SCHUMER PUSHES PLAN TO BOOST BUSINESS FOR WAYNE COUNTYS DEFISHER FARMS FARM NEEDS FEDERAL PERMIT TO OPEN NEW APPLE CIDERY NEW DEFINITION OF HARD APPLE CIDER WILL LOWER TAXES ON PRODUCT

Today at DeFisher Fruit Farm in Williamson, U.S. Senator Charles E. Schumer unveiled a twopronged plan to boost business, and particularly hard cider sales, at Wayne County's DeFisher Fruit Farm. First, Schumer will urge the Alcohol Tobacco Tax and Trade Bureau (TTB) to expeditiously approve a pending permit application to allow DeFisher to open a new apple cidery production and bottling operation, at its one year old Apple County Spirits distillery. The DeFisher family, who grow apples, pears, peaches, and cherries, opened a distillery in late 2012 to make vodka from their apples as an additional cropbased revenue source, and they need this new federal permit approved soon in order to begin a new hard apple cider production line as planned in early 2014.  

Second, Schumer pushed his legislation to allow existing hard apple cider producers to expand their business or for apple and pear growers, like the DeFishers, to add this increasingly popular craft beverage to their product line. Schumer will explain that the alcohol content of hard cider fluctuates greatly due to sugar content, and current law often forces it to be taxed at a higher rate, preventing it from being labeled as hard cider. Compliance adds a significant financial burden to producers and consumers, and an unpredictable nature to the business. Schumer will therefore fight for his proposal, the CIDER Act (Cider, Investment & Development through Excise Tax Reduction Act), to reform the definition for hard apple and pear cider in the Internal Revenue Code (IRC) that would increase their allowed alcohol by volume from 7 percent to 8.5 percent, encompassing significantly more hard cider products and allowing them to be labeled and taxed like hard cider, rather than wine.

"Wayne County is the state's largest apple producing county, so there's no doubt that it should be at the core of the hard cider industry, which is rapidly growing in popularity across New York," said Schumer. "However, current federal tax rules make it extremely costly for Rochester and Finger Lakes hard cider producers to make, market and sell this product, which could prevent New York's hundreds of apple growers and hard cider producers from fully benefiting from the stable income that comes with this new product. But beyond updating the definition of hard cider in the federal tax code, Defisher Fruit Farm needs a federal permit approved quickly in order to get their apple cidery up and running, and I'm urging the TTB to complete this permit so that the DeFisher's 4 ^th generation farm can expand by early 2014."

 

Schumer toured the Apple County Spirits tasting and production facility on the DeFisher family farm, joined by owner David DeFisher, Production Assistant Luke DeFisher, Apple Country Spirits Head Distiller Collin McConville, and members of the 4 ^th generation DeFisher family farm.

To assist Apple Country Spirits in launching their new cider business, Schumer first pushed the TTB to swiftly approve DeFisher's pending permit application for a new apple cidery production and operation center.  He explained that the farm hoped to begin production in early 2014, but are facing the prospect of pushing back that date due to delays in the permitting process. Secondly, Schumer announced his proposal, the CIDER Act (Cider, Investment & Development through Excise Tax Reduction Act), to update the definition for hard apple and pear cider in the Internal Revenue Code (IRC) that would increase their allowed alcohol by volume from 7 percent to 8.5 percent, encompassing significantly more hard cider products and allowing them to be labeled and taxed like hard cider, rather than wine. Schumer's proposal would also address existing tax issues related to carbonation levels in hard cider, and would put the new definition in line with that of the European Union, so producers can better compete with European products abroad. Hard cider is a valueadded product that is sold around the same price every year; therefore hard cider gives producers a stable source of income when apple crops suffer due to weather and other unforeseen factors. New York apple producers are increasingly interested in producing smaller, artisanal batches of hard cider, but cite the cost and difficulty to comply with the IRC definition as significant impediments to expanding their businesses.

  

The farm owners, David DeFisher and his family, have grown apples, pears, peaches, cherries, and more on this farm for 4 generations.  Last year, David decided to open an onfarm distillery and tasting room to make apple vodka as a way to bring a new valueadded product to their farm so that they can have another revenue source for their crops. In recent years, thanks to the growing popularity of hard cider, many apple producers like the DeFishers have turned to producing this craft beverage as a method to keep apple orchards profitable, generate new economic development opportunities, and attract a new visitor demographic to their farms.

