82 FR 7653 - Implementation of Statutory Amendments Requiring the Modification of the Definition of Hard Cider
DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau Federal Register Volume 82, Issue 13 (January 23, 2017)
Alcohol and Tobacco Tax and Trade Bureau
Federal Register Volume 82, Issue 13 (January 23, 2017)
| Page Range | 7653-7666 | |
| FR Document | 2017-00333 |
[Federal Register Volume 82, Number 13 (Monday, January 23, 2017)] [Rules and Regulations] [Pages 7653-7666] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-00333] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Alcohol and Tobacco Tax and Trade Bureau 27 CFR Parts 24 and 27 [Docket No. TTB-2016-0014; T.D. TTB-147; Re: Notice No. 168] RIN 1513-AC31 Implementation of Statutory Amendments Requiring the Modification of the Definition of Hard Cider AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury. ACTION: Temporary rule; Treasury decision; cross reference to notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: This temporary rule amends the Alcohol and Tobacco Tax and Trade Bureau (TTB) regulations to implement changes made to the definition of ``hard cider'' in the Internal Revenue Code of 1986 by the Protecting Americans from Tax Hikes Act of 2015. The modified definition broadens the range of wines eligible for the hard cider tax rate. TTB is amending its regulations to reflect the modified definition of hard cider effective for products removed on or after January 1, 2017, and to set forth new labeling requirements to identify products to which the hard cider tax rate applies. The new labeling requirements include both a one-year transitional rule and a new labeling requirement that takes effect for products removed on or after January 1, 2018. TTB is also soliciting comments from all interested parties on these amendments through a notice of proposed rulemaking published elsewhere in this issue of the Federal Register. DATES: This temporary rule is effective January 23, 2017. FOR FURTHER INFORMATION CONTACT: Kara Fontaine, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., Box 12, Washington, DC 20005; telephone (202) 453-1039 ext. 103. SUPPLEMENTARY INFORMATION: I. Background Protecting Americans From Tax Hikes Act of 2015 On December 18, 2015, the President signed into law the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Division Q of this Act is titled the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). Section 335(a) of the PATH Act amends the Internal Revenue Code of 1986 (IRC) at 26 U.S.C. 5041 by modifying the definition of hard cider for excise tax classification purposes. Pursuant to section 335(b) of the PATH Act, the amended definition of hard cider applies to such products removed on or after January 1, 2017. The PATH Act does not change the tax rate applicable to wine eligible for the hard cider tax rate; rather, it broadens the range of products to which the hard cider tax rate applies. Among other things, the range of products to which the hard cider tax rate applies will include certain sparkling and carbonated products and certain products that are subject to the requirements of the Federal Alcohol Administration Act (FAA Act). TTB Authority The Alcohol and Tobacco Tax and Trade Bureau (TTB) of the Department of the Treasury administers chapter 51 of the IRC, which sets forth the Federal excise taxes on wine and related provisions, including provisions addressing the production and marking of wine (see 26 U.S.C. chapter 51). Section 5041 of the IRC (26 U.S.C. 5041) imposes six excise tax rates, including the hard cider tax rate, on wines. These tax rates are associated with six tax classes that correspond to section 5041(b) subparagraphs (1) through (6), as follows:Section 5041(b)(1) imposes a tax of $1.07 per wine gallon \1\ on still wines containing not more than 14 percent alcohol by volume. --------------------------------------------------------------------------- \1\ The TTB regulations in 27 CFR 24.10 define the term ``wine gallon'' as ``a United States gallon of liquid measure equivalent to the volume of 231 cubic inches.'' --------------------------------------------------------------------------- Section 5041(b)(2) imposes a tax of $1.57 per wine gallon on still wines containing more than 14 percent and not exceeding 21 percent of alcohol by volume. Section 5041(b)(3) imposes a tax of $3.15 per wine gallon on still wines containing more than 21 percent and not exceeding 24 percent of alcohol by volume. Section 5041(b)(4) imposes a tax of $3.40 per wine gallon on champagne and other sparkling wines. [[Page 7654]] Section 5041(b)(5) imposes a tax of $3.30 per wine gallon on artificially carbonated wines. Section 5041(b)(6) imposes a tax of $0.226 per wine gallon on hard cider. With regard to the hard cider tax class, prior to the effective date of the hard cider provisions of the PATH Act, section 5041(b)(6) defines the term ``hard cider'' as a still wine derived primarily from apples or apple concentrate and water, containing no other fruit product, and containing at least one-half of 1 percent and less than 7 percent alcohol by volume. Under section 5041(a), a ``still wine'' is a wine containing not more than 0.392 gram of carbon dioxide per 100 milliliters of wine, with tolerances ``as may be reasonably necessary in good commercial practice'' as prescribed by regulation. Section 5041(c) allows a credit of up to 90 cents per wine gallon for small domestic wine producers on the first 100,000 gallons of wine taxed at one of the three still wine tax rates or at the artificially carbonated wine tax rate removed for consumption or sale during a calendar year, under certain prescribed circumstances. The law allows a credit of up to 5.6 cents per wine gallon for small domestic producers on wine that is taxed at the hard cider tax rate. Section 5041(c) does not provide a credit against taxes imposed under section 5041(b)(4) on wine that is taxed at the champagne or other sparkling wine tax rate. The tax on wine is determined at the time of removal (generally, removal from a bonded wine premises or release from customs custody) for consumption or sale (26 U.S.C. 5041(a)). Wine so removed must be in containers bearing marks and labels evidencing compliance with the IRC as the Secretary of the Treasury may by regulations prescribe (26 U.S.C. 5368(b)). Proprietors of bonded wine premises and importers must keep records, in such a form, and containing such information, as the Secretary may by regulations prescribe (26 U.S.C. 5367 and 26 U.S.C. 5555). Section 7805 of the IRC (26 U.S.C. 7805) provides the Secretary with authority to issue regulations to carry out the provisions of the IRC. In addition to the IRC requirements, wine is subject to the requirements of the FAA Act. As defined by the FAA Act, the term ``wine'' includes apple and pear wine containing at least 7 percent alcohol by volume (27 U.S.C. 211(a)(6)). Section 105(e) of the FAA Act, codified at 27 U.S.C. 205(e), authorizes the Secretary of the Treasury to prescribe regulations for the labeling of wine to, among other things, prohibit consumer deception and the use of misleading statements on labels and to ensure that the labels provide the consumer with adequate information as to the identity and quality of the product. The FAA Act generally requires bottlers and importers to obtain a TTB certificate of label approval (COLA) prior to bottling wine or removing bottled wine from customs custody for sale in interstate or foreign commerce. Section 103 of the FAA Act, codified at 27 U.S.C. 203, also requires that producers, blenders, wholesalers, and importers of wine that contains at least 7 percent alcohol by volume obtain a ``basic permit'' to engage in such businesses. The Alcoholic Beverage Labeling Act of 1988 (ABLA) requires a health warning statement to appear on containers of all alcoholic beverages, including wine, containing at least one-half of one percent alcohol by volume (27 U.S.C. 214 and 215). TTB administers chapter 51 of the IRC and the FAA Act, and their implementing regulations, pursuant to section 1111(d) of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary has delegated various authorities through Treasury Department Order 120-01, dated December 10, 2013 (superseding Treasury Order 120-01, dated January 24, 2003), to the TTB Administrator to perform the functions and duties in the administration and enforcement of these laws. Regulations that implement the provisions of the IRC, as they relate to wine, include regulations in part 24 (27 CFR part 24) for domestic wine and part 27 (27 CFR part 27) for imported wine. Regulations that implement the provisions of FAA Act, as they relate to wine, include regulations in parts 1 and 4 (27 CFR parts 1 and 4). Regulations that implement the provisions of ABLA are in part 16 (27 CFR part 16). II. History of the Regulatory Definition of Hard Cider for Tax Purposes The Taxpayer Relief Act of 1997 (TRA), Public Law 105-34, enacted on August 5, 1997, added the tax class for wine called ``hard cider'' in 26 U.S.C. 5041(b)(6), as shown above. The definition of wine eligible for the ``hard cider'' tax classification, as enacted by the TRA, was clarified (to specify that ``hard cider'' is a ``still wine'') by the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206. This clarification was effective October 1, 1997, the same effective date as the hard cider provisions of the TRA. On August 21, 1998, pursuant to the TRA, the Bureau of Alcohol, Tobacco, and Firearms (ATF), TTB's predecessor agency, published a temporary rule in the Federal Register (T.D. ATF-398, 63 FR 44779) amending part 24 of the TTB regulations to add a definition of wine that was eligible for the new hard cider excise tax rate found in 26 U.S.C. 5041(b)(6). ATF also issued a concurrent notice of proposed rulemaking (Notice No. 859, 63 FR 44819) inviting comments on the temporary rule. The portion of the temporary rule related to cider generated comments on the proposed definition of cider and the labeling rules. In particular, many commenters expressed concern that the labeling rules for hard cider in T.D. ATF-398 did not allow for the appropriate designation of their products. The temporary rule would have changed both the IRC and the FAA Act labeling rules to require use of the term ``hard cider'' on products that are taxable as hard cider, and prohibit use of that term on any other wine. In response to the comments ATF received regarding T.D. ATF-398, ATF published T.D. ATF-418 (64 FR 51896) on September 27, 1999, postponing the labeling compliance date for the rules in T.D. ATF-398. At the same time, ATF published Notice No. 881 (64 FR 51933) to solicit comments on alternative labeling rules. ATF subsequently published T.D. ATF-430 (65 FR 57734) on September 26, 2000, postponing the labeling compliance date until January 31, 2001. ATF finalized this temporary rule on November 26, 2001, with the publication of T.D. ATF-470 (66 FR 58938). ATF defined the term ``hard cider'' in 27 CFR 24.10 as a still wine derived primarily from apples or apple concentrate and water (apple juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration, must represent more than 50 percent of the volume of the finished product); containing no other fruit product nor any artificial product which imparts a fruit flavor other than apple; containing at least one-half of 1 percent and less than 7 percent alcohol by volume; having the taste, aroma, and characteristics generally attributed to hard cider, and sold or offered for sale as hard cider and not as a substitute for any other alcohol product. The regulatory definition clarified the statutory definition in two respects. First, in the preamble of T.D. ATF-398, ATF explained that it interpreted the statutory phrase, ``derived primarily from apples or apple concentrate and water,'' to mean that apple juice or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration must represent more than 50 percent of the [[Page 7655]] volume of the finished product. (The term ``brix'' in this text refers to the quantity of dissolved solids expressed as grams of sucrose in 100 grams of solution at 60 degrees Fahrenheit. For example, one degree Brix is 1 gram of sucrose in 100 grams of solution and represents the strength of the solution as percentage by mass.) Second, ATF interpreted the statutory phrase ``containing no other fruit product'' to mean ``containing no other fruit product nor any artificial product which imparts a fruit flavor other than apple.'' As explained in the preamble of T.D. ATF-470, this interpretation is based on the legislative history of the TRA, which states: Once fermented, eligible hard cider may not be altered by the addition of other fruit juices, flavor, or other ingredient that alters the flavor that results from the fermentation process. Thus, for example, cider fermented from apples, but which has raspberry flavor added to it prior to bottling and marketing to the public, will not be eligible for the 22.6 cents-per gallon tax rate.\2\ --------------------------------------------------------------------------- \2\ See General Explanation of Tax Legislation Enacted in 1997, published by the Joint Committee on Taxation (JCS-23-97). ATF ``d[id] not believe it was Congress's intent to provide a tax incentive for use of artificial ingredients in preference to real ones.'' See 66 FR 58941. The preamble to T.D. ATF-470 also explained that the regulatory definition does not preclude the use of flavors such as honey or spices, noting that ``[f]lavoring materials will only affect the tax classification of hard cider if they are derived from or impart the flavor of a fruit other than apple.'' See 66 FR 58941. This position is also reflected in current public guidance in the form of an FAQ on the TTB Web site. Specifically, FAQ CID24 states that, because the IRC provides that the hard cider tax rate under section 5041(b)(6) is not available to wines that contain a fruit product other than apple, a cider containing either natural or artificial fruit flavors (other than apple flavors) is not eligible for the hard cider tax rate of 22.6[cent] per gallon. Instead, a fruit-flavored cider would be taxed at the appropriate wine excise tax rate. (See https://www.ttb.gov/faqs/alcohol_faqs.shtml?Cider#Cider.) In the preamble to T.D. ATF-470, ATF also addressed the prohibition on ``other fruit products'' with regard to authorized wine treating materials that are derived from fruits other than apple, such as tannin or citric acid. The preamble explained that the final rule did not restrict the use of approved wine treating materials derived from fruit in cider, stating that it would be impractical to make a distinction between fruit-derived wine treating materials and the same materials derived from other sources, unless there were other circumstances that indicated the producer was using these materials as flavorings. One of those circumstances would be the labeling of the product as being ``flavored'' with a fruit other than apple. ATF noted that, when used as directed in 27 CFR part 24 for natural wines, authorized wine treating materials would not impart a fruit flavor to wine. However, ATF also noted that some ciders are made under approved formulas rather than under the rules for production of natural wine in subparts F and L of part 24, and that for formula wines \3\, the use of wine treating materials may be approved at a level beyond the level authorized in part 24 for stabilizing or adjusting the acidity of a natural wine. ATF further noted that while the final rule did not place limits on the use of wine treating materials derived from fruits other than apple in a formula wine eligible for the hard cider tax rate, a formula wine may not contain such treating materials in amounts sufficient to impart a fruit flavor other than apple and still be taxed as hard cider. For example, if a cider contained more citric acid than the amount allowed under subpart L of part 24 for the production of natural wine,\4\ and was labeled as ``citrus flavored,'' the product would be classified for tax purposes as a still wine under 14 percent alcohol by volume rather than hard cider. --------------------------------------------------------------------------- \3\ The TTB regulations at 27 CFR 24.10 define the term ``formula wine'' as special natural wine, agricultural wine, and other than standard wine (except for distilling material and vinegar stock) produced on bonded wine premises under an approved formula. \4\ Natural wine, under 26 U.S.C. 5381, is the product of the juice or must of sound, ripe grapes or other sound, ripe fruit, made with such cellar treatment as may be authorized under section 5382 of the IRC (26 U.S.C. 5382) and containing not more than 21 percent by weight of total solids. --------------------------------------------------------------------------- Finally, ATF recognized that the term ``hard cider'' had broader meaning in the industry and among consumers than the definition given in the regulations. As a result, ATF stated that it would allow the use of the term ``hard cider'' on labels of products that do not belong to the hard cider tax class, as long as other information on the label allows for the identification of the appropriate tax class. III. PATH Act's Modification of the IRC Definition of Hard Cider for Tax Purposes The PATH Act amendments to section 5041 of the IRC change the definition of ``hard cider,'' allowing a broader range of products to be eligible for the hard cider tax rate. TTB notes that the PATH Act did not amend the FAA Act, although the definition of hard cider under the PATH Act now includes products to which the FAA Act requirements apply. Under the PATH Act, effective January 1, 2017, section 5041 of the IRC, Imposition and rate of tax, contains a new paragraph (g), which defines the term ``hard cider'' as a wine. Under