27 C.F.R. § 17.135 – Use of specially denatured alcohol (S.D.A.).

(a) Use of S.D.A. in nonbeverage or intermediate products—(1) General. Except as provided in paragraph (b) of this section, the use of specially denatured alcohol (S.D.A.) and taxpaid spirits in the same product by a nonbeverage manufacturer is prohibited where drawback of tax is claimed.
(2) Alternative formulations. No formula for a product on TTB Form 5154.1 shall be approved for drawback under this subpart if the manufacturer also has on file an approved TTB Form 1479-A or Form 5150.19, Formula for Article Made With Specially Denatured Alcohol or Rum, pertaining to the same product.
(b) Use of S.D.A. in ingredients—(1) Purchased ingredients. Generally, purchased ingredients containing S.D.A. may be used in nonbeverage or intermediate products. However, such ingredients shall not be used in medicinal preparations or flavoring extracts intended for internal human use, where any of the S.D.A. remains in the finished product.
(2) Self-manufactured ingredients. Self-manufactured ingredients may be made with S.D.A. and used in nonbeverage or intermediate products, provided—
1. (i) No taxpaid spirits are used in manufacturing such ingredients; and
2. (ii) All S.D.A. is recovered or dissipated from such ingredients prior to their use in nonbeverage or intermediate products. (Recovery of S.D.A. shall be in accordance with subpart K of part 20 of this chapter; recovered S.D.A., with or without its original denaturants, shall not be reused in nonbeverage or intermediate products.)
  (Sec. 201, Pub. L. 85-859, 72 Stat. 1372, as amended (26 U.S.C. 5273))