Pennsylvania Congressman Supports CIDER Act
August 31, 2015 
Congressman Costello talks to Steve Frecon, co-owner of Frecon Farms, about the CIDER Act during a recent visit. (Photo credit Pennsylvania Apple Marketing Program)
Freshman Congressman Ryan Costello (PA-06) spent a recent afternoon at Frecon Farms in Boyertown, PA, to tout the CIDER Act, bipartisan legislation that was reintroduced in the 114th Congress to loosen regulations and lessen the tax burden on selling hard cider. The visit occurred during the Congressional August District Work Period, an opportunity for members of Congress to spend entire days visiting with their constituents and local communities.
Costello joined brothers Steve and Hank Frecon, co-owners of Frecon Farms, on a tour of the Douglass Township orchard and neighboring Colebrookdale Township cidery. Over the past several years, the hard cider industry has experienced a boom, leading orchards, like Frecon, to expand their business to include a cidery. In fact, according to market-research from Nielsen, cider sales were up 79% in 2014 and 24 new brands launched hard ciders. Costello is working to make sure federal tax laws do not unfairly squeeze hard cider operations.
“Visits such as this one are an essential aspect of gaining additional knowledge on a subject in order to be a more effective legislator,” said Costello, a cosponsor of the CIDER Act. The CIDER Act is a commonsense effort to make it easier and more affordable for PA-06 orchards, such as Frecon Farms, to produce hard cider.”
The CIDER Act will amend the section of the tax code that defines wine and related beverages to support the growing craft and entrepreneurial cider makers, and alter IRS rules to reflect variations in craft ciders across the country. During the fermentation process, a variety of factors can lead to small changes in the composition of a cider’s alcohol content and carbonation. Because of hard cider’s narrow definition in the tax code, these small variations can lead to that batch of cider being assessed at a tax rate up to 15 times higher than what the statute intended.
Under the current federal law, cider with more than 7% alcohol by volume (ABV) is considered wine and are taxed at nearly double the rate of cider. Cider with high levels of carbonation are subject to an even greater tax increase because it is considered champagne. The more sugar present in the apples, the higher the ABV. If enacted, the CIDER Act would increase the ABV from 7% to 8.5%, nearly double the allowed carbonation rate, and expand the definition of hard cider to not just include apples, but pears as well.
“The current tax code is antiquated and must be updated to reduce regulations and ensure local entrepreneurs are not burdened by red tape and bureaucratic rules,” said Costello. “This small tweak in the law would be a welcomed change for the industry and cider lovers everywhere. I want to encourage local producers to continue finding new ways to get their products from the fields and orchards into our grocery bags.”
Steve Frecon expressed concerns with the rapidly increasing state and federal regulations that pose challenges to selling their family’s product. He said the CIDER Act is a commonsense solution to tax alcoholic beverages at a consistent rate.
“Under the current laws that regulate the production and distribution of hard cider, apple growers and hard cider manufactures like Frecon Farms are restricted in their ability to widely distribute a quality hard cider. The best ciders must be self-distributed by the producer which limits availability to the consumer. A legislative change that increases the ABV and carbonation limits of hard cider will allow apple growers and hard cider producers to grow true cider apples that will result in the creation and wide distribution of premier ciders,” Frecon said.
Julie Bancroft, executive director of the Pennsylvania Apple Marketing Program, explained why the legislation Costello supports is important.
“Legislative changes for hard cider at the federal and state level are critical for this rapidly growing beverage segment,” Bancroft said. “Removing some of the barriers for craft production and distribution has the potential to create new markets for both apple growers and cider producers. It will also give Pennsylvania growers a new outlet for processing varieties that may be waning in popularity in traditional processing markets.”
The CIDER Act was rolled into H.R. 2903: the Craft Beverage Modernization and Tax Reform Act, which would modernize the tax code and streamline regulations for producers of craft beverages, cider, wine, and distilled spirits. Costello, also a cosponsor of H.R. 2903, remains hopeful that this legislation would see a House vote this year. In addition to support from Frecon Farms, the CIDER Act is backed by the Pennsylvania Apple Marketing Program.
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