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Calendar No. 40
114th Congress } { Report
SENATE
1st Session } { 114-17
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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.
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Item Current tax rate
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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\
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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.
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\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\
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\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.
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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).
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