On December 18, 2015, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (“the PATH Act”) into law. The PATH Act contains changes to certain statutory provisions which are administered by TTB, including applicable sections of the Internal Revenue Code (“IRC”) which apply to alcohol beverages. In particular, the modifications under the PATH Act expand the definition of “hard cider” for taxation purposes. Section 335 of the PATH Act alters the definition of wine that is eligible for hard cider excise tax rates (which are lower than other wine tax classes, as per TTB’s current Tax and Fee Rates).
Currently, for taxation purposes only, “hard cider” is defined as the following:
[A] still wine derived primarily from apples or apple concentrate and water, containing no other fruit product, and containing at least one-half of 1 percent and less than 7 percent alcohol by volume, 22.6 cents per wine gallon.
26 U.S.C. 5041(b)(6). Still wines are further classified as “wines containing not more than 0.392 gram of carbon dioxide per hundred milliliters of wine . . . .” 26 U.S.C. 5041(a). This means, to meet the current “hard cider” definition for taxation purposes, a product must be a still wine (i.e., not more than 0.392 gram of carbon dioxide per hundred milliliters of wine), derived primarily from apples or apple concentrate and water (containing no other fruit product as the cider base), and have an alcohol by volume of at least 0.5% alcohol by volume and less than 7.0% alcohol by volume.
The PATH Act revises the definition of “hard cider” for taxation purposes to extend the carbonation level from 0.392 gram of carbon dioxide per hundred milliliters of wine to be 0.64 gram; increases the allowable alcohol by volume content from less than 7% alcohol by volume to less than 8.5% alcohol by volume; and authorizes the use of pear, pear juice, and pear products and flavoring in the definition of “hard cider” (again, all for taxation purposes). Such changes apply to hard cider removed from bond after December 31, 2016, and the above mentioned changes will go into effect in 2017. See IRC Amendments Affecting Excise Tax Due Dates and Bond Requirements for Eligible Taxpayers and Revision of Hard Cider Definition.
Keep in mind that the above changes do not modify the federal definition of “hard cider” with respect to TTB labeling, permits, or advertising (which apply to ciders at or above 7% alcohol by volume). Note that ciders under 7% alcohol by volume fall within the labeling jurisdiction of the FDA and are (generally speaking) subject to different requirements.
For more information on wine or alcohol law, excise taxes, hard cider, or TTB matters, please contact Lindsey Zahn.
DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.