It is legal to manufacture grain alcohol (like ethanol) to be used as fuel. The process is basically the same as making shine. The big difference is the amount of sugar present in the original source material (like corn, sugar beets, etc) and whether you have to add it or not.
I do not know if a permit is required, but I do know for a fact that it can be done legally because my son and his ag class made several batches of it on campus in their bio-fuels class a few years back. He was on the FFA bio-fuels resource team his junior year and they made multiple batches using a variety of ingredients. Heck, his ag teacher even printed off copies of the recipe and procedure for cooking it and said it was drinkable alcohol. He brought some home and I ran it in my lawn mower mixed 50/50 with gas.
He had his picture took with the Governor of GA and the governor was holding a Mason jar of the stuff.