[Congressional Record Volume 143, Number 36 (Wednesday, March 19, 1997)]
[Senate]
[Pages S2561-S2562]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS (for himself, Mr. Leahy, Mr. D'Amato, and Mr. 
        Moynihan):
  S. 475. A bill to amend the Internal Revenue Code of 1986 to clarify 
the excise tax treatment of draft cider; to the Committee on Finance.


             TAX TREATMENT OF HARD APPLE CIDER LEGISLATION

 Mr. JEFFORDS. Mr. President, I am introducing tax legislation 
designed to increase opportunities for the apple industry in the United 
States. I am pleased that Senators Leahy, D'Amato, and Moynihan are 
joining me as original cosponsors of the bill.
  Our bill clarifies the excise tax treatment of fermented apple cider. 
Current Federal tax law unfairly taxes fermented apple cider at a much 
higher rate than beer despite the two beverages similar alcohol levels. 
Currently, fermented apple cider, commonly known as draft cider, is 
subject to a tax of $1.07 per wine gallon, despite its alcohol level. 
This bill lowers the excise tax on draft cider containing not more than 
7 percent alcohol to equal the beer tax rate of 22.6 cents per gallon.
  I believe this small tax change would allow draft cider producers to 
compete more fairly in the market with comparable beverages. As draft 
cider becomes more competitive the market will likely grow. This will 
greatly benefit the apple growers throughout this Nation, by expanding 
the use and need for their product.
  The production of draft hard cider comes from apples that are culls, 
processing apples or apples that are not usable in the fresh market. 
The conversion of culled apples into high value processed products such 
as draft cider is important to growers as well as to processors.
  Cider and other apple byproducts are important to Vermont's economy, 
providing a market for otherwise unmarketable fruit. Of Vermont's 
average annual crop of 1.1 million bushels, approximately 20 percent, 
or 220,000 bushels, are graded out as culls, or processing apples. 
Apple production has a long history in Vermont, and is an integral part 
of agriculture in our State as it is in many States.
  Many States have recognized the potential benefits to their apple 
farmers by lowering the tax on draft cider to equal the beer tax rate. 
State Departments of Agriculture, farm bureaus, and representatives 
from the apple industry across this Nation have voiced their support 
for lowering the cider tax rate.
  This bill that I introduce today is similar to legislation that I 
introduced along with my friend from Vermont, Senator Leahy, and my 
colleagues from New York in the last Congress. The same bill was 
successful in the Senate last Congress as part of the Small Business 
Job Protection Act of 1996, H.R. 3448. Unfortunately, the language was 
not included in the conference report of H.R. 3448.
  Mr. President, it is my hope that this legislation will again pass in 
the Senate and be signed by the President. I ask my colleagues to 
support this legislation.
 Mr. LEAHY. Mr. President, I am pleased to join my friend from 
Vermont, Senator Jeffords, in introducing tax legislation designed to 
stimulate the apple industry in the United States. I am pleased that 
Senators D'Amato and Moynihan are joining me as original cosponsors of 
the bill.
  Our bill revises the Federal excise tax on fermented apple cider, 
more commonly known as draft cider, to beer tax rates. As one of the 
senior members of the Senate Agriculture Committee, I believe this 
small tax change will be of great benefit to cider makers and apple 
growers across the country.
  Draft cider is one of the oldest categories of alcoholic beverages in 
North America. Back in colonial times, nearly every innkeeper served 
draft cider to

[[Page S2562]]

his or her patrons during the long winter. In fact, through the 19th 
Century, beer and draft cider sold equally in the United States.
  Recently, draft cider has made a comeback in the United States and 
around the world. Our tax law, however, unfairly taxes draft cider at a 
much higher rate than beer despite the two beverages sharing the same 
alcohol level and consumer market. This tax treatment, I believe, 
creates an artificial barrier to the growth of draft cider. Our 
legislation will correct this inequity.
  Present law taxes fermented cider, regardless of its alcohol level, 
as a wine at a rate of $1.07 per gallon. Our bill would clarify that 
draft cider containing not more than 7 percent alcohol and marketed in 
various size containers would be taxed at the beer rate of 22.6 cents 
per gallon. I believe this tax change would allow draft cider producers 
to compete fairly with comparable beverage makers. As draft cider grows 
in popularity, apple growers around the nation should prosper because 
draft cider is made from culled apples, the least marketable apples.
  The growth of draft cider should convert these least marketable 
apples, which account for about 20 percent of the entire U.S. apple 
production, into a high value product, helping our struggling apple 
growers. Indeed, I have received letters from officials at state 
agriculture departments from across the nation--Arizona, Connecticut, 
Georgia, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, 
Vermont and Virginia--supporting the taxing of draft cider at the beer 
rate because this change would allow apple farmers in their States to 
reap the benefits of an expanded culled apple market.
  I have also heard from the Northeast McIntosh Apple Growers 
Association, the New York Apple Association, the New England Apple 
Council and many apple farmers, processors and cider producers that 
support revising the excise tax on draft cider.
  This bill is identical to legislation I introduced with Senators 
Jeffords, D'Amato and Moynihan in the last Congress. That bill passed 
the Senate as part of the Small Business Job Protection Act of 1996, H. 
R. 3448, but was not included in the conference report on H.R. 3448. I 
am hopeful that with the leadership of Senators Jeffords, D'Amato and 
Moynihan, we can enact into law this small tax change that will have a 
large positive impact on the Nation's apple industry.
  I urge my colleagues to support this legislation.
                                 ______