[Senate Report 114-17]
[From the U.S. Government Publishing Office]


                                                        Calendar No. 40
114th Congress    }                                      {       Report
                                 SENATE
 1st Session      }                                      {       114-17

======================================================================



 
 CIDER INVESTMENT AND DEVELOPMENT THROUGH EXCISE TAX REDUCTION (CIDER) 
                                  ACT

                                _______
                                

                 April 14, 2015.--Ordered to be printed

                                _______
                                

               Mr. Hatch, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 906]

    The Committee on Finance, having considered an original 
bill, S. 906, to amend the Internal Revenue Code of 1986 to 
modify the types of wines taxed as hard cider, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
 I. LEGISLATIVE BACKGROUND............................................1
II. EXPLANATION OF THE BILL...........................................2
        A. Modification of Definition of Hard Cider (sec. 2 of 
            the bill and sec. 5041 of the Code)..................     2
        B. Increase Continuous Levy Authority on Payments to 
            Medicare Providers and Suppliers.....................     4
III.BUDGET EFFECTS OF THE BILL........................................6

IV. VOTES OF THE COMMITTEE............................................8
 V. REGULATORY IMPACT AND OTHER MATTERS...............................8
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED.............9

                       I. LEGISLATIVE BACKGROUND

    The Committee on Finance, having considered S. 906, the 
``Cider Investment and Development through Excise Tax Reduction 
(CIDER) Act,'' to amend the Internal Revenue Code of 1986 to 
modify the types of wines taxed as hard cider, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

Background and need for legislative action

    Background.--Based on a proposal recommended by Senator 
Schumer, and on S. 1531 (113th Congress) cosponsored by 
Senators Schumer, Leahy, Casey, Collins, Manchin, Merkley and 
Shaheen, the Committee on Finance marked up original 
legislation (a bill to amend the Internal Revenue Code of 1986 
to modify the types of wines taxed as hard cider) on February 
11, 2015, and, with a majority present, ordered the bill 
favorably reported.
    Need for legislative action.--Still wine derived primarily 
from apples or pears, or from apple juice or pear juice 
concentrate and water with alcohol by volume of seven percent 
or more, and wine derived primarily from apples or pears, or 
from apple juice or pear juice concentrate and water containing 
more than 3.92 grams of carbon dioxide per liter or more are 
taxed at $1.07 to $3.15 and $3.30 to $3.40 per wine gallon 
respectively. An expanded definition of hard cider that would 
allow a higher carbonation level and a higher level of alcohol 
by volume and would include pear juice or pear juice 
concentrate and water in addition to apples and apple juice 
concentrate would encourage investment and development in the 
apple and pear hard cider markets.
    In addition, it has been reported that many thousands of 
Medicare providers and suppliers have outstanding Federal 
employment and income tax liability, which contribute to the 
tax gap. The permissible percentage of payments to a Medicare 
provider subject to levy should be increased.

                      II. EXPLANATION OF THE BILL


  A. Modification of Definition of Hard Cider (sec. 2 of the bill and 
                         sec. 5041 of the Code)


                              PRESENT LAW

    An excise tax is imposed on all distilled spirits, wine, 
and beer produced in, or imported into, the United States.\1\ 
The tax liability legally comes into existence the moment the 
alcohol is produced or imported but payment of the tax is not 
required until a subsequent withdrawal or removal from the 
distillery, winery, brewery, or, in the case of an imported 
product, from customs custody or bond.\2\
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    \1\Secs. 5001 (distilled spirits), 5041 (wines), and 5051 (beer). 
Unless otherwise stated, all section references are to the Internal 
Revenue Code of 1986, as amended (the ``Code'').
    \2\Secs. 5006, 5043, and 5054. In general, proprietors of distilled 
spirit plants, proprietors of bonded wine cellars, brewers, and 
importers are liable for the tax.
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    Distilled spirits, wine, and beer produced or imported into 
the United States are taxed at the following rates per 
specified volumetric measure:
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    \3\A ``proof gallon'' is a U.S. liquid gallon of proof spirits, or 
the alcoholic equivalent thereof. Generally a proof gallon is a U.S. 
liquid gallon consisting of 50 percent alcohol. On lesser quantities, 
the tax is paid proportionately. Credits are allowed for wine content 
and flavors content of distilled spirits. Sec. 5010.
    \4\Small domestic wine producers (i.e., those producing not more 
than 250,000 wine gallons in a calendar year) are allowed a credit of 
$0.90 per wine gallon ($0.056 per wine gallon in the case of hard 
cider) on the first 100,000 wine gallons (other than champagne and 
other sparkling wines) removed. The credit is reduced by one percent 
for each 1,000 wine gallons produced in excess of 150,000 wine gallons 
per calendar year.
    \5\A ``wine gallon'' is a U.S. gallon of liquid measure equivalent 
to the volume of 231 cubic inches. On lesser quantities, the tax is 
paid proportionately.
    \6\Sec. 5001(a)(4).
    \7\A small domestic brewer (one who produces not more than 2 
million barrels in a calendar year) is subject to a per barrel rate of 
$7.00 on the first 60,000 barrels produced in that year.
    \8\A ``barrel'' contains not more than 31 gallons, each gallon 
equivalent to the volume of 231 cubic inches. On lesser quantities, the 
tax is paid proportionately.