the PATH Act, effective January 1, 2017, section 5041 of the IRC, Imposition and rate of tax, contains a new paragraph (g), which defines the term ``hard cider'' as a wine derived primarily from apples or pears, or from apple juice concentrate or pear concentrate and water, which contains no fruit product or fruit flavoring other than apple or pear. Also, under the revised definition, hard cider cannot contain ``more than 0.64 gram of carbon dioxide per hundred milliliters of wine, except that the Secretary may by regulations prescribe such tolerances to this limitation as may be reasonably necessary in good commercial practice.'' In addition, the revised definition states that the alcohol content of hard cider may range between at least 0.5 percent and less than 8.5 percent alcohol by volume. The specific changes concerning the hard cider tax rate resulting from the PATH Act are discussed individually below. Increase in Authorized Amount of Carbon Dioxide As noted above, prior to the effective date of the hard cider provisions of the PATH Act, to be eligible for the ``hard cider'' tax rate under the IRC, wine must be, among other things, a ``still wine,'' that is, a wine containing not more than 0.392 gram of carbon dioxide per 100 milliliters. The modified definition of hard cider allows wine that is eligible for the hard cider tax rate to contain no more than 0.64 gram of carbon dioxide per 100 milliliters of wine. Prior to the effective date of the hard cider provisions of the PATH Act, wine with a carbon dioxide content greater than 0.392 gram of carbon dioxide per 100 milliliters of wine is an ``effervescent wine'' and is taxed as either ``sparkling wine'' or as ``artificially carbonated wine'' depending on the source of the carbon dioxide. Sparkling wine is an effervescent wine for which the carbon dioxide has resulted solely from the secondary fermentation of the wine within a closed container. Artificially carbonated wine is a wine made effervescent by the injection of carbon [[Page 7656]] dioxide. See Sec. 24.10. Sparkling wine and artificially carbonated wine have no maximum level of carbon dioxide. The definition of hard cider, as modified by the PATH Act, includes certain effervescent wines that contain more than 0.392 gram but no more than 0.64 gram of carbon dioxide per 100 milliliters of wine. This means that, under the modified definition, certain wines that would previously have fallen within the tax classes applicable to sparkling wine or artificially carbonated wine will be eligible for the hard cider tax rate. Use of Pears and Pear Concentrate in Addition to Apples and Apple Concentrate Prior to the effective date of the hard cider provisions of the PATH Act, the statutory definition of wine eligible for the hard cider tax rate requires that wine be derived primarily from apples or apple concentrate and water in order to be eligible for that tax rate. The modified definition under the PATH Act provides that wine eligible for the hard cider tax rate must be derived primarily from apples or pears or from apple juice concentrate or pear juice concentrate and water. According to its legislative history,\5\ this amendment was to ``expand the hard cider definition to include pears, or pear juice concentrate and water, in addition to apples and apple juice concentrate and water.'' TTB believes that the amendment to the definition of hard cider was not intended to prevent the use of apples and pears together. In keeping with the current definition of hard cider found in part 24 which provides, in part, ``* * * (apple juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration, must represent more than 50 percent of the volume of the finished product) * * *,'' TTB is interpreting the modified definition to mean that apple juice, pear juice, a combination of apple juice and pear juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration, must represent more than 50 percent of the volume of the finished product. In other words, if apple juice and pear juice (or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration) together represent more than 50 percent of the volume of the finished product, this requirement is met. --------------------------------------------------------------------------- \5\ See JCX-144-15, ``Technical Explanation of the Protecting Americans From Tax Hikes Act of 2015, House Amendment #2 to the Senate Amendment to H.R. 2029 (Rules Committee Print 114-40).'' --------------------------------------------------------------------------- Fruit Products and Fruit Flavoring Prior to the effective date of the hard cider provisions of the PATH Act, the statutory definition of hard cider provides that no fruit product other than apple and apple concentrate may be used in wine eligible for the hard cider tax rate. As described above, the current regulatory definition of hard cider for tax purposes states that, among other things, hard cider must contain ``no other fruit product nor any artificial product which imparts a fruit flavor other than apple.'' Pursuant to the PATH Act, the modified definition of hard cider prohibits the use of any ``fruit product or fruit flavoring other than apple or pear.'' With the exception of the inclusion of pear, the prohibition against other fruit products or fruit flavorings is similar to the current statutory and regulatory text, except that it is even clearer than the prior law that wines eligible for the ``hard cider'' tax rate may not contain either ``fruit products'' (that is, ingredients derived from fruit) or ``fruit flavoring'' (regardless of its source) other than apple or pear. This is consistent (aside from the inclusion of pear) with TTB's current policy with regard to fruit flavors. Accordingly, it is TTB's interpretation that wine is not eligible for the hard cider tax rate if it contains any fruit flavoring that imparts the flavor of a fruit other than apple or pear. The term ``fruit flavoring'' includes a natural fruit flavor, an artificial fruit flavor, and a natural flavor that artificially imparts the flavor of a fruit that is not contained in that flavor. Increase in Allowed Alcohol Content Prior to the effective date of the hard cider provisions of the PATH Act, wine is not eligible for the hard cider tax rate unless it contains less than 7 percent alcohol by volume. However, the definition of hard cider as modified by the PATH Act increases the allowable alcohol content to less than (not equal to) 8.5 percent alcohol by volume. The increase in the allowed alcohol content allows a broader range of products to be eligible for the hard cider tax rate, including products that are subject to the FAA Act labeling and permit requirements, which apply to wines that contain at least 7 percent alcohol by volume. The PATH Act did not amend the FAA Act, and this rule does not amend TTB's FAA Act permit or labeling requirements in 27 CFR parts 1 and 4, respectively. IV. Description of Regulatory Changes Regarding Tax Classification and Operations New Regulations Setting Forth Eligibility Criteria for the Hard Cider Tax Rate As a result of the PATH Act amendments to the definition of hard cider, TTB is amending its regulations in part 24 by adding a new Subpart P--Eligibility for the Hard Cider Tax Rate. New subpart P consists of two new sections, 27 CFR 24.331 and 24.332. Section 24.331 sets forth the statutory criteria for eligibility for the hard cider tax rate for wines removed on or after January 1, 2017, while Sec. 24.332 elaborates on those criteria. Consistent with the TTB interpretation of the statutory text discussed above, Sec. 24.332(a) provides that wine will be considered to be derived primarily from apples or pears, or from apple juice concentrate or pear juice concentrate and water, if the apple juice, pear juice, or combination of apple and pear juice, or the equivalent amount of concentrate of apple and/or pear juice reconstituted to the original brix of the juice prior to concentration, or any combination thereof, represents more than 50 percent of the volume of the finished product. Further, Sec. 24.332(b)(1) provides that wine is not eligible for the hard cider tax rate if it contains any fruit product other than apple or pear. Consistent with current policy, Sec. 24.332(b)(1) makes clear that a fruit product is any material derived or made from any fruit or part of a fruit, including but not limited to concentrates, extracts, juices, powders, or wine spirits, of any fruit or part of a fruit. New Sec. 24.332(b)(2) provides that an authorized wine treating material set forth in Sec. 24.246 that is derived from a fruit other than apple or pear may be used in the production of wine eligible for the hard cider tax rate if it is used for a purpose other than flavoring and it is either used in accordance with the wine treating materials provisions of Sec. 24.246 (if used in a natural wine), or used in amounts insufficient to impart a fruit flavor other than apple or pear (if used in a special natural wine or other than standard wine). Any written or pictorial reference to a material derived from a fruit other than apple or pear (other than the inclusion of a wine treating material in an ingredient labeling statement) in the labeling or advertising of a wine will be treated as evidence that the wine treating material was added for the purpose of flavoring the wine. Further, new Sec. 24.332(c) prohibits the use, in wine eligible for the hard cider tax rate, of any fruit flavoring that [[Page 7657]] imparts the flavor of a fruit other than apple or pear. For purposes of this section, a flavoring that imparts the flavor of a fruit other than apple or pear includes a natural fruit flavor, an artificial fruit flavor, and a natural flavor that artificially imparts the flavor of a fruit that is not contained in that flavor. The preamble to T.D. ATF-470 provided that honey or spices would not disqualify an apple wine from the hard cider tax rate; however, language to that effect did not appear in any regulatory text. TTB is now incorporating such language in the new Sec. 24.332(c) to make this position more easily accessible to industry members and the public. TTB has also received questions about the use of pumpkin flavors in cider. While pumpkins are botanically classified as fruit, they are treated as ``vegetables'' for several other purposes.\6\ It has been TTB's position that pumpkins are not ``fruit'' for purposes of part 24. Instead, wines made from pumpkins are classified as wines made from ``other agricultural products'' under 26 U.S.C. 5387 and 27 CFR 24.204. See, e.g., TTB Ruling 2016-2. Accordingly, in new Sec. 24.332(c), TTB clarifies that the use of spices, honey, hops, or pumpkins as a flavoring will not make a wine ineligible for the hard cider tax rate. --------------------------------------------------------------------------- \6\ For example, the United States Department of Agriculture's National Nutrient Database for Standard Reference currently lists pumpkin in its ``Vegetables and Vegetable Product'' food group. --------------------------------------------------------------------------- New Sec. 24.332(c) also provides that any written or pictorial reference to a fruit flavor other than apple or pear in the labeling or advertising of a wine that contains a flavoring will be treated as evidence that the wine contains a flavoring that imparts a fruit flavor other than apple or pear and thus the wine will not be eligible for the hard cider tax rate. The new definition in Sec. 24.332, differing from the current definition of hard cider in Sec. 24.10, does not require that hard cider have the taste, aroma, and characteristics generally attributed to hard cider. Nor does it require hard cider to be sold or offered for sale as hard cider. With regard to the reference to ``taste, aroma, and characteristics generally attributed to hard cider,'' these aspects of the definition have been removed because under the PATH Act, wine that is eligible for the hard cider tax rate may contain pear, which TTB believes is not a characteristic generally attributed to hard cider. With regard to the reference to hard cider having to be ``sold or offered for sale as hard cider,'' this aspect has been removed because a wine that meets the criteria of the hard cider tax class and is produced from just pears may be sold as ``perry,'' ``pear wine,'' or ``hard perry.'' Definitional Changes To Implement the PATH Act The IRC at section 5041(a) provides that ``[s]till wines shall include those wines containing not more than 0.392 gram of carbon dioxide per hundred milliliters * * *.'' Because wine classified as hard cider will no longer necessarily be a ``still wine'' after the PATH Act amendments take effect, and because hard ciders that are defined as ``still wine'' under section 5041(a) are not taxed as ``still wine'' under section 5041(b), TTB is adding a definition of ``still hard cider'' to Sec. 24.10, and excluding ``hard cider'' from the definition of ``still wine'' in that section. As amended, part 24 will use the term ``still wine'' to refer to wine containing not more than 0.392 gram of carbon dioxide per 100 milliliters of wine that falls within one of the three tax classes applicable to still wine set forth at section 5041(b)(1), (b)(2), or (b)(3). The term ``still hard cider,'' when used in the regulations, is used to denote wine that is eligible for the hard cider tax rate at section 5041(b)(6) and that contains not more than 0.392 gram of carbon dioxide per 100 milliliters. Similarly, TTB is adding definitions of ``artificially carbonated hard cider'' and ``sparkling hard cider'' to describe wine that is eligible for the hard cider tax rate at section 5041(b)(6); that contains more than 0.392 but not more than 0.64 gram of carbon dioxide per 100 milliliters; and that is made effervescent either by artificial injection of carbon dioxide or solely by secondary fermentation within a closed container. Under this temporary rule, TTB is also excluding wine that is eligible for the hard cider tax rate from the definitions of ``artificially carbonated wine,'' and ``sparkling wine or champagne'' set forth in Sec. 24.10. As a result of these definitional changes, there is no need to amend the regulations in 27 CFR 24.278(a), which provide that ``champagne and other sparkling wine'' are not eligible for the tax credit for certain small producers. This regulation is based on 26 U.S.C. 5041(c)(1), which disqualifies ``wine described in subsection (b)(4)'' from eligibility for the small producer credit. Wine described in section 5041(b)(4) is wine that is taxable at the rate prescribed for ``champagne and other sparkling wines.'' This temporary rule specifies that the term ``sparkling wine'' does not include hard cider that derives its effervescence solely from the secondary fermentation in a closed container (and contains no more than 0.64 gram of carbon dioxide per 100 milliliters of wine); thus, this wine is not precluded from eligibility for the small domestic producers credit described in Sec. 24.278. These definitional changes also provide that wine that is eligible for the lower hard cider tax rate at section 5041(b)(6) is not subject to the higher tax rates for ``still wine,'' ``sparkling wine,'' or ``artificially carbonated wine'' at section 5041(b)(1)-(b)(5). TTB is incorporating the terms ``artificially carbonated hard cider,'' ``artificially carbonated wine,'' ``sparkling hard cider'' and ``sparkling wine'' in the definition of ``effervescent wine'' to make it clear that, when used in the regulations, ``effervescent wine'' includes all four terms. The new definition for the existing term ``hard cider'' cross-references the new definitions of ``artificially carbonated hard cider,'' ``sparkling hard cider,'' and ``still hard cider,'' and cites the new eligibility requirements set forth in Sec. 24.331. TTB is removing the current eligibility criteria included in the definition of ``Hard cider'' at Sec. 24.10 that interprets the law as it exists prior to the effective date of the hard cider provisions of the PATH Act. In addition to amending the definition of ``artificially carbonated wine'' to exclude wine eligible for the hard cider tax rate, TTB is replacing the reference in that definition to wine ``artificially charged with carbon dioxide'' with the phrase ``artificially injected with carbon dioxide.'' This change is not intended to substantively change the provision, but rather to be consistent with the description of wine carbonated by the injection of carbon dioxide used in 27 CFR 24.190. TTB also is amending a cross-reference to the FAA Act that appears in the definition of ``cider'' in Sec. 24.10 to make clear that 27 CFR 4.21(e)(5) provides information regarding the labeling of wine that may be designated as ``cider'' under the FAA Act. Tolerance and Recordkeeping Requirements for Artificially Carbonated Hard Cider and Sparkling Hard Cider While there is no maximum allowed carbon dioxide level for wine falling within the sparkling wine and artificially carbonated wine tax classes, under the modified definition of hard cider, wine is not eligible for the hard cider tax rate if it contains more than 0.64 gram of carbon dioxide per 100 milliliters. As amended by the PATH Act, section 5041(g)(1) authorizes TTB to prescribe through regulation ``such tolerances to this limitation as may be [[Page 7658]] reasonably necessary in good commercial practice.'' Current TTB regulations applicable to still wine with added carbon dioxide, at 27 CFR 24.245, prescribe a tolerance of not more than 0.009 gram per 100 milliliters where the amount of carbon dioxide in excess of 0.392 gram per 100 milliliters is due to mechanical variations that cannot be completely controlled under good commercial practice. In this temporary rule, TTB sets forth a new section, 27 CFR 24.251, and extends the same 0.009 gram per 100 milliliters tolerance