AP Business Writer
BELTSVILLE, Md. (AP) - Deep in a secure laboratory just outside Washington sits the federal government's heaviest smoker.
It is a half-ton hulk of a machine, all brushed aluminum and gasping smoke holes, like a retrofit of equipment used on an Industrial Revolution production line. It can smoke 20 cigarettes at once and conclude which are unsafe because they are counterfeit and which are unsafe merely because they are cigarettes.
Down the hall, a chemist tests shiny flecks from a bottle of Goldschlager, the spicy cinnamon schnapps, to make sure they're real gold. A government agent was sent out to stores to buy it and hundreds of other alcoholic drinks randomly chosen for analysis.
Back at headquarters in downtown Washington, a staffer prepares for a meeting of the Tequila Working Group -- a committee created to mollify Mexico and keep bulk tequila flowing north across the border.
These are the proud scientists, rule-makers and trade ambassadors of the Alcohol and Tobacco Tax and Trade Bureau, one of the federal government's least-known and most peculiar corners.
The bureau, known as TTB, collects taxes on booze and smokes and tells the companies that produce them how to do business -- from approving beer can labels to deciding how much air a gin bottle can contain between lid and liquor.
It decides which valleys in Oregon and California can slap their names on wine labels, what grapes can go into wine and which new alcoholic drinks are safe to import.
The bureau is one example of the specialized government offices threatened by Washington's current zeal for cost-cutting. Obama administration officials weighed eliminating it during the fiscal stalemate of 2011, according to news reports at the time. Its officials were called to the White House budget office to justify their existence -- or risk having their duties split between the Internal Revenue Service and the Food and Drug Administration.
The White House ultimately left the bureau's $100 million budget in place for this year -- perhaps because it spends far less money to collect each tax dollar than its counterpart, the IRS. But officials there remain hyper-aware of their vulnerability as Republicans and Democrats look to squeeze savings from unlikely places.
If they look closely, the belt-tighteners will discover an agency whose responsibilities often appear to conflict -- a regulator that protects its industry from rules it deems unfair, a tax collector that sometimes cuts its companies a break.
Some of its decisions are open to negotiation. A tequila-like liquor with a scorpion floating in it made scientists balk until the producer convinced them that the scorpions are farm-raised and non- toxic.
In other words, this may be the only federal agency that responds favorably to receiving scorpion candy in the mail -- an edible tool for persuading scientists that the arthropods were fit for human consumption.
If labs, rules and taxes weren't enough for the bureau's 500-odd employees, they also have law enforcement authority. TTB investigators can send people to jail for things like removing alcohol from the production line and reselling it before it has been taxed by authorities.
With all these responsibilities, it's no surprise the agency's priorities sometimes clash. The bureau gives companies a wide berth on some rules and taxes, officials and experts say, mainly because of its small size and history of collaborating with business. It has granted millions in tax givebacks because of concerns that companies will sue and tie up government resources.
"Because we're regulated by such a friendly agency, and because enforcement isn't huge, there's a level of non-compliance that's sort of acceptable," says Rachel Dumas Rey, president of Compli, a California company that helps wineries comply with Treasury policy.
Agency officials say they use scant resources where they can make the most difference, generally on the biggest producers or companies where there is an indication of wrongdoing.
Yet last July, the bureau slashed a tax bill for the multinational agribusiness conglomerate Cargill from $839,370 to $63,000. Cargill failed to report or pay taxes on about 23,000 gallons of nearly pure industrial alcohol that leaked from a rail car, violating several U.S. laws, according to documents on the bureau's website.
Since 2010, under similar deals with alcohol and tobacco companies, the agency has forgiven more than $25.4 million; the total amount is unclear because some public documents do not list the size of the tax bill or penalty that is being reduced. Nine companies persuaded the agency to slash their bills by more than 95 percent, including Procter & Gamble's Olay subsidiary, which uses alcohol in its skin care products.
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