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Schumer pushes plan to support capital region apple, cider producers

DBR Staff Writer Published 04 November 2013

Today, at the Golden Harvest Farms in Valatie, U.S. Senator Charles E. Schumer toured the farm's distillery and unveiled a new plan to boost the sales for New York’s over 20 existing hard apple cider producers and allow the over 650 apple growers to expand their business and add this increasingly popular craft beverage to their product line.

Currently, Harvest Spirits Farm Distillery, adjacent to the farm, produces six types of spirits and is very interested in adding cider to their product line. Schumer explained that the alcohol content of New York's 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, which makes it more expensive for existing producers and less attractive for potential new cider producers like Golden Harvest Farms. Schumer therefore vowed to 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.

"New York is the second largest apple producer in the country, and there's no doubt it should be at the core of the hard cider industry, which is rapidly growing in popularity," said Schumer. "However, current federal tax rules make it extremely costly for Capital Region producers and consumers alike to produce, 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. That is why I'm pushing a plan that will update the definition of hard cider in the federal tax code, to ensure that all products can be labeled and taxed for what they actually are, all while increasing New York cider producers' ability to compete overseas.

Schumer was joined by Golden Harvest Farms owners Alan and Derek Grout as he launched 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 value-added 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.

New York is the second largest apple producer nationwide, harvesting a total of 29.5 million bushels annually from over 650 farms and 41,000 acres across the state. In recent years, thanks to the growing popularity of hard cider, many apple producers 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. There have been an increasing number of hard cider producers as a result, starting with a few producers a few years ago to over 20 today. And Schumer highlighted that number should only continue to grow, as a significant number of apple farmers are interested in adding this popular product, and have sought out advice and expertise from the Cornell Cooperative to do so.

Currently, Harvest Spirits Farm Distillery, adjacent to the farm, produces six types of spirits and is very interested in adding cider to their product line. In 2008, Alan Grout's son Derek started Harvest Spirits Farm Distillery with the first NYS class D Farm Distillery License. They use NYS grown grains and apples to distill six kinds of spirits: core vodka, Cornelius Apple Jack and Pear Brandy are the main lines, with some flavored variations as well. The distillery has experienced double-digit growth each year and is up 20% over last year. They currently press about 60,000 gallons of hard cider each year, but as an ingredient for the spirit distilling.

Schumer, however, pointed to their sale of Slyboro House hard cider from Slyboro House in Washington County, which Schumer visited in April 2013. Schumer explained that Golden Harvest Farms has sold Slyboro House cider so well that they are interested in expanding their production to include hard cider - a move that would be incentivized by passage of the CIDER Act.

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. Some producers grow specific varieties of apples to produce hard cider, while other producers can use apples from their crops that have been damaged by storms. 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 value-added product, and can reign in significant value for producers than simply selling the same apples. However, the federal definition of hard cider under the Internal Revenue Code is restrictive to both current producers as well as those hundreds of growers that would like to enter production of this craft beverage.

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 non-compliant 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.