to artificially carbonated hard cider and sparkling hard cider where the amount of carbon dioxide in excess of 0.64 gram per 100 milliliters is due to mechanical variations or secondary fermentation variations that cannot be completely controlled under good commercial practice. This tolerance will not be allowed where it is found that the proprietor continuously or intentionally exceeds 0.64 gram of carbon dioxide per 100 milliliters of artificially carbonated hard cider or sparkling hard cider or where the variation results from the use of methods or equipment determined by the appropriate TTB officer not to be in accordance with good commercial practice. Apple or pear wine that has in excess of 0.64 gram of carbon dioxide per 100 milliliters (unless covered by the allowed tolerance) will be classified and taxed at the applicable ``sparkling wine'' or ``artificially carbonated wine'' rate, see section 5041(b)(4) and (b)(5). Accordingly, TTB is amending 27 CFR 24.255(a) to specify that proprietors of a bonded wine premises or a taxpaid wine bottling house premises are responsible for the correct determination of the amount of carbon dioxide in artificially carbonated hard cider or sparkling hard cider. TTB is also amending Sec. 24.302 to require that the amount of carbon dioxide in artificially carbonated hard cider or sparkling hard cider be included in the effervescent wine record, which is required to be kept by proprietors who produce or receive effervescent wine in bond. Conforming Amendments Other amendments maintain the existing treatment of still wine and effervescent wine, and apply certain requirements currently applicable to still wine to ``still hard cider'' and certain requirements currently applicable to artificially carbonated wine and sparkling wine to ``artificially carbonated hard cider'' and ``sparkling hard cider,'' respectively. These include amendments to 27 CFR 24.190, 24.191, 24.192, and 24.193 in subpart G (Production of Effervescent Wine); 27 CFR 24.225 and 24.234 in subpart K (Spirits); Sec. 24.246 in subpart L (Storage, Treatment and Finishing of Wine); 27 CFR 24.266 in subpart M (Losses of Wine); Sec. Sec. 24.290 and 24.291 in subpart N (Removal, Return and Receipt of Wine); 27 CFR 24.301, 24.302, 24.306, 24.308, and 24.319 in subpart O (Records and Reports). Along with conforming amendments to Sec. 24.245, TTB also is removing a reference to ``authorized test procedures'' for determining the amount of carbon dioxide in still wine to which carbon dioxide has been added. Section 24.245 currently states that ``[t]he proprietor shall determine the amount of carbon dioxide added to wine using authorized test procedures.'' TTB's predecessor agency, ATF, published several authorized test procedures from 1971 to 1983. These are ATF Procedure 73-1 (authorizing the enzymatic method, the manometric method, and the volumetric method), ATF Procedure 77-2 (authorizing the infrared spectrophotometer method), and ATF Procedure 83-2 (authorizing the use of an automated thermal conductivity analyzer). Although TTB still views these methods as valid, TTB currently uses the enzymatic \7\ and titrimetric \8\ method to determine the carbon dioxide levels in wine. --------------------------------------------------------------------------- \7\ AOAC Official Method of Analysis 964.09 (17th Ed). See also https://www.ttb.gov/ssd/pdf/list_of_beverage_methods.pdf. \8\ AOAC Official Method of Analysis 988.07 (17th Ed). See also https://www.ttb.gov/ssd/pdf/list_of_beverage_methods.pdf. --------------------------------------------------------------------------- It is TTB's current policy that producers may use any method that has been formally validated (e.g., that underwent a multi-laboratory performance evaluation) or that is otherwise scientifically valid to determine the carbon dioxide levels in wine. (A scientifically valid method is, among other things, accurate, precise, and specific for its intended purpose, and it has results that are consistently reliable, accurate, and reproducible.) Accordingly, TTB is removing the language in Sec. 24.245 that requires proprietors to use ``authorized'' test procedures, and is revoking ATF Procedure 73-1, ATF Procedure 77-2, and ATF Procedure 83-2. Finally, TTB is dividing the current text of 27 CFR 24.270, Determination of Tax, into paragraphs (a) and (b), and adding a new paragraph (c) to list the tax rates imposed on wine by 26 U.S.C. 5041(b). With respect to the hard cider tax rate at section 5041(b)(6), TTB is referencing the eligibility requirements set forth in new Sec. 24.331. Also, TTB is incorporating in Sec. 24.270(a) language from the definition of ``wine'' in Sec. 24.10, which explains that a product containing less than one-half of one percent alcohol by volume is not taxable as wine. V. Labeling of Wine Eligible for the Hard Cider Tax Rate As noted above, TTB administers the labeling requirements of both the IRC and the FAA Act. TTB bases its labeling requirements in part 24 on section 5368(b) of the IRC, which gives the Secretary of the Treasury general authority to issue labeling regulations that require evidence of compliance with tax provisions. Labeling Requirements Prior to the Effective Date of Hard Cider Provisions of the PATH Act Current Sec. 24.257 sets forth the requirements for labeling containers of wine, including wine eligible for the hard cider tax rate, for purposes of the IRC. In general, Sec. 24.257 provides that proprietors must label each bottle or other container of beverage wine prior to removal for consumption or sale, and the label must show: (1) The name and address of the wine premises where the wine is bottled or packed, (2) the brand name, if it is different from the name shown in the name and address statement; (3) the alcohol content of the wine; (4) the kind of wine; and (5) the net contents of the container. Current Sec. 24.257 provides that conformity with TTB's FAA Act labeling regulations found in part 4 of the TTB regulations is sufficient to identify the appropriate tax class. With regard to alcohol content, Sec. 24.257(a)(3) provides that a label must state the alcohol content as percent by volume or in accordance with part 4.\9\ --------------------------------------------------------------------------- \9\ Thus, for wines with less than 7 percent alcohol by volume, a numerical statement of the percentage of alcohol by volume must appear on the label. 27 CFR 4.32(b)(3) and 4.36 require alcohol content statements on labels. TTB notes that pursuant to Sec. 4.36, in the case of fruit wine containing at least 7 percent but no more than 14 percent or less of alcohol by volume, the alcohol content need not be stated if the type designation ``table wine'' or ``light wine'' (without a numerical statement of alcohol content) appears on the brand label. Because ``hard cider'' is currently defined in part 24 as wine containing less than 7 percent alcohol by volume, ``table wine'' and ``light wine'' designations have been sufficient to identify FAA Act wine as ineligible for the hard cider tax rate. --------------------------------------------------------------------------- Current Sec. 24.257(a)(4) also sets out parameters for how the kind of wine should be presented on a label.\10\ Wine that contains at least 7 percent alcohol by volume and requires label approval under the FAA Act must be labeled with [[Page 7659]] the ``kind'' of wine in accordance with part 4.\11\ See Sec. 24.257(a)(4)(i). --------------------------------------------------------------------------- \10\ TTB notes that 27 CFR 24.259 requires each container larger than 4 liters or each case used to remove wine for consumption or sale to be durably marked with the kind of wine, stated in accordance with Sec. 24.257. \11\ Under 27 CFR part 4, wine that requires label approval must be labeled ``sparkling'' or ``carbonated,'' if applicable, see Sec. Sec. 4.32(a)(2) (requiring the class, type or other designation on wine labels), 4.34 and 4.22 (requiring a truthful and adequate statement of composition if the wine is not defined in 27 CFR 4.21), and 4.21 (setting forth standards of identity for wine and requiring the words ``sparkling'' or ``carbonated'' when applicable). --------------------------------------------------------------------------- For wine that contains less than 7 percent alcohol by volume or is the subject of a certificate of exemption from the COLA requirements in part 4, a statement of composition is required to be on the label in order to adequately identify the wine. See Sec. 24.257(a)(4)(ii) and (iii). The regulations in Sec. 24.257(a)(4)(iv) provide that the statement of composition must include enough information to identify the tax class when viewed with the alcohol content. There are several components to this requirement. First, the wine should be identified by the word ``wine,'' ``mead,'' ``cider,'' or ``perry,'' as applicable. Second, if the wine contains more than 0.392 gram of carbon dioxide per 100 milliliters, the word ``sparkling'' or ``carbonated,'' as applicable, must be included in the statement of composition. Third, if the statement of composition leaves doubt as to the tax class of the wine, the wine must be marked with an appropriate tax class statement (such as the statement ``tax class 5041(b)(1) IRC''). Section 24.257(a)(4)(iv) provides examples of labels that would or would not leave doubt as to the tax class of the wines. For example, a still wine labeled as ``raspberry hard cider'' and ``9 percent alcohol by volume'' is adequately marked to designate the tax class specified in section 5041(b)(1), which is the tax class for ``still wines containing not more than 14 percent of alcohol by volume.'' That information is sufficient because the wine is clearly not eligible for the hard cider tax rate under current law on two different grounds--it contains raspberries or raspberry flavor, and it is 9 percent alcohol by volume. This example also illustrates that the terms ``cider'' and ``hard cider,'' by themselves, do not indicate that a wine is eligible for the hard cider tax rate. Thus, the regulations provide the example of a still wine marked ``cider'' or ``hard cider'' and ``6 percent alcohol by volume.'' Under current regulations, that wine is adequately marked if it is eligible for the hard cider tax rate, but if it is not eligible for the hard cider tax rate, it is not adequately marked to identify its tax class as falling under section 5041(b)(1), so the tax class must be shown. As mentioned earlier in this preamble, the current regulations were issued after ATF received comments in opposition to T.D. ATF-398, which would have required use of the term ``hard cider'' on products eligible for the hard cider tax rate, and prohibited use of the ``hard cider'' designation on products not eligible for the hard cider tax rate, including all wines subject to the FAA Act. Accordingly, ATF solicited comments on and adopted an alternative proposal, that allowed use of the term ``hard cider'' on products over 7 percent alcohol by volume. For products under 7 percent alcohol by volume, ATF wanted to differentiate between ciders that are eligible for the hard cider tax rate and those that are taxable as still wine containing not more than 14 percent alcohol by volume. Some producers have marketed eligible products as ``draft cider,'' ``fermented cider'' or ``apple cider'' and did not wish to use the term ``hard cider'' on labels. Some producers marketed mixed-fruit ciders or low-alcohol ciders that were otherwise excluded from the current definition of hard cider under the name ``hard cider'' and did not wish to rename their products. Accordingly, ATF proposed, where the words on the label leave doubt as to the tax class, that cider makers must include a reference to the tax class by section of the law. ATF noted that this wording was similar to the wording of 27 CFR 25.242, on marking nontaxable cereal beverages. ATF requested industry and consumer comments on these proposals. In general, the commenters supported ATF's proposal to allow more flexibility in naming hard cider and related products. ATF also noted that it had requested suggestions for other ways of identifying the tax class, but received no suggestions. As a result, the final rule allowed the use of the term ``hard cider'' on labels of products that do not belong to the hard cider tax class, as long as other information on the label allows for the identification of the appropriate tax class. Need for Revised Labeling Requirements To Implement the PATH Act for the Hard Cider Tax Class As previously noted, current regulations require wines to be labeled with the ``kind'' of wine, and provide that wines that are not subject to FAA Act labeling requirements must be labeled with a statement of composition that, when viewed with the alcohol content, includes enough information to identify the tax class. Under the statutory definition of ``hard cider'' as it stood prior to the effective date of the hard cider provisions of the PATH Act, this flexibility makes sense. Among other things, any wine eligible for the ``hard cider'' tax rate under current law must be a still wine, and must have less than 7 percent alcohol by volume. Thus, wines subject to the labeling requirements of the FAA Act are, by definition, ineligible for the hard cider tax rate if removed prior to January 1, 2017. Similarly, sparkling wines and carbonated wines are, by definition, ineligible for the hard cider tax rate. Under the definition of hard cider set forth in the PATH Act, wine taxed at the hard cider tax rate may contain a higher alcohol content (less than 8.5 percent instead of less than 7 percent alcohol by volume) and may be effervescent (containing not more than 0.64 gram of carbon dioxide per 100 milliliters of wine). Under the modified definition, wine may also contain pears in addition to or in place of apples. This affects how the product must be labeled to provide sufficient information to identify the appropriate tax class. For example, under the modified definition of hard cider, wines that are subject to the FAA Act labeling regulations may be taxed at the hard cider tax rate. The current regulations in Sec. 24.257 do not require wines labeled in accordance with the FAA Act to include enough information to identify the tax class. Such a requirement was not necessary when the definition of hard cider excluded any wines containing 7 percent or more alcohol by volume. Because some (but not all) apple or pear wines subject to the FAA Act labeling regulations may be taxed at the hard cider tax rate under the IRC as modified by the PATH Act, it is now necessary to include language in Sec. 24.257 to require wines (including hard cider) labeled in accordance with the FAA Act labeling regulations to also include enough information to identify the tax class. A designation such as ``apple table wine'' for a wine subject to the FAA Act will no longer suffice to identify whether the wine is eligible for the hard cider tax rate, because it will not identify whether the wine has less than 8.5 percent alcohol by volume. Similarly, the hard cider tax class is no longer restricted to still wines. Under current regulations, a ``sparkling'' or ``carbonated'' wine statement suffices to indicate that the wine was not eligible for the hard cider tax rate. Under the standards as modified by the PATH Act, some, but not all, sparkling and carbonated apple and/or pear wines may be eligible for the hard cider tax rate. Thus, knowing that an apple and/ [[Page 7660]] or pear wine is sparkling or carbonated does not resolve the question of whether it is eligible for the hard cider rate, and such wines are unlikely to be labeled with the exact level of carbon dioxide per 100 milliliters of wine. Finally, the use of terms such as ``apple'' or ``pear'' wine, or ``cider,'' ``hard cider,'' or ``perry'' may suggest the hard cider tax class, but do not necessarily indicate that the product is eligible for such a classification. Furthermore, a statement of composition such as ``apple cider with natural flavors'' or ``honey pear wine'' does not necessarily indicate the tax class. VI. Description of Regulatory Changes Regarding Labeling Accordingly, TTB is amending its regulations in parts 24 and 27 to require the statement ``Tax class 5041(b)(6)'' on the container of any wine for which the hard cider tax rate is claimed. TTB recognizes that industry members who currently produce or import hard cider will need time to comply with such a requirement, and TTB is therefore providing a one-year grace period before the requirement goes into effect. Amendments to Part 24 As mentioned above, TTB is amending Sec. 24.257 to impose a new labeling requirement for wines eligible for the hard cider tax rate. As amended by this temporary rule, Sec. 24.257(a)(4) is reorganized. Section 24.257(a)(4)(i) addresses wines that require label approval under the FAA Act. Consistent with current regulations, Sec. 24.257(a)(4)(i)(A), which takes effect for wines removed on or after January 1, 2017, provides that if a wine contains 7 percent or more alcohol by volume and must have label approval under part 4, the required designation of the wine is the class, type or other designation provided in part 4. Section 24.257(a)(4)(i)(B) provides specific labeling rules for those products taxed at the ``hard cider'' tax rate. Section 24.257(a)(4)(i)(B)(1) provides, as part of a transitional rule for ``hard cider'' removed on or after January 1, 2017 and prior to January 1, 2018, that such wines may include the statement ``Tax class 5041(b)(6)'' on the label to adequately identify the appropriate tax class. For products removed from wine premises on or after January 1, 2018, that are taxed at the ``hard cider'' tax rate, the designation must also include the statement ``Tax class 5041(b)(6).'' This statement may appear anywhere on the label. With