------------------------------------------------------------------------
                   Item                           Current tax rate
------------------------------------------------------------------------
Distilled Spirits.........................  $13.50 per proof gallon\3\
Wine:\4\
    Still Wines:
        Not more than 14 percent alcohol..  $1.07 per wine gallon\5\
        More than 14 percent but not more   $1.57 per wine gallon
         than 21 percent alcohol.
        More than 21 percent but not more   $3.15 per wine gallon
         than 24 percent alcohol.
        More than 24 percent alcohol......  Taxed as distilled
                                             spirits\6\ ($13.50 per
                                             proof gallon)
    Hard cider............................  $0.226 per wine gallon
    Sparkling Wines:
        Champagne and other naturally       $3.40 per wine gallon
         sparkling wines.
        Artificially carbonated wines.....  $3.30 per wine gallon
Beer\7\...................................  $18.00 per barrel\8\
------------------------------------------------------------------------

    Hard cider is a still wine derived primarily from apples or 
apple concentrate and water, containing no other fruit product, 
and containing at least one-half of one percent and less than 
seven percent alcohol by volume.\9\ Still wines are wines 
containing not more than 0.392 grams of carbon dioxide per 
hundred milliliters of wine.
---------------------------------------------------------------------------
    \9\Sec. 5041(b)(6).
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    Other wines made from apples, apple concentrate or other 
fruit products are taxed at the rates applicable in accordance 
with the alcohol and carbon dioxide content of the wine.

                           REASONS FOR CHANGE

    Still wine derived primarily from apples or pears, or from 
apple juice or pear juice concentrate and water with alcohol by 
volume of seven percent or more, and wine derived primarily 
from apples or pears, or from apple juice or pear juice 
concentrate and water containing more than 3.92 grams of carbon 
dioxide per liter or more are taxed at $1.07 to $3.15 and $3.30 
to $3.40 per wine gallon respectively.
    The Committee believes that in order to encourage 
investment and development in the apple and pear hard cider 
markets, it is appropriate to expand the definition of hard 
cider to allow a higher carbonation level and a higher level of 
alcohol by volume and to include pear juice or pear juice 
concentrate and water in addition to apples and apple juice 
concentrate and water.

                        EXPLANATION OF PROVISION

    The provision would amend the definition of hard cider to 
mean a wine with a carbonation level that does not exceed 0.64 
grams of carbon dioxide per hundred milliliters of wine. 
Additionally, the provision would expand the hard cider 
definition to include pears, or pear juice concentrate in 
addition to apples and apple juice concentrate and water. Under 
the provision, the Secretary may, by regulation, prescribe 
tolerance to the limitation as may be reasonably necessary in 
good commercial practice. The provision would change the 
allowable alcohol content of cider to at least one-half of one 
percent and less than 8.5 percent alcohol by volume.

                             EFFECTIVE DATE

    The provision applies to articles removed after December 
31, 2015.

B. Increase Continuous Levy Authority on Payments to Medicare Providers 
                             and Suppliers


                              PRESENT LAW

In general

    Levy is the administrative authority of the IRS to seize a 
taxpayer's property, or rights to property, to pay the 
taxpayer's tax liability.\10\ Generally, the IRS is entitled to 
seize a taxpayer's property by levy if a Federal tax lien has 
attached to such property,\11\ the property is not exempt from 
levy,\12\ and the IRS has provided both notice of intention to 
levy\13\ and notice of the right to an administrative hearing 
(the notice is referred to as a ``collections due process 
notice'' or ``CDP notice'' and the hearing is referred to as 
the ``CDP hearing'')\14\ at least 30 days before the levy is 
made. A levy on salary or wages generally is continuously in 
effect until released.\15\ A Federal tax lien arises 
automatically when: (1) a tax assessment has been made; (2) the 
taxpayer has been given notice of the assessment stating the 
amount and demanding payment; and (3) the taxpayer has failed 
to pay the amount assessed within 10 days after the notice and 
demand.\16\
---------------------------------------------------------------------------
    \10\Sec. 6331(a). Levy specifically refers to the legal process by 
which the IRS orders a third party to turn over property in its 
possession that belongs to the delinquent taxpayer named in a notice of 
levy.
    \11\Ibid.
    \12\Sec. 6334.
    \13\Sec. 6331(d).
    \14\Sec. 6330. The notice and the hearing are referred to 
collectively as the CDP requirements.
    \15\Secs. 6331(e) and 6343.
    \16\Sec. 6321.
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    The notice of intent to levy is not required if the 
Secretary finds that collection would be jeopardized by delay. 
The standard for determining whether jeopardy exists is similar 
to the standard applicable when determining whether assessment 
of tax without following the normal deficiency procedures is 
permitted.\17\
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    \17\Secs. 6331(d)(3) and 6861.
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    The CDP notice (and pre-levy CDP hearing) is not required 
if: (1) the Secretary finds that collection would be 
jeopardized by delay; (2) the Secretary has served a levy on a 
State to collect a Federal tax liability from a State tax 
refund; (3) the taxpayer subject to the levy requested a CDP 
hearing with respect to unpaid employment taxes arising in the 
two-year period before the beginning of the taxable period with 
respect to which the employment tax levy is served; or (4) the 
Secretary has served a Federal contractor levy. In each of 
these four cases, however, the taxpayer is provided an 
opportunity for a hearing within a reasonable period of time 
after the levy.\18\
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    \18\Sec. 6330(f).
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Federal payment levy program

