On January 23, 2017 the Alcohol & Tobacco Tax & Trade Bureau (TTB) published a Temporary Rule and a Notice of Proposed Rulemaking (NPRM) related to the new definition of hard cider. Congressional action required a new definition when Congress amended the Internal Revenue Code in December 2015 by enacting the Protecting Americans from Tax Hikes (PATH) Act. The Temporary Rule lays out TTB’s current thinking on regulations to implement the revised definition, while the NPRM requests comments on the regulations spelled out in the Temporary Rule.
We view the following provisions as most significant:
1. Requiring a new mandatory tax classification statement on all products eligible for the hard cider tax rate, effective January 1, 2018.
2. Requiring the words “sparking” or “carbonated” on all hard cider with carbonation in excess of 0.392 grams per 100 ml.
3. Codifying in the regulations (although this reflects longstanding TTB policy) that materials like honey, hops, spices and pumpkin may be added to hard cider without jeopardizing the hard cider tax rate.
4. Establishing a .009 gram per 100 ml tolerance for carbonation in cider.
5. Suggesting in the pre-amble that treating materials, regardless of source, could render a product ineligible for the hard cider rate if those materials imparts a fruit flavor other than apple (under the new regulations apple or pear).
6. Codifying in the regulations for the first time (although this reflects longstanding TTB policy) that the hard cider definition and most rules also apply to imported hard cider.
The current deadline for comments on the proposed regulations is March 24, 2017, but TTB generally grants reasonable extensions (typically 60 or 90 additional days) upon request.