regard to wines, including hard cider, that do not require label approval, Sec. 24.257(a)(4)(ii) includes both a rule that takes effect for all wines removed on or after January 1, 2017 and additional labeling rules for hard cider that take effect for products removed on or after January 1, 2018. The general rule for wine that does not require label approval (either because it is covered by a certificate of exemption from label approval or because it contains less than 7 percent alcohol by volume) is provided in new Sec. 24.257(a)(4)(ii)(A). This kind of wine must bear a designation that includes enough information (when viewed with the alcohol content statement) to identify the tax class under section 5041. The wine must be identified by the term ``wine'' (or a word that signifies a type of wine, such as ``cider,'' ``perry,'' or ``mead,'' as applicable). If the wine contains more than 0.392 gram of carbon dioxide per 100 milliliters, the word ``sparkling'' or ``carbonated,'' as applicable, must be included in the designation. Section 24.257(a)(4)(ii)(A)(1) provides additional labeling rules effective for ``hard cider'' removed from wine premises on or after January 1, 2017. These rules provide that the designation for such products must be consistent with a hard cider tax classification. For example, the designations ``hard cider,'' ``hard perry,'' ``apple wine,'' ``pear wine,'' ``apple cider,'' ``apple perry,'' ``apple pear wine,'' ``cider,'' and ``perry'' are consistent with a hard cider tax classification. The designation ``blueberry cider'' is not consistent with a hard cider tax classification, because it indicates that the product contains either blueberries or blueberry flavors, which are not authorized for use in wine that is eligible for the hard cider tax class. If the hard cider contains more than 0.392 gram of carbon dioxide per 100 milliliters, the word ``sparkling'' or ``carbonated,'' as applicable, must be on the label. Section 24.257(a)(4)(ii)(A)(2) provides a transitional rule for wines removed on or after January 1, 2017 and prior to January 1, 2018. For these wines, a label will not be deemed out of compliance with Sec. 24.257(a)(4)(ii)(A) solely because the label does not provide enough information to identify whether the wine is eligible for a ``hard cider'' tax classification. On an optional basis, wines eligible for the ``hard cider'' tax class may include the statement ``Tax class 5041(b)(6)'' on the label to adequately indicate the appropriate tax class. Section 24.257(a)(4)(ii)(A)(3) provides additional labeling rules effective for ``hard cider'' removed from wine premises on or after January 1, 2018. The regulations provide that the label must also include the statement ``Tax class 5041(b)(6).'' Finally, TTB modified and moved the existing cross-reference to the FDA labeling rules applicable to wines containing less than 7 percent alcohol by volume to Sec. 24.257(a)(4)(ii)(B). Similarly, the existing cross-reference to the health warning statement requirements found in part 16 was modified and moved to Sec. 24.257(a)(6). Amendments to Part 27 The amendments to the definition of ``hard cider'' in the PATH Act apply to imported wine as well as to wine produced in the United States. Accordingly, TTB is amending part 27, which applies to imported wine, by adding a new definition of ``hard cider'' to section 27.11. Consistent with the definition in part 24, the term ``hard cider'' is defined for imported wines as a wine that meets the eligibility requirements set forth in Sec. 24.331 for the hard cider tax rate set forth in Sec. 24.270. The labeling regulations for imported wine in 27 CFR 27.59 are also amended by redesignating the existing regulation as Sec. 27.59(a) and adding a new Sec. 27.59(b). The new regulation provides that the container of any imported wine eligible for the ``hard cider'' tax classification set forth in Sec. 24.270 of this chapter must be labeled in accordance with the requirements applicable to wine containers removed from wine premises under Sec. 24.257(a)(4) of this chapter. The regulation also provides a cross-reference to Sec. 24.331 for the eligibility requirements for the hard cider tax rate. Thus, this temporary rule provides that the labeling requirements for imported hard cider are the same as the labeling requirements for hard cider produced in the United States. Regulatory Analysis and Notices Public Participation To submit comments on the regulatory provisions contained in this temporary rule, including the labeling provisions and any alternatives to requiring ``Tax Class 5041(b)(6)'' on the label, please refer to the notice of proposed rulemaking on this subject published in the ``Proposed Rules'' section of this issue of the Federal Register. Executive Order 12866 Certain TTB regulations issued under the IRC, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. [[Page 7661]] Regulatory Flexibility Act In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), TTB certifies that this temporary rule will not have a significant economic impact on a substantial number of small entities. The temporary rule will not impose, or otherwise cause, a significant increase in reporting, recordkeeping, or other compliance burdens on a substantial number of small entities. The temporary rule implements certain changes made to the Internal Revenue Code of 1986 by the Protecting Americans from Tax Hikes Act of 2015 (see Pub. L. 114-113, Division Q, section 335). These statutory changes broaden the definition of hard cider, which means that more products will be eligible for the lower rate of tax applicable to hard cider. However, to ensure that labels and records adequately reflect the correct tax class of hard cider products, the temporary rule includes provisions that will require certain labeling changes, and will require producers of artificially carbonated hard cider and sparkling hard cider to test for carbon dioxide levels and keep records of those tests. These requirements flow directly from the new statutory criteria for eligibility for the hard cider tax rate. Accordingly, any increased burden associated with establishing eligibility for the hard cider tax rate flows directly from the statutory changes that prescribe the criteria for eligibility. The temporary rule provides industry members with a one-year transition period to make the required labeling changes, thus reducing the burden on industry members. Pursuant to section 7805(f) of the IRC (26 U.S.C. 7805(f)), TTB will submit the temporary regulations to the Chief Counsel for Advocacy of the Small Business Administration for comment on the impact of the temporary regulations on small businesses. Paperwork Reduction Act Nine of the regulatory sections addressed in this temporary rule contain collections of information that have been previously reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) and assigned control numbers 1513-0009, 1513-0088, 1513-0092, and 1513-0115. Those sections are 27 CFR 24.255, 24.257, 24.266, 24.291, 24.301, 24.302, 24.306, 24.308, and 24.319. No changes are being made to the existing approved information collections. In this temporary rule, TTB is proposing two new recordkeeping requirements, and TTB has received OMB approval for these two requirements under two new OMB control numbers. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by OMB. The first new recordkeeping requirement is contained in new paragraphs (a)(4)(i)(B)(2) and (a)(4)(ii)(A)(3) of Sec. 24.257 and paragraph (b) of Sec. 27.59. Specifically, the new information collection will require that industry members who remove wine to which the hard cider tax rate applies place a specific statement, ``Tax class 5041(b)(6),'' on containers of such wine, in order to adequately identify the applicable tax rate. Under Sec. 24.257(a)(4)(i)(B)(2) and (a)(4)(ii)(A)(3) and Sec. 27.59, this new requirement is imposed on such wine removed on or after January 1, 2018. TTB has determined that this statement is necessary for the enforcement of the Internal Revenue Code, and it is the simplest and clearest way to identify these products without any confusion with other tax classes of wine and without requiring any other changes to statements that industry members may be using or wish to use to identify their products. The delayed effective date provides sufficient time for affected industry members to bring their labels into compliance with the new requirement. In 2015, 457 domestic manufacturers removed wine that was eligible for the hard cider tax class from their premises. TTB estimates that in addition to those industry members who removed wine eligible for the hard cider tax rate from their premises in 2015, potentially 20 percent more (or 91 manufacturers for a total of 548) may be interested in removing such wine from their premises given the new provisions applicable in 2017. Additionally, in 2015, according to U.S. Customs and Border Protection entry data, TTB determined that 191 importers obtained release from customs custody of products that were identified as cider under the Harmonized Tariff Schedule of the United States (HTSUS). TTB estimates that in addition to those importers who removed cider from customs custody in 2015, another 20 percent (or 38 importers for a total of 229 importers) will be interested in importing products that fall under that HTSUS code starting in 2017. Accordingly, TTB estimates that there are approximately 777 industry members (manufacturers and importers combined) who will be required to comply with this marking requirement. TTB estimates that each industry member will have a one-time burden of one hour to come into compliance with this information collection, but that the continued compliance burden will be negligible. Therefore, TTB estimates that 777 respondents will respond an average of once per year to this information collection, for a total estimate annual burden of 777 hours. Estimated number of respondents: 777. Estimated average total annual burden hours: 777. The second new recordkeeping requirement is contained in new paragraph (k) of Sec. 24.302. Specifically, the new recordkeeping requirement will require proprietors who produce artificially carbonated hard cider and sparkling hard cider to maintain a record of the amount of carbon dioxide contained in the wine. This new requirement is imposed on such wine removed on or after January 1, 2017. TTB has determined that this recordkeeping requirement is necessary for demonstrating compliance with the statutory requirement that, to be eligible for the hard cider tax rate, among other things, the wine must contain no more than 0.64 gram of carbon dioxide per 100 milliliters of wine. Like the tax class statement requirement, TTB estimates that there are 548 domestic manufacturers who must comply with this new recordkeeping requirement. TTB's laboratory estimates that it will take each industry member on average four hours to test the level of carbon dioxide in the wine using either the titrimetric or enzymatic test method. TTB also estimates that it will take an additional 15 minutes to record the level of carbon dioxide in the wine for a total of four hours and 15 minutes to test and record the carbon dioxide for one batch of artificially carbonated hard cider or sparkling hard cider. TTB is also estimating that each industry member will perform this recordkeeping requirement for 25 batches over one year. This equals 106.25 burden hours for each industry member in one year, for a total of 58,225 burden hours. Estimated number of respondents: 548. Estimated average total annual burden hours: 58,225. As noted above, TTB has submitted these new information collection requirements to the OMB for review. Comments on this new recordkeeping requirement should be sent to OMB at Office of Management and Budget, Attention: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503 or by email to [[Page 7662]] [email protected]. A copy should also be sent to TTB by any of the methods described in the notice of proposed rulemaking related to this temporary rule published elsewhere in this issue of the Federal Register. Comments on the information collection should be submitted no later than March 24, 2017. Comments are specifically requested concerning: Whether the collection of information submitted to OMB is necessary for the proper performance of the functions of the Alcohol and Tobacco Tax and Trade Bureau, including whether the information will have practical utility; The accuracy of the estimated burden associated with the collection of information submitted to OMB; and How to enhance the quality, utility, and clarity of the information to be collected. Inapplicability of Prior Notice and Public Comment and Delayed Effective Date Procedures Based on the January 1, 2017, effective date of the PATH Act amendments to section 5041 of the IRC, TTB believes that proper administration and enforcement of those provisions necessitate the immediate adoption of implementing regulations as a temporary rule. TTB is issuing this temporary rule without prior notice and comment pursuant to authority under section 4(a) of the Administrative Procedure Act, as amended (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and comment when a rule is interpretive or when the agency for good cause finds that those procedures are ``impracticable, unnecessary, or contrary to the public interest.'' The majority of the regulatory provisions contained in this temporary rule are exempt from prior notice and comment because they are interpretive. TTB finds that it has good cause to dispense with prior notice and comment for the substantive provisions of this rule that set forth labeling requirements, recordkeeping requirements for artificially carbonated hard cider and sparkling hard cider, and a carbon dioxide tolerance for artificially carbonated hard cider and sparkling hard cider. Because this document implements provisions of law that are effective on January 1, 2017, and because immediate guidance is necessary to implement these provisions, it is found to be impracticable to issue this Treasury decision with prior notice and public procedure under 5 U.S.C. 553(b). TTB is also including in this temporary rule additional labeling rules effective for ``hard cider'' removed from wine premises on or after January 1, 2018 (see Sec. 24.257(a)(4)(i)(B)(2) and (a)(4)(ii)(A)(3)) and for imported wines removed on or after January 1, 2018 (see Sec. 27.59(b)), to provide certainty to industry members regarding how they will be required to identify the appropriate tax class of their products. TTB is issuing this temporary rule without a delayed effective date pursuant to authority under section 4(c) of the APA (5 U.S.C. 553(d)). TTB finds good cause under 5 U.S.C. 553(d)(3) to dispense with the effective date limitation in 5 U.S.C. 553(d). A 30-day delayed effective date is impracticable because this temporary rule implements statutory changes that are effective after December 31, 2016. Accordingly, the effective date of this temporary rule is January 1, 2017. TTB is providing a delayed effective date for the requirement that all wine that qualifies for the hard cider tax rate must be labeled with ``Tax class 5041(b)(6)'' (see Sec. 24.257(a)(4)(i)(B)(2) and (a)(4)(ii)(A)(3) and Sec. 27.59(b)) in order to provide the industry with sufficient time to make arrangements for compliance. This requirement is effective January 1, 2018. Drafting Information Dana Register and Kara Fontaine of the Regulations and Rulings Division drafted this document with the assistance of other Alcohol and Tobacco Tax and Trade Bureau personnel. List of Subjects 27 CFR Part 24 Administrative practice and procedure, Cider, Claims, Electronic funds transfers, Excise taxes, Exports, Food additives, Fruit juices, Hard Cider, Labeling, Liquors, Packaging and containers, Reporting and recordkeeping requirements, Research, Scientific equipment, Spices and flavorings, Surety bonds, Vinegar, Warehouses, Wine. 27 CFR Part 27 Alcohol and alcoholic beverages, Beer, Cosmetics, Customs duties and inspections, Electronic funds transfers, Excise taxes, Imports, Labeling, Liquors, Packaging and containers, Reporting and Recordkeeping requirements, Wine. Amendments to the Regulations For the reasons discussed in the preamble, TTB is amending 27 CFR chapter I, parts 24 and 27 as follows: PART 24--WINE 0 1. The authority citation for part 24 continues to read as follows: Authority: 5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042, 5044, 5061, 5062, 5121, 5122-5124, 5173, 5206, 5214, 5215, 5351, 5353, 5354, 5356, 5357, 5361, 5362, 5364-5373, 5381-5388, 5391, 5392, 5511, 5551, 5552, 5661, 5662, 5684, 6065, 6091, 6109, 6301, 6302, 6311, 6651, 6676, 7302, 7342, 7502, 7503, 7606, 7805, 7851; 31 U.S.C. 9301, 9303, 9304, 9306. 