convenience. I just want to know why you have two bungholes?

Mr. FORREST. I can see, sir, where a stamp might become so soiled that when he drove the spigot into it he might drive the dirt into the beer, he might drive it through the other spigot hole, and it is conceivable that some saloonkeepers might have good reasons for wishing a choice of taps. It depends upon whether they are laying the keg down or standing it on end.

Senator BAILEY. He can be required, for his own convenience, to lay the keg so that one bung would be sufficient to tap the barrel. If he goes ahead and puts the bung against the wall that is his lookout. That would be a matter of storage.

Mr. HESTER. Is your question directed to whether or not the two would endanger the revenue?

Senator BAILEY. In one case, where you tap the barrel, you destroy the stamp; and in the other case, when you tap the barrel, you do not destroy the stamp.

Mr. FORREST. He is required to destroy it.

Senator BAILEY. One is automatic, and one is of necessity. Here is a package of cigarettes. I cannot open the package of cigarettes without destroying the stamp. That is the whole idea. It is put across the top. Now you have got a barrel and should not be able to open it without destroying the stamp, but the way the law is drawn you can open the barrel without destroying the stamp. Mr. BERKSHIRE. That is wrong, then.

Senator BAILEY. You can say that you can cancel the stamp by writing or by printing, but that is not automatic. One is automatic, and the other is voluntary.

Mr. BERKSHIRE. It is certaily not contemplated they can tap the barrel without destroying the stamp.

Senator KING. I suggest that may be checked up.

Mr. HESTER. We will give consideration to it.

Mr. BERKSHIRE. If it does not do that, then it is wrong, that is all there is to that.

Mr. HESTER. Section 314 amends sections 3242 and 3281 of the Revised Statutes by making uniform the penalties which may be imposed upon any person who carries on the business of a brewer, rectifier, wholesale liquor dealer, retail liquor dealer, wholesale dealer in malt liquors, retail dealer in malt liquors, or manufacturer of stills, and willfully fails to pay the special tax required by law. Under the present law the last sentence of section 3242 of the Revised Statutes imposes a comparatively light penalty upon brewers who operate without paying the special tax, and section 3281 imposes a relatively high penalty upon the other special taxpayers named. In addition, section 314 imposes the penalties only upon those who willfully fail to pay the special taxes. This makes it uniform. It now provides it must be a willful violation.

Section 3335 of the Revised Statutes is amended by section 315 to require more complete information to be supplied by brewers in

their notices than is now required by law, for the purposes of enforcing tax liability, affecting forfeitures, and approving bonds offered by prospective brewers. The Commissioner of Internal Revenue is authorized to require the notice to set out the names and residences of persons directly or indirectly interested in the business, the precise place and description of the premises, and such additional information as he deems necessary for the protection of the revenue.

Section 316 amends section 336 of the Revised Statutes by permitting the Secretary of the Treasury to prescribe the penal sums of bonds to be furnished by brewers, in proportion to the production capacity of the plant, but in no event to be less than $1,000. The present law provides that the bond shall be in a sum equal to three times the amount of tax upon the amount of fermented malt liquor which it is estimated the brewer will manufacture in any 1 month. Since the present rate of tax on fermented malt liquor is $5 on each barrel of 31 gallons, it will be seen that the present bond required of brewers is excessive and imposes an unnecessary hardship as to premiums. In addition, the section provides that not only must the brewer furnish a new bond once every 4 years, but must furnish a new bond whenever required so to do by the Commissioner.

Senator BAILEY. What is the idea here, that Congress should pass an act on liquor that is not intoxicating liquor?

Mr. HESTER. It did it on 3.2 beer. It simply said "3.2 beer."
Mr. BERKSHIRE. That is repealed.

Senator BAILEY. We appear on record as saying that is not intoxicating.

Senator BARKLEY. Real beer contains more alcohol.

Mr. BERKSHIRE. Not for taxing purposes, Senator.

Mr. HESTER. We collect the tax on the beer regardless of what the alcohol content is.

Senator BAILEY. I will agree we classified it as intoxicating from 1892 down to about 2 years ago, then we classified it as nonintoxicating. Now we are classifying it as intoxicating. It bothers a man just to know what the word "intoxicating" means.

Mr. BERKSHIRE. We do not know anything about 3.2 any more. Senator BAILEY. You do not make any distinction?

Mr. BERKSHIRE. That is correct.

Mr. HESTER. This bill does not classify beer as intoxicating liquor. It refers to it as fermented malt liquor.

Senator BAILEY. This is a bill to regulate intoxicating liquor. Senator BARKLEY. It also says "for other purposes." That includes beer.

Senator KING. Is the same tax levy imposed upon 3.2 beer as would be imposed upon 4-, 5-, or 6-percent beer?

Senator BAILEY. That is right.

Mr. HESTER. Yes.

Senator KING. A man that has strong beer, then, would pay no more than a man who had weak beer?

Mr. HESTER. That is right.

Section 3340 of the Revised Statutes is amended by section 317 to provide for the forfeiture of brewers' premises for flagrant and willful removal of taxable malt liquors for consumption or sale without payment of the tax thereon. The present law does not provide for such forfeiture, and this amendment is considered necessary in aid