`SEC. 5011. ELECTION TO BE TREATED AS BONDED DEALER.

`(a) ELECTION- Any wholesale dealer, or any control State entity, may elect, at such time and in such manner as the Secretary shall prescribe, to be treated as a bonded dealer if such wholesale dealer or entity sells bottled distilled spirits exclusively to a wholesale dealer in liquor, to an independent retail dealer subject to the limitation set forth in subsection (b), or to another bonded dealer. Except in the case of a control State entity, this election is not available to a retail dealer in liquor. This election is not available to any person with gross receipts from

the sale of distilled spirits, in the 12-month period prior to making such election, of less than $5,000,000 (applying the rules of section 5061(e)(3)).

`(b) SPECIAL RULES- (1) Any person, other than a control State entity, who is a bonded dealer shall not be considered as selling to an independent retail dealer if the bonded dealer has a greater than 10 percent ownership interest in, or control of the retail dealer; the retail dealer has a greater than 10 percent ownership interest in, or control of the bonded dealer; or where any person has a greater than 10 percent ownership interest in, or control of both the bonded and retail dealer. For purposes of this subparagraph, ownership interest, not limited to stock ownership, shall be attributed to other persons in the manner prescribed by section 318.

`(2) In the case of any control State entity, subsection (a) shall be applied without regard to the word `independent'.

`(c) INVENTORY OWNED AT TIME OF ELECTION- Any bottled distilled spirits in the inventory of any person electing under section 5011 to be treated as a bonded dealer shall, to the extent that the Federal excise tax previously has been determined and paid at the time the election becomes effective, not be subject to additional Federal excise tax on such spirits as a result of the election being in effect.

`(d) REVOCATION OF ELECTION- The election made under this section may be revoked by the bonded dealer at any time, but once revoked shall not be made again without the consent of the Secretary. When the election is revoked, the bonded dealer shall immediately withdraw the distilled spirits on determination of tax in accordance with a tax payment procedure established by the Secretary.

`(e) EQUITABLE TREATMENT OF BONDED DEALERS USING LIFO INVENTORY- The Secretary shall provide such rules as may be necessary to assure that taxpayers using the last-in first-out method of inventory valuation do not suffer a recapture of their LIFO reserve by reason of making the election under section 5011 or by reason of operating a bonded wine cellar as permitted by section 5351.

`(f) APPROVAL OF APPLICATION- Any person submitting an application under section 5171(c) and electing under this section to be treated as a bonded dealer shall be entitled to approval of such application to the same extent they would be entitled to approval of an application for a basic permit under section 204(a)(2) of title 27 of the United States Code (the Federal Alcohol Administration Act) and shall be accorded notice and hearing as described in section 204(b) of such title 27.'

(c) CONFORMING AMENDMENT- The table of sections of subpart A of part I of subchapter A of chapter 51 and the table of contents of subtitle E are amended by adding at the appropriate places:

`Sec. 5011. Election to be treated as bonded dealer.'

SEC. 6. DETERMINATION OF TAX.

The first sentence of section 5006(a)(1) is amended to read as follows: `Except as otherwise provided in this section, the tax on distilled spirits shall be determined when the spirits are transferred from a distilled spirits plant to a bonded dealer or are withdrawn from bond.'

SEC. 7. LOSS OR DESTRUCTION OF DISTILLED SPIRITS.

(a) Subsections (a)(1)(A) and (a)(2) of section 5008 are amended by inserting `bonded dealer,' after `distilled spirits plant,'.