0 2. In Sec. 24.10: 0 a. The definition of ``Artificially carbonated hard cider'' is added in alphabetical order; 0 b. The definitions of ``Artificially carbonated wine'', ``Cider'', ``Effervescent wine'', and ``Hard cider'' are revised; 0 c. The definition of ``Sparkling hard cider'' is added in alphabetical order; 0 d. The definition of ``Sparkling wine or champagne'' is revised; 0 e. The definition of ``Still hard cider'' is added in alphabetical order; and 0 f. The definition of ``Still wine'' is revised. The revisions and additions read as follows: Sec. 24.10 Meaning of terms. * * * * * Artificially carbonated hard cider. Hard cider artificially injected with carbon dioxide and containing more than 0.392 but not more than 0.64 gram of carbon dioxide per 100 milliliters. Artificially carbonated wine. Wine (other than hard cider) artificially injected with carbon dioxide and containing more than 0.392 gram of carbon dioxide per 100 milliliters. * * * * * Cider. See definitions for hard cider and tax exempt cider. For the labeling of wine that may be designated as ``cider'' under the Federal Alcohol Administration Act, see Sec. 4.21(e)(5) of this chapter. * * * * * Effervescent wine. A wine containing more than 0.392 gram of carbon dioxide per 100 milliliters, including artificially carbonated hard cider, artificially carbonated wine, sparkling hard cider, and sparkling wine. * * * * * Hard cider. A wine that meets the eligibility requirements set forth in Sec. 24.331 for the hard cider tax rate set forth in Sec. 24.270. See the definitions for artificially carbonated hard cider, sparkling hard cider, and still hard cider. * * * * * Sparkling hard cider. Hard cider containing more than 0.392 but not [[Page 7663]] more than 0.64 gram of carbon dioxide per 100 milliliters of wine, resulting solely from the secondary fermentation of the wine within a closed container. Sparkling wine or champagne. Wine (other than hard cider) containing more than 0.392 gram of carbon dioxide per 100 milliliters of wine resulting solely from the secondary fermentation of the wine within a closed container. * * * * * Still hard cider. A hard cider containing not more than 0.392 gram of carbon dioxide per 100 milliliters. Still wine. Wine (other than hard cider) containing not more than 0.392 gram of carbon dioxide per 100 milliliters. * * * * * 0 3. Section 24.190 is revised to read as follows: Sec. 24.190 General. (a) Effervescent wine may be made on bonded wine premises. Where the effervescence results from fermentation of the wine within a closed container, the wine is classified and taxed as sparkling wine or as hard cider, as applicable. In such wine, the use of carbon dioxide, nitrogen gas, or a combination of both, is permitted to maintain counterpressure during transfer and bottling. Wine carbonated by injection of carbon dioxide is classified and taxed as artificially carbonated wine or as hard cider, as applicable. (For wine to be classified and taxed at the hard cider tax rate, it must meet the requirements set forth in Sec. 24.331, including the limitation of not more than 0.64 gram of carbon dioxide per 100 milliliters.) (b) Effervescent wine and any wine used as a base in the production of effervescent wine may not have an alcohol content in excess of 14 percent by volume. However, wine containing more than 14 percent alcohol by volume may be used in preparing a dosage for finishing effervescent wine. (Sec. 201, Pub. L. 85-859, 72 Stat. 1383, as amended (26 U.S.C. 5382)) 0 4. Section 24.191 is revised to read as follows: Sec. 24.191 Segregation of operations. Where more than one process of producing effervescent wine is used, the appropriate TTB officer may require the portion of the premises used for the production and storage of wine made by each process (bottle fermenting, bulk fermenting, or injecting carbon dioxide) to be segregated as provided by Sec. 24.27. (Sec. 201, Pub. L. 85-859, 72 Stat. 1381, as amended (26 U.S.C. 5365)) Sec. 24.192 [Amended] 0 5. Section 24.192 is amended by: 0 a. Adding the words ``or still hard cider'' after the words ``still wine'' in the first sentence; 0 b. Removing the words ``sparkling wine or artificially carbonated wine'' wherever they appear in the first six sentences of the section and adding, in their place, the words ``effervescent wine''; 0 c. Removing the word ``which'' in the sixth sentence and adding, in its place, the word ``that''; and 0 d. Adding the words ``or sparkling hard cider'' after the words ``sparkling wine'' in the last sentence. Sec. 24.193 [Amended] 0 6. Section 24.193 is amended by: 0 a. Adding the words ``or still hard cider'' after the words ``still wine'' in the section heading; 0 b. Removing the words ``Sparkling wine or artificially carbonated wine'' and adding, in their place, the words ``Effervescent wine''; and 0 c. Adding the words ``or still hard cider'' after the words ``still wine''. Sec. 24.225 [Amended] 0 7. Section 24.225 is amended by adding the words ``or natural still hard cider'' after the words ``still wine''. Sec. 24.234 [Amended] 0 8. Section 24.234 is amended by removing the words ``sparkling wine, artificially carbonated wine'' and adding, in their place, the words ``effervescent wine''. 0 9. Section 24.245 is revised to read as follows: Sec. 24.245 Use of carbon dioxide in still wine and still hard cider. (a) Use of carbon dioxide. The addition of carbon dioxide to (and retention of carbon dioxide in) still wine and still hard cider is permitted if at the time of removal for consumption or sale, the still wine or still hard cider does not contain more than 0.392 gram of carbon dioxide per 100 milliliters of wine. (b) Tolerance limit. A tolerance of not more than 0.009 gram per 100 milliliters to the maximum limitation of carbon dioxide in still wine and still hard cider will be allowed where the amount of carbon dioxide in excess of 0.392 gram per 100 milliliters is due to mechanical variations that cannot be completely controlled under good commercial practice. A tolerance will not be allowed where it is found by the appropriate TTB officer that the proprietor continuously or intentionally exceeds 0.392 gram of carbon dioxide per 100 milliliters of wine or where the variation results from the use of methods or equipment determined by the appropriate TTB officer to be not in accordance with good commercial practice. (c) Penalties. Penalties are provided in 26 U.S.C. 5662 for any person who, whether by manner of packaging or advertising or by any other form of representation, misrepresents any still wine or still hard cider to be effervescent wine or a substitute for effervescent wine. (d) Records. Records for the use of carbon dioxide in still wine must be maintained in accordance with Sec. 24.319 of this section. (Sec. 201, Pub. L. 85-859, 72 Stat. 1331, as amended, 1381, as amended, 1407, as amended (26 U.S.C. 5041, 5367, 5662)) Sec. 24.246 [Amended] 0 10. Section 24.246 is amended by removing the words ``sparkling wines'' from the description of the use of ammonium phosphate in the ``Materials and use column'' of the table, and adding, in their place, the words ``sparkling wine or sparkling hard cider''. 0 11. Section 24.251 is added immediately after Sec. 24.250 to read as follows: Sec. 24.251 Tolerance for artificially carbonated hard cider and sparkling hard cider. (a) Tolerance. A tolerance of not more than 0.009 gram per 100 milliliters to the maximum limitation of carbon dioxide in artificially carbonated hard cider and sparkling hard cider will be allowed where the amount of carbon dioxide in excess of 0.64 gram per 100 milliliters is due to mechanical variations or secondary fermentation variations that cannot be completely controlled under good commercial practice. A tolerance will not be allowed where it is found by the appropriate TTB officer that the proprietor continuously or intentionally exceeds 0.64 gram of carbon dioxide per 100 milliliters of artificially carbonated hard cider or sparkling hard cider or where the variation results from the use of methods or equipment determined by the appropriate TTB officer to be not in accordance with good commercial practice. (See Subpart P of this part for the definition of hard cider for purposes of determining eligibility for the hard cider tax rate.) (b) Records. See Sec. 24.302 of this chapter for recordkeeping requirements. (Sec. 335, Pub. L. 114-113, 129 Stat. 3109, as amended (26 U.S.C. 5041) [[Page 7664]] Sec. 24.255 [Amended] 0 12. In Sec. 24.255(a), the first sentence is revised by adding, after the word ``removed'', the words ``as well as for the correct determination of carbon dioxide in artificially carbonated hard cider and in sparkling hard cider'', and the Office of Management and Budget control number reference is revised by removing the numbers ``1512-0298 and 1512-0503'' and adding, in their place, the numbers ``1513-0115 and 1513-0092''. 0 13. Section 24.257 is amended by: 0 a. Revising paragraph (a)(4); 0 b. Adding paragraph (a)(6); and 0 c. Revising the Office of Management and Budget control number reference. The revisions and addition read as follows: Sec. 24.257 Labeling wine containers. (a) * * * (4) An appropriate designation of the kind of wine, as follows: (i) Wines that require label approval--(A) General. If the wine contains 7 percent or more alcohol by volume and must have label approval under 27 CFR part 4, the designation is the class, type, or other designation required by that part. (B) Labeling rules for wines eligible for the ``hard cider'' tax class--(1) Transitional rule for ``hard cider'' removed on or after January 1, 2017 and prior to January 1, 2018. On an optional basis, wines that are taxed at the ``hard cider'' tax rate may include the statement ``Tax class 5041(b)(6)'' on the label to adequately indicate the appropriate tax class. (2) Additional labeling rules effective for ``hard cider'' removed from wine premises on or after January 1, 2018. For wines removed from wine premises on or after January 1, 2018 that are taxed at the ``hard cider'' tax rate, the label must also include the statement ``Tax class 5041(b)(6).'' This statement may appear anywhere on the label. (ii) Wines that do not require label approval--(A) Adequate designation. If the wine is not subject to label approval under 27 CFR part 4 because it either is covered by a certificate of exemption from label approval or contains less than 7 percent alcohol by volume, its label must bear a designation that includes enough information (when viewed with the alcohol content statement) to identify the tax class under 26 U.S.C. 5041. The wine must be identified by the term ``wine'' (or a word that signifies a type of wine, such as ``cider,'' ``perry,'' or ``mead,'' as applicable). If the wine contains more than 0.392 gram of carbon dioxide per 100 milliliters, the word ``sparkling'' or ``carbonated,'' as applicable, must be included in the designation. (1) Additional labeling rules effective for wines eligible for the ``hard cider'' tax class. For wines removed from wine premises on or after January 1, 2017, that are taxed at the ``hard cider'' tax rate, the designation must be consistent with a hard cider tax class. For example, the designations ``hard cider,'' ``hard perry,'' ``apple wine,'' ``pear wine,'' ``apple cider,'' ``apple perry,'' ``apple pear wine,'' ``cider'' and ``perry'' are consistent with the hard cider tax class. The designation ``blueberry cider'' is not consistent with the hard cider tax class, because it indicates that the product contains either blueberries or blueberry flavors, which are not authorized for use in wine that is eligible for the hard cider tax class. If the hard cider contains more than 0.392 gram of carbon dioxide per 100 milliliters, the word ``sparkling'' or ``carbonated,'' as applicable, must be on the label. (2) Transitional rule for wines removed on or after January 1, 2017 and prior to January 1, 2018. For wines removed on or after January 1, 2017 and prior to January 1, 2018, a label will not be deemed out of compliance with Sec. 24.257(a)(4)(ii)(A) on the sole ground that the label does not provide enough information to identify whether the wine is eligible for a ``hard cider'' tax classification. On an optional basis, wines eligible for the ``hard cider'' tax class may include the statement ``Tax class 5041(b)(6)'' on the label to adequately indicate the appropriate tax class. (3) Additional labeling rules effective for ``hard cider'' removed from wine premises on or after January 1, 2018. For wines removed from wine premises on or after January 1, 2018, that are taxed at the ``hard cider'' tax rate, the label must also include the statement ``Tax class 5041(b)(6).'' This statement may appear anywhere on the label. (B) Cross reference. For additional labeling rules applicable to wines containing less than 7 percent alcohol by volume, see the food labeling regulations issued by the U.S. Food and Drug Administration. * * * * * (6) Cross reference. For regulations requiring a health warning statement on the container of any alcoholic beverage containing not less than one-half of one percent alcohol by volume, see part 16 of this chapter. * * * * * (Approved by the Office of Management and Budget under control numbers 1513-0115 and 1513-XXXX) 0 14. Section 24.266 is amended by revising paragraph (b)(2) and the reference to the Office of Management and Budget control number, to read as follows: Sec. 24.266 Inventory losses. * * * * * (b) * * * (2)(i)(A) Where the loss of wine on bonded wine premises during the annual period exceeds three percent of the aggregate volume of wine on- hand at the beginning of the annual period and the volume of wine received in bond during the annual period; (B) The loss exceeds six percent of the still wine or still hard cider produced by fermentation; (C) The loss exceeds six percent of the sparkling wine or sparkling hard cider produced by fermentation in bottles; (D) The loss exceeds three percent of the special natural wine produced under Sec. 24.195 or other wine produced under Sec. 24.218; (E) The loss exceeds three percent of the artificially carbonated wine or artificially carbonated hard cider produced; or (F) The loss exceeds three percent of the bulk process sparkling wine or bulk process sparkling hard cider produced. (ii) The percentage applicable to each tax class of wine will be calculated separately, unless the calculation is impracticable because of the mixture of different tax classes by addition of wine spirits or blending during the annual period, in which case the percentage will be calculated on the aggregate volume. Wine removed immediately after production for use as distilling material and on which the usual racking, clarifying, and filtering losses are not sustained, will not be included in the calculations. * * * * * (Approved by the Office of Management and Budget under control number 1513-0088) 0 15. Section 24.270 is revised to read as follows: Sec. 24.270 Determination of tax. (a) General. The tax on wine is determined at the time of removal from a bonded wine premises for consumption or sale. Section 5041 of 26 U.S.C., imposes an excise tax, at the rates prescribed, on all wine (including imitation, substandard, or artificial wine, and compounds sold as wine, which contain 24 percent or less of alcohol by volume) produced in or imported into the United States. Wine containing more than 24 percent of alcohol by volume is classified as distilled spirits and taxed accordingly. [[Page 7665]] A wine product containing less than one-half of one percent alcohol by volume is not taxable as wine when removed from the bonded wine premises. (b) Tax determined and paid on the volume of wine. The tax is determined and paid on the volume of wine: (1) In bottles or other containers filled according to United States measure recorded to the nearest 10th gallon; or, (2) In bottles or other containers filled according to metric measure, on the volume of wine in United States wine gallons to the nearest 10th gallon; or (3) In the case of pipeline removals, on the volume of bulk wine removed recorded to the nearest whole gallon, five-tenths gallon being converted to the next full gallon. (c) Tax rates imposed on wine. The following taxes are imposed on wine: (1) Tax class 5041(b)(1). On still wines containing not more than 14 percent alcohol by volume, $1.07, per wine gallon; (2) Tax class 5041(b)(2). On still wines containing more than 14 percent and not exceeding 21 percent alcohol by volume, $1.57 per wine gallon; (3) Tax class 5041(b)(3). On still wines containing more than 21 percent and not exceeding 24 percent alcohol by volume, $3.15 per wine gallon; (4) Tax class 5041(b)(4). On champagne and other sparkling wines, $3.40 per wine gallon; (5) Tax class 5041(b)(5). On artificially carbonated wines, $3.30 per wine gallon; and (6) Tax class 5041(b)(6). On hard cider, 22.6 cents per wine gallon. See Sec. 24.331 for the definition of hard cider for purposes of determining eligibility for the hard cider tax class. (d) Small domestic producer tax credit. For eligibility for the small producer tax credit, see Sec. Sec. 24.278 and 24.279. (Sec. 201, Pub. L. 85-859, 72 Stat. 1331, and Sec. 335, Pub. L. 114- 113, 129 Stat. 3109, as amended (26 U.S.C. 5041)) Sec. 24.290 [Amended] 0 16. Section 24.290(a) is amended by adding the words ``or still hard cider'' after the words ``still wine'' in the first sentence. Sec. 24.291 [Amended] 0 17. Section 24.291 is amended: 0 a. In the first sentence of paragraph (a), by adding the words ``or still hard cider'' after the words ``still wine''; and, 0 b. In the Office of Management and Budget control number reference, by removing the numbers ``1512-0058, 1512-0292 and 1512-0298'', and adding, in their place, the numbers ``1513-0009 and 1513-0115''. Sec. 24.301 [Amended] 0 18. Section 24.301 is amended: 0 a. In the section heading, by adding the words ``and bulk still hard cider'' after the words ``still wine''; 0 b. In the first sentence of the introductory text, by adding the words ``or bulk still hard cider'' after the words ``still wine'' each time they appear; 0 c. In the second sentence of the introductory text, by adding the words ``or for hard cider'' after the words ``still wine''; 0 d. In the third sentence of the introductory text, by adding the words ``and bulk still hard cider'' after the words ``still wine''; 0 e. In paragraph (b), by adding the words ``or sparkling hard cider'' after the words ``sparkling wine''; and 0 f. In the Office of Management and Budget control number reference, by removing the number ``1512-0298'' and adding, in its place, the number ``1513-0115''. 