    To help the IRS collect taxes more effectively, the 
Taxpayer Relief Act of 1997\19\ authorized the establishment of 
the Federal Payment Levy Program (``FPLP''), which allows the 
IRS to continuously levy up to 15 percent of certain 
``specified payments'' by the Federal government if the payees 
are delinquent on their tax obligations. With respect to 
payments to vendors of goods, services, or property sold or 
leased to the Federal government, the continuous levy may be up 
to 100 percent of each payment.\20\ For payments to Medicare 
providers and suppliers, the levy is up to 15 percent for 
payments made within 180 days after December 19, 2014. For 
payments made after that date, the levy is up to 30 
percent.\21\
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    \19\Pub. L. No. 105-34.
    \20\Sec. 6331(h)(3).
    \21\Pub. L. No. 113-295, Division B.
---------------------------------------------------------------------------
    Under FPLP, the IRS matches its accounts receivable records 
with Federal payment records maintained by Treasury's Bureau of 
Fiscal Service (``BFS''), such as certain Social Security 
benefit and Federal wage records. When these records match, the 
delinquent taxpayer is provided both the notice of intention to 
levy and the CDP notice. If the taxpayer does not respond after 
30 days, the IRS can instruct BFS to levy the taxpayer's 
Federal payments. Subsequent payments are continuously levied 
until such time that the tax debt is paid or the IRS releases 
the levy.

                           REASONS FOR CHANGE

    It has been reported that many thousands of Medicare 
providers and suppliers have outstanding Federal employment and 
income tax liability, which contribute to the tax gap. 
Consequently, the Committee believes that it is appropriate to 
increase the permissible percentage of payments to a Medicare 
provider subject to levy.

                        EXPLANATION OF PROVISION

    The provision provides that the present limitation of 30 
percent of certain specified payments be increased by an amount 
sufficient to offset the estimated revenue loss of the 
provision described in Part A, above.

                             EFFECTIVE DATE

    The provision is effective for payments made after 180 days 
after the date of enactment.

                    III. BUDGET EFFECTS OF THE BILL


                         A. Committee Estimates

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate, the following statement is made 
concerning the estimated budget effects of the revenue 
provision of the ``Cider Investment and Development through 
Excise Tax Reduction (CIDER) Act'' as reported.
    The provision is estimated to have the following effect on 
Federal fiscal year budget receipts for the period 2015-2025.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                B. Budget Authority and Tax Expenditures


Budget authority

    In compliance with section 308(a)(1) of the Congressional 
Budget and Impoundment Control Act of 1974 (``Budget 
Act''),\22\ the Committee states that no provisions of the bill 
as reported involve new or increased budget authority.
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    \22\Pub. L. No. 93-344.
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Tax expenditures

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that the provisions of the bill have a 
negligible effect on tax expenditures (see revenue table in 
part A., above).

            C. Consultation With Congressional Budget Office

    In accordance with section 403 of the Budget Act, the 
Committee advises that the Congressional Budget Office has not 
submitted a statement on the bill. The letter from the 
Congressional Budget Office will be provided separately.

                       IV. VOTES OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that, with a 
majority present, the ``Cider Investment and Development 
through Excise Tax Reduction (CIDER) Act,'' was ordered 
favorably reported by voice vote on February 11, 2015.

                 V. REGULATORY IMPACT AND OTHER MATTERS


                          A. Regulatory Impact

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill.

Impact on individuals and businesses, personal privacy and paperwork

    The bill modifies the types of wines taxed as hard cider. 
It also increases the IRS's continuous levy authority on 
payments to Medicare providers and suppliers. The provisions of 
the bill are not expected to impose additional administrative 
requirements or regulatory burdens on individuals or 
businesses.
    The provisions of the bill do not impact personal privacy.

                     B. Unfunded Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the tax provisions of the 
reported bill do not contain Federal private sector mandates or 
Federal intergovernmental mandates on State, local, or tribal 
governments within the meaning of Public Law 104-4, the 
Unfunded Mandates Reform Act of 1995.

                       C. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. The staff of the Joint Committee on Taxation has 
determined that there are no provisions that are of widespread 
applicability to individuals or small businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In the opinion of the Committee, it is necessary in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate (relating to the showing of changes in existing 
law made by the bill as reported by the Committee).

                                  [all]