 

Producing hard cider offers major benefits to apple orchards, whether they choose to increase production and add additional acres of "hard cider trees," or if farmers simply use existing products to diversify their business. Most importantly, apple and other fruit growers who have suffered from frosts and bad weather in recent years, have benefited from adding hard cider into their business model, as it is not nearly as susceptible to these unpredictable occurrences. Hard cider can also be made from apples that are high quality, but that are not as aesthetically pleasing to sell on a farmer stand, and that would otherwise be sold at a loss or thrown away. In addition, hard cider is a valueadded product, and can reign in significant value for producers than simply selling the same apples.
 

Schumer highlighted that under current federal law, the outdated definition of hard apple and pear cider only allows for up to 7 percent alcohol by volume before it is taxed as wine, and only a certain level of carbonation before it is subject to the champagne tax. All of New York's cider producers are small craft cider operators, and because they rely on natural products, there is very little predictability and control over the precise alcohol content of their product. In addition, some consumers of hard apple cider expect a high level of carbonation as a substitute for beer, and current federal tax law doesn't permit the desired amount without classifying the product as champagne. In both cases, hard cider often falls into a different beverage category, which makes noncompliant ciders subject to higher alcohol excise taxes, and complicates labeling issues. This makes the product more expensive for producers and consumers alike, and can make the sale and marketing of cider significantly more difficult.

 

Schumer explained that consumers at local bars and restaurants are buying these products alongside beer, which means that virtually all ciders should be under $15/750ml bottle, and simply cannot compete when subject to higher excise taxes such as those in effect with champagne and wine. To illustrate, current law definition results in a tax of as much as $1.07 per gallon if the alcohol content is more than 7 percent and as much as $3.30 per gallon if it contains more than 39 percent carbon dioxide by volume. With the definition change, all hard cider will be taxed at the same rate of $0.23 per gallon, equivalent to the excise tax on beer. The new definition will also apply for the smallest producers to ensure they can maintain their discounted $0.17 per gallon tax on all hard cider production.  

 

Schumer's solution, the CIDER Act, would address these issues by expanding the current definition of hard cider under the IRC to bring in line with the definition of the beverage in the European Union. This would be vastly beneficial for a variety of reasons, mainly because it expands the amount and type of hard apple cider products that can still be taxed and labeled as such. First, it would increase the level of alcohol content from 7 percent to 8.5 percent, to ensure that those craft artisanal batches with higher alcohol content are still subject to the hard cider tax, rather than wine. Second, the proposal would remove carbonation limits to ensure the products aren't subject to the higher tax levels on champagne. Third, by putting New York hard cider products on a level playing field with those in the European Union, domestic products can better compete in European markets where fruitbased ciders are extremely popular.

 

A copy of Senator Schumer's letter to TTB Administrator Manfreda appears below:

 

Dear Administrator Manfreda,

 

I am writing on behalf of an expanding farmbased distiller, Celk Distilling, LLC d/b/a Apple Country Spirits, to request the Alcohol and Tobacco Tax and Trade Bureau (TTB) expeditiously complete the processing of their Basic Permit application in order to open a new apple cidery.  Without this TTB permit, Apple Country Spirits will be unable to move forward with its planned expansion to add a new apple cider production and bottling line at their 4 ^th generation DeFisher family Fruit Farms distillery. 

 

The DeFisher family, who grow apples, pears, peaches, and cherries opened an apple vodka distillery in late 2012 as an additional cropbased revenue source to support their family farm.  At the time, I intervened on their behalf with TTB when they encountered months of delays in garnering TTB approval to include the label "glutenfree" on their apple vodka bottles.  Now that they are planning to open a new apple cidery, the DeFisher's are encountering additional delays. 

 

Specifically Apple Country Spirits is awaiting TTB consideration of their Basic Permit, which was submitted to the TTB on September 24, 2013 but has been listed by TTB as "pending" since October 23, 2013 and remains classified as such. Recipt of this federal TTB permit is critical to enable Apple Country Spirits to receive its operating permit from New York State in time to begin production as planned in early 2014.  Apple County Spirits has ordered its cider production equipment and is targeting to start cider production in early 2014.

 

I appreciate your assistance and attention to this matter.

 

Sincerely,

 

Charles E. Schumer

U.S. Schumer