0 19. Section 24.302 is amended by: 0 a. Revising the introductory text and paragraphs (a), (d), (e), (g), (i), and (j); 0 b. Adding paragraph (k); and 0 c. Revising the Office of Management and Budget control number reference. The revisions and addition read as follows: Sec. 24.302 Effervescent wine record. A proprietor who produces or receives effervescent wine in bond shall maintain records showing the transaction date and details of production, receipt, storage, removal, and any loss incurred. Records will be maintained for each specific process used (bulk or bottle fermented, injection of carbon dioxide) and by the specific kind of wine, e.g., grape, apple, pear, cherry, hard cider. The record will contain the following: (a) The volume of still wine or still hard cider filled into bottles or pressurized tanks prior to secondary fermentation or prior to the addition of carbon dioxide; * * * * * (d) The volume of bottle fermented sparkling wine or bottle fermented sparkling hard cider in process, transferred and received; (e) The volume returned to still wine or still hard cider; * * * * * (g) The volume of finished effervescent wine bottled or packed (amount produced); * * * * * (i) An explanation of any unusual transaction; (j) If the proprietor is an importer of wine to which the provisions of Sec. 27.140 of this chapter apply, any certification or other records required at the time of release from customs custody under that section; and (k) The amount of carbon dioxide in artificially carbonated hard cider or sparkling hard cider. (Sec. 201, Pub. L. 85-859, 72 Stat. 1381, as amended (26 U.S.C. 5367)) (Approved by the Office of Management and Budget under control number 1513-0115 and 1513-XXXX) Sec. 24.306 [Amended] 0 20. Section 24.306 is amended by adding in the words ``and bulk still hard cider'' after the words ``still wine'' in the last sentence, and, in the Office of Management and Budget control number reference, by removing the number ``1512-0298'' and adding, in its place, the number ``1513-0115''. Sec. 24.308 [Amended] 0 21. Section 24.308 is amended by adding the words ``or bottle fermented sparkling hard cider'' after the words ``bottle fermented sparkling wine'' in the last sentence of paragraph (a), and, in the Office of Management and Budget control number reference, by removing the number ``1512-0298'' and adding, in its place, the number ``1513-0115''. Sec. 24.319 [Amended] 0 22. Section 24.319 is amended by adding the words ``or still hard cider'' after the words ``still wine'', and, in the Office of Management and Budget control number reference, by removing the number ``1512-0298'' and adding, in its place, the number ``1513-0115''. 0 23. Subpart P, consisting of Sec. Sec. 24.331 and 24.332, is added to read as follows: Subpart P--Eligibility for the Hard Cider Tax Rate Sec. 24.331 Wine eligible for the hard cider tax rate. A wine removed on or after January 1, 2017 is eligible for the hard cider tax rate listed in Sec. 24.270 if: (a) It contains no more than 0.64 gram of carbon dioxide per 100 milliliters of wine; (b) It is derived primarily from apples or pears, or from apple juice concentrate or pear juice concentrate and water, as described in Sec. 24.332(a); (c) It contains no fruit product or fruit flavoring other than apple or pear, as described in Sec. 24.332(b) and (c); and (d) It contains at least one-half of 1 percent and less than 8.5 percent alcohol by volume. [[Page 7666]] (Sec. 335, Pub. L. 114-113, 129 Stat. 3109, as amended (26 U.S.C. 5041)) Sec. 24.332 Hard cider materials. This section pertains to wine that is eligible for the hard cider tax rate as set out in Sec. 24.331. (a) Apples and pears. Wine will be considered to be derived primarily from apples or pears, or from apple juice concentrate or pear juice concentrate and water, if the apple juice, pear juice, or combination of apple and pear juice, or the equivalent amount of concentrate of apple and/or pear juice reconstituted to the original brix of the juice prior to concentration, or any combination thereof, represents more than 50 percent of the volume of the finished product. (b) Fruit products. (1) Wine is not eligible for the hard cider tax rate if it contains any fruit product other than apple or pear. A fruit product is any material derived or made from any fruit or part of a fruit, including but not limited to, concentrates, extracts, juices, powders, or wine spirits. (2) Notwithstanding the provisions of Sec. 24.332(b)(1), an authorized wine treating material set forth in Sec. 24.246 that is derived from a fruit other than apple or pear may be used in the production of wine otherwise eligible for the hard cider tax rate if it is used for a purpose other than flavoring and it is either used in accordance with the wine treating materials provisions of Sec. 24.246 (if used in a natural wine), or used in amounts insufficient to impart a fruit flavor other than apple or pear (if used in a special natural wine or other than standard wine). In determining whether the use of wine treating materials derived from a fruit other than apple or pear is for a purpose other than flavoring, TTB will consider such factors as the labeling and advertising of the product. Any written or pictorial reference to a material derived from a fruit other than apple or pear (other than the inclusion of a wine treating material in an ingredient labeling statement) in the labeling or advertising of a wine will be treated as evidence that the wine treating material was added for the purpose of flavoring the wine. (c) Flavorings. Wine is not eligible for the hard cider tax rate if it contains any fruit flavoring other than apple or pear. For purposes of this section, a fruit flavoring other than apple or pear is any flavoring that imparts the flavor of a fruit other than apple or pear and includes a natural fruit flavor, an artificial fruit flavor, and a natural flavor that artificially imparts the flavor of a fruit that is not contained in that flavor. In determining whether the use of a flavoring imparts the flavor of a fruit other than apple or pear, TTB will consider such factors as the labeling and advertising of the product. Any written or pictorial reference to a fruit flavor other than apple or pear in the labeling or advertising of a wine that contains a flavoring will be treated as evidence that the wine contains a flavoring that imparts a fruit flavor other than apple or pear and thus the wine is not eligible for the hard cider tax rate. The use of spices, honey, hops, or pumpkins as a flavoring will not make a wine ineligible for the hard cider tax rate. (Sec. 335, Pub. L. 114-113, 129 Stat. 3109, as amended (26 U.S.C. 5041)) PART 27--IMPORTATION OF DISTILLED SPIRITS, WINES, AND BEER 0 24. The authority citation for part 27 continues to read as follows: Authority: 5 U.S.C. 552(a), 19 U.S.C. 81c, 1202; 26 U.S.C. 5001, 5007, 5008, 5010, 5041, 5051, 5054, 5061, 5121, 5122-5124, 5201, 5205, 5207, 5232, 5273, 5301, 5313, 5382, 5555, 6109, 7805. 0 25. Section 27.11 is amended by adding the definition of ``Hard cider'' in alphabetical order to read as follows: Sec. 27.11 Meaning of terms. * * * * * Hard cider. A wine that meets the eligibility requirements set forth in Sec. 24.331 for the hard cider tax rate set forth in Sec. 24.270. * * * * * 0 26. Section 27.59 is revised by: 0 a. Designating the current paragraph as paragraph (a); 0 b. Adding a paragraph heading to newly designated paragraph (a); 0 c. Adding paragraph (b); and 0 d. Adding an Office of Management and Budget control number reference. The designation and additions read as follows: Sec. 27.59 Wines. (a) General. * * * (b) Hard cider. The container of any wine eligible for the ``hard cider'' tax class set forth in Sec. 24.270 of this chapter must be labeled in accordance with the requirements applicable to wine containers removed from wine premises under Sec. 24.257(a)(4) of this chapter. (See Sec. 24.331 of this chapter for the eligibility requirements for the hard cider tax rate). (Approved by the Office of Management and Budget under control number 1513-XXXX) Signed: December 7, 2016. John J. Manfreda, Administrator. Approved: January 4, 2017. Timothy E. Skud, Deputy Assistant Secretary (Tax, Trade and Tariff Policy). [FR Doc. 2017-00333 Filed 1-19-17; 8:45 am] BILLING CODE 4810-31-P
![Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations 7653
PART 226—LEASING OF OSAGE Dated: January 11, 2017. I. Background
RESERVATION LANDS FOR OIL AND Lawrence S. Roberts,
Protecting Americans From Tax Hikes
GAS MINING Principal Deputy Assistant Secretary—Indian Act of 2015
Affairs.
■ 9. The authority citation for part 226 [FR Doc. 2017–01076 Filed 1–19–17; 8:45 am] On December 18, 2015, the President
is revised to read as follows: BILLING CODE 4337–15–P signed into law the Consolidated
Appropriations Act, 2016 (Pub. L. 114–
Authority: Sec. 3, 34 Stat. 543; secs. 1, 2,
45 Stat. 1478; sec. 3, 52 Stat. 1034, 1035; sec. 113). Division Q of this Act is titled the
2(a), 92 Stat. 1660; and Sec. 701, Pub. L. 114– Protecting Americans from Tax Hikes
74, 129 Stat. 599. DEPARTMENT OF THE TREASURY Act of 2015 (PATH Act). Section 335(a)
of the PATH Act amends the Internal
§ 226.42 [Amended] Alcohol and Tobacco Tax and Trade Revenue Code of 1986 (IRC) at 26 U.S.C.
■ 10. In § 226.42, remove ‘‘$891’’ and Bureau 5041 by modifying the definition of
add in its place ‘‘$906’’. hard cider for excise tax classification
27 CFR Parts 24 and 27 purposes. Pursuant to section 335(b) of
§ 226.43 [Amended] the PATH Act, the amended definition
[Docket No. TTB–2016–0014; T.D. TTB–147; of hard cider applies to such products
■ 11. In § 226.43:
Re: Notice No. 168] removed on or after January 1, 2017.
■ a. Remove ‘‘$89’’ each time it appears The PATH Act does not change the tax
and add in each place ‘‘$90’’ wherever rate applicable to wine eligible for the
it appears in this section. RIN 1513–AC31
hard cider tax rate; rather, it broadens
■ b. In paragraph (e), remove ‘‘$178’’ Implementation of Statutory the range of products to which the hard
and add in its place ‘‘$181’’. Amendments Requiring the cider tax rate applies. Among other
■ c. In paragraph (f), remove ‘‘$356’’ and Modification of the Definition of Hard things, the range of products to which
add in its place ‘‘$362’’. Cider the hard cider tax rate applies will
■ d. In paragraph (g), remove ‘‘$891’’ include certain sparkling and
and add in its place ‘‘$906’’. AGENCY: Alcohol and Tobacco Tax and carbonated products and certain
Trade Bureau, Treasury. products that are subject to the
PART 227—LEASING OF CERTAIN ACTION: Temporary rule; Treasury requirements of the Federal Alcohol
LANDS IN WIND RIVER INDIAN decision; cross reference to notice of Administration Act (FAA Act).
RESERVATION, WYOMING, FOR OIL proposed rulemaking. TTB Authority
AND GAS MINING
SUMMARY: This temporary rule amends The Alcohol and Tobacco Tax and
■ 12. The authority citation for part 227 the Alcohol and Tobacco Tax and Trade Trade Bureau (TTB) of the Department
is revised to read as follows: Bureau (TTB) regulations to implement of the Treasury administers chapter 51
Authority: Sec. 1, 39 Stat. 519; and Sec. changes made to the definition of ‘‘hard of the IRC, which sets forth the Federal
701, Pub. L. 114–74, 129 Stat. 599, unless cider’’ in the Internal Revenue Code of excise taxes on wine and related
otherwise noted. 1986 by the Protecting Americans from provisions, including provisions
Tax Hikes Act of 2015. The modified addressing the production and marking
§ 227.24 [Amended] of wine (see 26 U.S.C. chapter 51).
definition broadens the range of wines
■ 13. In § 227.24, remove ‘‘$1,250’’ and eligible for the hard cider tax rate. TTB Section 5041 of the IRC (26 U.S.C. 5041)
add in its place ‘‘$1,270’’. is amending its regulations to reflect the imposes six excise tax rates, including
modified definition of hard cider the hard cider tax rate, on wines. These
PART 243—REINDEER IN ALASKA effective for products removed on or tax rates are associated with six tax
after January 1, 2017, and to set forth classes that correspond to section
■ 14. The authority citation for part 243 new labeling requirements to identify 5041(b) subparagraphs (1) through (6),
is revised to read as follows: products to which the hard cider tax as follows:
Authority: Sec. 12, 50 Stat. 902; 25 U.S.C. rate applies. The new labeling • Section 5041(b)(1) imposes a tax of
500K; and Sec. 701, Pub. L. 114–74, 129 Stat. requirements include both a one-year $1.07 per wine gallon 1 on still wines
599. transitional rule and a new labeling containing not more than 14 percent
requirement that takes effect for alcohol by volume.
§ 243.8 [Amended]
products removed on or after January 1, • Section 5041(b)(2) imposes a tax of
■ 15. In § 243.8(a) introductory text, 2018. TTB is also soliciting comments $1.57 per wine gallon on still wines
remove ‘‘$5,893’’ and add in its place from all interested parties on these containing more than 14 percent and
‘‘$5,989’’. amendments through a notice of not exceeding 21 percent of alcohol by
proposed rulemaking published volume.
PART 249—OFF–RESERVATION elsewhere in this issue of the Federal • Section 5041(b)(3) imposes a tax of
TREATY FISHING Register. $3.15 per wine gallon on still wines
containing more than 21 percent and
■ 16. The authority citation for part 249 DATES: This temporary rule is effective not exceeding 24 percent of alcohol by
is revised to read as follows: January 23, 2017. volume.
• Section 5041(b)(4) imposes a tax of
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Authority: 25 U.S.C. 2, and 9; 5 U.S.C. FOR FURTHER INFORMATION CONTACT: Kara
301; and Sec. 701, Pub. L. 114–74, 129 Stat. Fontaine, Regulations and Rulings $3.40 per wine gallon on champagne
599, unless otherwise noted. Division, Alcohol and Tobacco Tax and and other sparkling wines.
Trade Bureau, 1310 G Street NW., Box
§ 249.6 [Amended] 12, Washington, DC 20005; telephone 1 The TTB regulations in 27 CFR 24.10 define the
(202) 453–1039 ext. 103. term ‘‘wine gallon’’ as ‘‘a United States gallon of
■ 17. In § 249.6(b), remove ‘‘$1,250’’ and liquid measure equivalent to the volume of 231
add in its place ‘‘$1,270’’. SUPPLEMENTARY INFORMATION: cubic inches.’’
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![Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations 7655
volume of the finished product. (The impractical to make a distinction ‘‘hard cider,’’ allowing a broader range
term ‘‘brix’’ in this text refers to the between fruit-derived wine treating of products to be eligible for the hard
quantity of dissolved solids expressed materials and the same materials cider tax rate. TTB notes that the PATH
as grams of sucrose in 100 grams of derived from other sources, unless there Act did not amend the FAA Act,
solution at 60 degrees Fahrenheit. For were other circumstances that indicated although the definition of hard cider
example, one degree Brix is 1 gram of the producer was using these materials under the PATH Act now includes
sucrose in 100 grams of solution and as flavorings. One of those products to which the FAA Act
represents the strength of the solution as circumstances would be the labeling of requirements apply.
percentage by mass.) the product as being ‘‘flavored’’ with a Under the PATH Act, effective
Second, ATF interpreted the statutory fruit other than apple. January 1, 2017, section 5041 of the IRC,
phrase ‘‘containing no other fruit ATF noted that, when used as Imposition and rate of tax, contains a
product’’ to mean ‘‘containing no other directed in 27 CFR part 24 for natural new paragraph (g), which defines the
fruit product nor any artificial product wines, authorized wine treating term ‘‘hard cider’’ as a wine.
which imparts a fruit flavor other than materials would not impart a fruit flavor Under the PATH Act, effective
apple.’’ As explained in the preamble of to wine. However, ATF also noted that January 1, 2017, section 5041 of the IRC,
T.D. ATF–470, this interpretation is some ciders are made under approved Imposition and rate of tax, contains a
based on the legislative history of the formulas rather than under the rules for new paragraph (g), which defines the
TRA, which states: production of natural wine in subparts term ‘‘hard cider’’ as a wine derived
F and L of part 24, and that for formula primarily from apples or pears, or from
Once fermented, eligible hard cider may
wines 3, the use of wine treating apple juice concentrate or pear
not be altered by the addition of other fruit
juices, flavor, or other ingredient that alters materials may be approved at a level concentrate and water, which contains
the flavor that results from the fermentation beyond the level authorized in part 24 no fruit product or fruit flavoring other
process. Thus, for example, cider fermented for stabilizing or adjusting the acidity of than apple or pear. Also, under the
from apples, but which has raspberry flavor a natural wine. ATF further noted that revised definition, hard cider cannot
added to it prior to bottling and marketing to while the final rule did not place limits contain ‘‘more than 0.64 gram of carbon
the public, will not be eligible for the 22.6 on the use of wine treating materials dioxide per hundred milliliters of wine,
cents-per gallon tax rate.2 derived from fruits other than apple in except that the Secretary may by
ATF ‘‘d[id] not believe it was Congress’s a formula wine eligible for the hard regulations prescribe such tolerances to
intent to provide a tax incentive for use cider tax rate, a formula wine may not this limitation as may be reasonably
of artificial ingredients in preference to contain such treating materials in necessary in good commercial practice.’’
real ones.’’ See 66 FR 58941. amounts sufficient to impart a fruit In addition, the revised definition states
The preamble to T.D. ATF–470 also flavor other than apple and still be taxed that the alcohol content of hard cider
explained that the regulatory definition as hard cider. For example, if a cider may range between at least 0.5 percent
does not preclude the use of flavors contained more citric acid than the and less than 8.5 percent alcohol by
such as honey or spices, noting that amount allowed under subpart L of part volume.
‘‘[f]lavoring materials will only affect 24 for the production of natural wine,4 The specific changes concerning the
the tax classification of hard cider if and was labeled as ‘‘citrus flavored,’’ the hard cider tax rate resulting from the
they are derived from or impart the product would be classified for tax PATH Act are discussed individually
flavor of a fruit other than apple.’’ See purposes as a still wine under 14 below.
66 FR 58941. This position is also percent alcohol by volume rather than Increase in Authorized Amount of
reflected in current public guidance in hard cider. Carbon Dioxide
the form of an FAQ on the TTB Web Finally, ATF recognized that the term
‘‘hard cider’’ had broader meaning in As noted above, prior to the effective
site. Specifically, FAQ CID24 states that,
the industry and among consumers than date of the hard cider provisions of the
because the IRC provides that the hard
the definition given in the regulations. PATH Act, to be eligible for the ‘‘hard
cider tax rate under section 5041(b)(6) is
As a result, ATF stated that it would cider’’ tax rate under the IRC, wine must
not available to wines that contain a
allow the use of the term ‘‘hard cider’’ be, among other things, a ‘‘still wine,’’
fruit product other than apple, a cider
on labels of products that do not belong that is, a wine containing not more than
containing either natural or artificial
to the hard cider tax class, as long as 0.392 gram of carbon dioxide per 100
fruit flavors (other than apple flavors) is
other information on the label allows for milliliters. The modified definition of
not eligible for the hard cider tax rate of
the identification of the appropriate tax hard cider allows wine that is eligible
22.6¢ per gallon. Instead, a fruit-
class. for the hard cider tax rate to contain no
flavored cider would be taxed at the
more than 0.64 gram of carbon dioxide
appropriate wine excise tax rate. (See III. PATH Act’s Modification of the IRC per 100 milliliters of wine. Prior to the
https://www.ttb.gov/faqs/alcohol_ Definition of Hard Cider for Tax effective date of the hard cider
faqs.shtml?Cider#Cider.) Purposes provisions of the PATH Act, wine with
In the preamble to T.D. ATF–470,
The PATH Act amendments to section a carbon dioxide content greater than
ATF also addressed the prohibition on
5041 of the IRC change the definition of 0.392 gram of carbon dioxide per 100
‘‘other fruit products’’ with regard to
milliliters of wine is an ‘‘effervescent
authorized wine treating materials that
3 The TTB regulations at 27 CFR 24.10 define the wine’’ and is taxed as either ‘‘sparkling
are derived from fruits other than apple, term ‘‘formula wine’’ as special natural wine, wine’’ or as ‘‘artificially carbonated
such as tannin or citric acid. The agricultural wine, and other than standard wine wine’’ depending on the source of the
preamble explained that the final rule
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(except for distilling material and vinegar stock)
produced on bonded wine premises under an carbon dioxide. Sparkling wine is an
did not restrict the use of approved
approved formula. effervescent wine for which the carbon
wine treating materials derived from 4 Natural wine, under 26 U.S.C. 5381, is the dioxide has resulted solely from the
fruit in cider, stating that it would be product of the juice or must of sound, ripe grapes secondary fermentation of the wine
or other sound, ripe fruit, made with such cellar
2 See General Explanation of Tax Legislation treatment as may be authorized under section 5382
within a closed container. Artificially
Enacted in 1997, published by the Joint Committee of the IRC (26 U.S.C. 5382) and containing not more carbonated wine is a wine made
on Taxation (JCS–23–97). than 21 percent by weight of total solids. effervescent by the injection of carbon
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![Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations 7657
imparts the flavor of a fruit other than pears may be sold as ‘‘perry,’’ ‘‘pear 0.64 gram of carbon dioxide per 100
apple or pear. For purposes of this wine,’’ or ‘‘hard perry.’’ milliliters of wine); thus, this wine is
section, a flavoring that imparts the not precluded from eligibility for the
Definitional Changes To Implement the
flavor of a fruit other than apple or pear small domestic producers credit
PATH Act
includes a natural fruit flavor, an described in § 24.278.
artificial fruit flavor, and a natural flavor The IRC at section 5041(a) provides These definitional changes also
that artificially imparts the flavor of a that ‘‘[s]till wines shall include those provide that wine that is eligible for the
fruit that is not contained in that flavor. wines containing not more than 0.392 lower hard cider tax rate at section
The preamble to T.D. ATF–470 gram of carbon dioxide per hundred 5041(b)(6) is not subject to the higher
provided that honey or spices would not milliliters * * *.’’ Because wine tax rates for ‘‘still wine,’’ ‘‘sparkling
disqualify an apple wine from the hard classified as hard cider will no longer wine,’’ or ‘‘artificially carbonated wine’’
cider tax rate; however, language to that necessarily be a ‘‘still wine’’ after the at section 5041(b)(1)–(b)(5).
effect did not appear in any regulatory PATH Act amendments take effect, and TTB is incorporating the terms
text. TTB is now incorporating such because hard ciders that are defined as ‘‘artificially carbonated hard cider,’’
language in the new § 24.332(c) to make ‘‘still wine’’ under section 5041(a) are ‘‘artificially carbonated wine,’’
this position more easily accessible to not taxed as ‘‘still wine’’ under section ‘‘sparkling hard cider’’ and ‘‘sparkling
industry members and the public. TTB 5041(b), TTB is adding a definition of wine’’ in the definition of ‘‘effervescent
has also received questions about the ‘‘still hard cider’’ to § 24.10, and wine’’ to make it clear that, when used
use of pumpkin flavors in cider. While excluding ‘‘hard cider’’ from the in the regulations, ‘‘effervescent wine’’
pumpkins are botanically classified as definition of ‘‘still wine’’ in that section. includes all four terms. The new
fruit, they are treated as ‘‘vegetables’’ for As amended, part 24 will use the term definition for the existing term ‘‘hard
several other purposes.6 It has been ‘‘still wine’’ to refer to wine containing cider’’ cross-references the new
TTB’s position that pumpkins are not not more than 0.392 gram of carbon definitions of ‘‘artificially carbonated
‘‘fruit’’ for purposes of part 24. Instead, dioxide per 100 milliliters of wine that hard cider,’’ ‘‘sparkling hard cider,’’ and
wines made from pumpkins are falls within one of the three tax classes ‘‘still hard cider,’’ and cites the new
classified as wines made from ‘‘other applicable to still wine set forth at eligibility requirements set forth in
agricultural products’’ under 26 U.S.C. section 5041(b)(1), (b)(2), or (b)(3). The § 24.331. TTB is removing the current
5387 and 27 CFR 24.204. See, e.g., TTB term ‘‘still hard cider,’’ when used in eligibility criteria included in the
Ruling 2016–2. Accordingly, in new the regulations, is used to denote wine definition of ‘‘Hard cider’’ at § 24.10 that
§ 24.332(c), TTB clarifies that the use of that is eligible for the hard cider tax rate interprets the law as it exists prior to the
spices, honey, hops, or pumpkins as a at section 5041(b)(6) and that contains effective date of the hard cider
flavoring will not make a wine ineligible not more than 0.392 gram of carbon provisions of the PATH Act.
dioxide per 100 milliliters. In addition to amending the definition
for the hard cider tax rate.
Similarly, TTB is adding definitions of ‘‘artificially carbonated wine’’ to
New § 24.332(c) also provides that
of ‘‘artificially carbonated hard cider’’ exclude wine eligible for the hard cider
any written or pictorial reference to a
and ‘‘sparkling hard cider’’ to describe tax rate, TTB is replacing the reference
fruit flavor other than apple or pear in
wine that is eligible for the hard cider in that definition to wine ‘‘artificially
the labeling or advertising of a wine that
tax rate at section 5041(b)(6); that charged with carbon dioxide’’ with the
contains a flavoring will be treated as
contains more than 0.392 but not more phrase ‘‘artificially injected with carbon
evidence that the wine contains a
than 0.64 gram of carbon dioxide per dioxide.’’ This change is not intended to
flavoring that imparts a fruit flavor other
100 milliliters; and that is made substantively change the provision, but
than apple or pear and thus the wine effervescent either by artificial injection rather to be consistent with the
will not be eligible for the hard cider tax of carbon dioxide or solely by secondary description of wine carbonated by the
rate. fermentation within a closed container. injection of carbon dioxide used in 27
The new definition in § 24.332,
Under this temporary rule, TTB is also CFR 24.190. TTB also is amending a
differing from the current definition of
excluding wine that is eligible for the cross-reference to the FAA Act that
hard cider in § 24.10, does not require hard cider tax rate from the definitions appears in the definition of ‘‘cider’’ in
that hard cider have the taste, aroma, of ‘‘artificially carbonated wine,’’ and § 24.10 to make clear that 27 CFR
and characteristics generally attributed ‘‘sparkling wine or champagne’’ set 4.21(e)(5) provides information
to hard cider. Nor does it require hard forth in § 24.10. regarding the labeling of wine that may
cider to be sold or offered for sale as As a result of these definitional be designated as ‘‘cider’’ under the FAA
hard cider. With regard to the reference changes, there is no need to amend the Act.
to ‘‘taste, aroma, and characteristics regulations in 27 CFR 24.278(a), which
generally attributed to hard cider,’’ these provide that ‘‘champagne and other Tolerance and Recordkeeping
aspects of the definition have been sparkling wine’’ are not eligible for the Requirements for Artificially
removed because under the PATH Act, tax credit for certain small producers. Carbonated Hard Cider and Sparkling
wine that is eligible for the hard cider This regulation is based on 26 U.S.C. Hard Cider
tax rate may contain pear, which TTB 5041(c)(1), which disqualifies ‘‘wine While there is no maximum allowed
believes is not a characteristic generally described in subsection (b)(4)’’ from carbon dioxide level for wine falling
attributed to hard cider. With regard to eligibility for the small producer credit. within the sparkling wine and
the reference to hard cider having to be Wine described in section 5041(b)(4) is artificially carbonated wine tax classes,
‘‘sold or offered for sale as hard cider,’’ wine that is taxable at the rate under the modified definition of hard
mstockstill on DSK3G9T082PROD with RULES
this aspect has been removed because a prescribed for ‘‘champagne and other cider, wine is not eligible for the hard
wine that meets the criteria of the hard sparkling wines.’’ This temporary rule cider tax rate if it contains more than
cider tax class and is produced from just specifies that the term ‘‘sparkling wine’’ 0.64 gram of carbon dioxide per 100
6 For example, the United States Department of
does not include hard cider that derives milliliters. As amended by the PATH
Agriculture’s National Nutrient Database for
its effervescence solely from the Act, section 5041(g)(1) authorizes TTB
Standard Reference currently lists pumpkin in its secondary fermentation in a closed to prescribe through regulation ‘‘such
‘‘Vegetables and Vegetable Product’’ food group. container (and contains no more than tolerances to this limitation as may be
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![7658 Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations
reasonably necessary in good CFR 24.225 and 24.234 in subpart K which explains that a product
commercial practice.’’ Current TTB (Spirits); § 24.246 in subpart L (Storage, containing less than one-half of one
regulations applicable to still wine with Treatment and Finishing of Wine); 27 percent alcohol by volume is not taxable
added carbon dioxide, at 27 CFR 24.245, CFR 24.266 in subpart M (Losses of as wine.
prescribe a tolerance of not more than Wine); §§ 24.290 and 24.291 in subpart
V. Labeling of Wine Eligible for the
0.009 gram per 100 milliliters where the N (Removal, Return and Receipt of
Hard Cider Tax Rate
amount of carbon dioxide in excess of Wine); 27 CFR 24.301, 24.302, 24.306,
0.392 gram per 100 milliliters is due to 24.308, and 24.319 in subpart O As noted above, TTB administers the
mechanical variations that cannot be (Records and Reports). labeling requirements of both the IRC
completely controlled under good Along with conforming amendments and the FAA Act. TTB bases its labeling
commercial practice. In this temporary to § 24.245, TTB also is removing a requirements in part 24 on section
rule, TTB sets forth a new section, 27 reference to ‘‘authorized test 5368(b) of the IRC, which gives the
CFR 24.251, and extends the same 0.009 procedures’’ for determining the amount Secretary of the Treasury general
gram per 100 milliliters tolerance to of carbon dioxide in still wine to which authority to issue labeling regulations
artificially carbonated hard cider and carbon dioxide has been added. Section that require evidence of compliance
sparkling hard cider where the amount 24.245 currently states that ‘‘[t]he with tax provisions.
of carbon dioxide in excess of 0.64 gram proprietor shall determine the amount Labeling Requirements Prior to the
per 100 milliliters is due to mechanical of carbon dioxide added to wine using Effective Date of Hard Cider Provisions
variations or secondary fermentation authorized test procedures.’’ TTB’s of the PATH Act
variations that cannot be completely predecessor agency, ATF, published
controlled under good commercial several authorized test procedures from Current § 24.257 sets forth the
practice. This tolerance will not be 1971 to 1983. These are ATF Procedure requirements for labeling containers of
allowed where it is found that the 73–1 (authorizing the enzymatic wine, including wine eligible for the
proprietor continuously or intentionally method, the manometric method, and hard cider tax rate, for purposes of the
exceeds 0.64 gram of carbon dioxide per the volumetric method), ATF Procedure IRC. In general, § 24.257 provides that
100 milliliters of artificially carbonated 77–2 (authorizing the infrared proprietors must label each bottle or
hard cider or sparkling hard cider or spectrophotometer method), and ATF other container of beverage wine prior
where the variation results from the use Procedure 83–2 (authorizing the use of to removal for consumption or sale, and
of methods or equipment determined by an automated thermal conductivity the label must show: (1) The name and
the appropriate TTB officer not to be in analyzer). Although TTB still views address of the wine premises where the
accordance with good commercial these methods as valid, TTB currently wine is bottled or packed, (2) the brand
practice. uses the enzymatic 7 and titrimetric 8 name, if it is different from the name
Apple or pear wine that has in excess method to determine the carbon dioxide shown in the name and address
of 0.64 gram of carbon dioxide per 100 levels in wine. statement; (3) the alcohol content of the
milliliters (unless covered by the It is TTB’s current policy that wine; (4) the kind of wine; and (5) the
allowed tolerance) will be classified and producers may use any method that has net contents of the container.
taxed at the applicable ‘‘sparkling wine’’ been formally validated (e.g., that Current § 24.257 provides that
or ‘‘artificially carbonated wine’’ rate, underwent a multi-laboratory conformity with TTB’s FAA Act
see section 5041(b)(4) and (b)(5). performance evaluation) or that is labeling regulations found in part 4 of
Accordingly, TTB is amending 27 CFR otherwise scientifically valid to the TTB regulations is sufficient to
24.255(a) to specify that proprietors of a determine the carbon dioxide levels in identify the appropriate tax class. With
bonded wine premises or a taxpaid wine wine. (A scientifically valid method is, regard to alcohol content, § 24.257(a)(3)
bottling house premises are responsible among other things, accurate, precise, provides that a label must state the
for the correct determination of the and specific for its intended purpose, alcohol content as percent by volume or
amount of carbon dioxide in artificially and it has results that are consistently in accordance with part 4.9
carbonated hard cider or sparkling hard reliable, accurate, and reproducible.) Current § 24.257(a)(4) also sets out
cider. TTB is also amending § 24.302 to Accordingly, TTB is removing the parameters for how the kind of wine
require that the amount of carbon language in § 24.245 that requires should be presented on a label.10 Wine
dioxide in artificially carbonated hard proprietors to use ‘‘authorized’’ test that contains at least 7 percent alcohol
cider or sparkling hard cider be procedures, and is revoking ATF by volume and requires label approval
included in the effervescent wine Procedure 73–1, ATF Procedure 77–2, under the FAA Act must be labeled with
record, which is required to be kept by and ATF Procedure 83–2.
9 Thus, for wines with less than 7 percent alcohol
proprietors who produce or receive Finally, TTB is dividing the current
by volume, a numerical statement of the percentage
effervescent wine in bond. text of 27 CFR 24.270, Determination of of alcohol by volume must appear on the label. 27
Tax, into paragraphs (a) and (b), and CFR 4.32(b)(3) and 4.36 require alcohol content
Conforming Amendments adding a new paragraph (c) to list the statements on labels. TTB notes that pursuant to
Other amendments maintain the tax rates imposed on wine by 26 U.S.C. § 4.36, in the case of fruit wine containing at least
existing treatment of still wine and 5041(b). With respect to the hard cider 7 percent but no more than 14 percent or less of
alcohol by volume, the alcohol content need not be
effervescent wine, and apply certain tax rate at section 5041(b)(6), TTB is stated if the type designation ‘‘table wine’’ or ‘‘light
requirements currently applicable to referencing the eligibility requirements wine’’ (without a numerical statement of alcohol
still wine to ‘‘still hard cider’’ and set forth in new § 24.331. Also, TTB is content) appears on the brand label. Because ‘‘hard
certain requirements currently incorporating in § 24.270(a) language cider’’ is currently defined in part 24 as wine
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containing less than 7 percent alcohol by volume,
applicable to artificially carbonated from the definition of ‘‘wine’’ in § 24.10, ‘‘table wine’’ and ‘‘light wine’’ designations have
wine and sparkling wine to ‘‘artificially been sufficient to identify FAA Act wine as
carbonated hard cider’’ and ‘‘sparkling 7 AOAC Official Method of Analysis 964.09 (17th ineligible for the hard cider tax rate.
hard cider,’’ respectively. These include Ed). See also https://www.ttb.gov/ssd/pdf/list_of_ 10 TTB notes that 27 CFR 24.259 requires each
beverage_methods.pdf. container larger than 4 liters or each case used to
amendments to 27 CFR 24.190, 24.191, 8 AOAC Official Method of Analysis 988.07 (17th remove wine for consumption or sale to be durably
24.192, and 24.193 in subpart G Ed). See also https://www.ttb.gov/ssd/pdf/list_of_ marked with the kind of wine, stated in accordance
(Production of Effervescent Wine); 27 beverage_methods.pdf. with § 24.257.
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![Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations 7663
more than 0.64 gram of carbon dioxide § 24.192 [Amended] milliliters of wine or where the
per 100 milliliters of wine, resulting ■ 5. Section 24.192 is amended by: variation results from the use of
solely from the secondary fermentation ■ a. Adding the words ‘‘or still hard methods or equipment determined by
of the wine within a closed container. cider’’ after the words ‘‘still wine’’ in the appropriate TTB officer to be not in
Sparkling wine or champagne. Wine the first sentence; accordance with good commercial
(other than hard cider) containing more ■ b. Removing the words ‘‘sparkling practice.
than 0.392 gram of carbon dioxide per wine or artificially carbonated wine’’ (c) Penalties. Penalties are provided in
100 milliliters of wine resulting solely wherever they appear in the first six 26 U.S.C. 5662 for any person who,
from the secondary fermentation of the sentences of the section and adding, in whether by manner of packaging or
wine within a closed container. their place, the words ‘‘effervescent advertising or by any other form of
* * * * * wine’’; representation, misrepresents any still
Still hard cider. A hard cider ■ c. Removing the word ‘‘which’’ in the wine or still hard cider to be
containing not more than 0.392 gram of sixth sentence and adding, in its place, effervescent wine or a substitute for
carbon dioxide per 100 milliliters. the word ‘‘that’’; and effervescent wine.
Still wine. Wine (other than hard ■ d. Adding the words ‘‘or sparkling (d) Records. Records for the use of
cider) containing not more than 0.392 hard cider’’ after the words ‘‘sparkling carbon dioxide in still wine must be
gram of carbon dioxide per 100 wine’’ in the last sentence. maintained in accordance with § 24.319
milliliters. of this section.
§ 24.193 [Amended]
* * * * * (Sec. 201, Pub. L. 85–859, 72 Stat. 1331, as
■ 6. Section 24.193 is amended by: amended, 1381, as amended, 1407, as
■ 3. Section 24.190 is revised to read as amended (26 U.S.C. 5041, 5367, 5662))
■ a. Adding the words ‘‘or still hard
follows:
cider’’ after the words ‘‘still wine’’ in § 24.246 [Amended]
§ 24.190 General. the section heading;
■ b. Removing the words ‘‘Sparkling ■ 10. Section 24.246 is amended by
(a) Effervescent wine may be made on
wine or artificially carbonated wine’’ removing the words ‘‘sparkling wines’’
bonded wine premises. Where the
and adding, in their place, the words from the description of the use of
effervescence results from fermentation
‘‘Effervescent wine’’; and ammonium phosphate in the ‘‘Materials
of the wine within a closed container,
■ c. Adding the words ‘‘or still hard and use column’’ of the table, and
the wine is classified and taxed as
cider’’ after the words ‘‘still wine’’. adding, in their place, the words
sparkling wine or as hard cider, as
‘‘sparkling wine or sparkling hard
applicable. In such wine, the use of § 24.225 [Amended] cider’’.
carbon dioxide, nitrogen gas, or a
combination of both, is permitted to ■ 7. Section 24.225 is amended by ■ 11. Section 24.251 is added
maintain counterpressure during adding the words ‘‘or natural still hard immediately after § 24.250 to read as
transfer and bottling. Wine carbonated cider’’ after the words ‘‘still wine’’. follows:
by injection of carbon dioxide is § 24.234 [Amended] § 24.251 Tolerance for artificially
classified and taxed as artificially carbonated hard cider and sparkling hard
carbonated wine or as hard cider, as ■ 8. Section 24.234 is amended by
cider.
applicable. (For wine to be classified removing the words ‘‘sparkling wine,
artificially carbonated wine’’ and (a) Tolerance. A tolerance of not more
and taxed at the hard cider tax rate, it than 0.009 gram per 100 milliliters to
must meet the requirements set forth in adding, in their place, the words
‘‘effervescent wine’’. the maximum limitation of carbon
§ 24.331, including the limitation of not dioxide in artificially carbonated hard
more than 0.64 gram of carbon dioxide ■ 9. Section 24.245 is revised to read as
cider and sparkling hard cider will be
per 100 milliliters.) follows:
allowed where the amount of carbon
(b) Effervescent wine and any wine § 24.245 Use of carbon dioxide in still wine dioxide in excess of 0.64 gram per 100
used as a base in the production of and still hard cider. milliliters is due to mechanical
effervescent wine may not have an variations or secondary fermentation
(a) Use of carbon dioxide. The
alcohol content in excess of 14 percent variations that cannot be completely
addition of carbon dioxide to (and
by volume. However, wine containing controlled under good commercial
retention of carbon dioxide in) still wine
more than 14 percent alcohol by volume practice. A tolerance will not be allowed
and still hard cider is permitted if at the
may be used in preparing a dosage for where it is found by the appropriate
time of removal for consumption or sale,
finishing effervescent wine. TTB officer that the proprietor
the still wine or still hard cider does not
(Sec. 201, Pub. L. 85–859, 72 Stat. 1383, as contain more than 0.392 gram of carbon continuously or intentionally exceeds
amended (26 U.S.C. 5382)) dioxide per 100 milliliters of wine. 0.64 gram of carbon dioxide per 100
■ 4. Section 24.191 is revised to read as (b) Tolerance limit. A tolerance of not milliliters of artificially carbonated hard
follows: more than 0.009 gram per 100 milliliters cider or sparkling hard cider or where
to the maximum limitation of carbon the variation results from the use of
§ 24.191 Segregation of operations. methods or equipment determined by
dioxide in still wine and still hard cider
Where more than one process of will be allowed where the amount of the appropriate TTB officer to be not in
producing effervescent wine is used, the carbon dioxide in excess of 0.392 gram accordance with good commercial
appropriate TTB officer may require the per 100 milliliters is due to mechanical practice. (See Subpart P of this part for
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portion of the premises used for the variations that cannot be completely the definition of hard cider for purposes
production and storage of wine made by controlled under good commercial of determining eligibility for the hard
each process (bottle fermenting, bulk practice. A tolerance will not be allowed cider tax rate.)
fermenting, or injecting carbon dioxide) where it is found by the appropriate (b) Records. See § 24.302 of this
to be segregated as provided by § 24.27. TTB officer that the proprietor chapter for recordkeeping requirements.
(Sec. 201, Pub. L. 85–859, 72 Stat. 1381, as continuously or intentionally exceeds (Sec. 335, Pub. L. 114–113, 129 Stat. 3109, as
amended (26 U.S.C. 5365)) 0.392 gram of carbon dioxide per 100 amended (26 U.S.C. 5041)
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![7664 Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations
§ 24.255 [Amended] 100 milliliters, the word ‘‘sparkling’’ or ■ 14. Section 24.266 is amended by
■ 12. In § 24.255(a), the first sentence is ‘‘carbonated,’’ as applicable, must be revising paragraph (b)(2) and the
revised by adding, after the word included in the designation. reference to the Office of Management
‘‘removed’’, the words ‘‘as well as for (1) Additional labeling rules effective and Budget control number, to read as
the correct determination of carbon for wines eligible for the ‘‘hard cider’’ follows:
dioxide in artificially carbonated hard tax class. For wines removed from wine
premises on or after January 1, 2017, § 24.266 Inventory losses.
cider and in sparkling hard cider’’, and
that are taxed at the ‘‘hard cider’’ tax * * * * *
the Office of Management and Budget
rate, the designation must be consistent (b) * * *
control number reference is revised by
with a hard cider tax class. For example, (2)(i)(A) Where the loss of wine on
removing the numbers ‘‘1512–0298 and
the designations ‘‘hard cider,’’ ‘‘hard bonded wine premises during the
1512–0503’’ and adding, in their place,
perry,’’ ‘‘apple wine,’’ ‘‘pear wine,’’ annual period exceeds three percent of
the numbers ‘‘1513–0115 and 1513–
‘‘apple cider,’’ ‘‘apple perry,’’ ‘‘apple the aggregate volume of wine on-hand at
0092’’.
pear wine,’’ ‘‘cider’’ and ‘‘perry’’ are the beginning of the annual period and
■ 13. Section 24.257 is amended by: the volume of wine received in bond
consistent with the hard cider tax class.
■ a. Revising paragraph (a)(4); during the annual period;
The designation ‘‘blueberry cider’’ is not
■ b. Adding paragraph (a)(6); and (B) The loss exceeds six percent of the
consistent with the hard cider tax class,
■ c. Revising the Office of Management still wine or still hard cider produced by
because it indicates that the product
and Budget control number reference. fermentation;
contains either blueberries or blueberry
The revisions and addition read as (C) The loss exceeds six percent of the
flavors, which are not authorized for use
follows: sparkling wine or sparkling hard cider
in wine that is eligible for the hard cider
§ 24.257 Labeling wine containers. tax class. If the hard cider contains more produced by fermentation in bottles;
than 0.392 gram of carbon dioxide per (D) The loss exceeds three percent of
(a) * * *
100 milliliters, the word ‘‘sparkling’’ or the special natural wine produced
(4) An appropriate designation of the
‘‘carbonated,’’ as applicable, must be on under § 24.195 or other wine produced
kind of wine, as follows:
the label. under § 24.218;
(i) Wines that require label approval—
(2) Transitional rule for wines (E) The loss exceeds three percent of
(A) General. If the wine contains 7
removed on or after January 1, 2017 and the artificially carbonated wine or
percent or more alcohol by volume and
prior to January 1, 2018. For wines artificially carbonated hard cider
must have label approval under 27 CFR
removed on or after January 1, 2017 and produced; or
part 4, the designation is the class, type, (F) The loss exceeds three percent of
or other designation required by that prior to January 1, 2018, a label will not
be deemed out of compliance with the bulk process sparkling wine or bulk
part. process sparkling hard cider produced.
(B) Labeling rules for wines eligible for § 24.257(a)(4)(ii)(A) on the sole ground
that the label does not provide enough (ii) The percentage applicable to each
the ‘‘hard cider’’ tax class—(1) tax class of wine will be calculated
Transitional rule for ‘‘hard cider’’ information to identify whether the
wine is eligible for a ‘‘hard cider’’ tax separately, unless the calculation is
removed on or after January 1, 2017 and impracticable because of the mixture of
prior to January 1, 2018. On an optional classification. On an optional basis,
wines eligible for the ‘‘hard cider’’ tax different tax classes by addition of wine
basis, wines that are taxed at the ‘‘hard spirits or blending during the annual
cider’’ tax rate may include the class may include the statement ‘‘Tax
class 5041(b)(6)’’ on the label to period, in which case the percentage
statement ‘‘Tax class 5041(b)(6)’’ on the will be calculated on the aggregate
label to adequately indicate the adequately indicate the appropriate tax
class. volume. Wine removed immediately
appropriate tax class. after production for use as distilling
(2) Additional labeling rules effective (3) Additional labeling rules effective
for ‘‘hard cider’’ removed from wine material and on which the usual
for ‘‘hard cider’’ removed from wine racking, clarifying, and filtering losses
premises on or after January 1, 2018. premises on or after January 1, 2018.
For wines removed from wine premises are not sustained, will not be included
For wines removed from wine premises in the calculations.
on or after January 1, 2018 that are taxed on or after January 1, 2018, that are
at the ‘‘hard cider’’ tax rate, the label taxed at the ‘‘hard cider’’ tax rate, the * * * * *
must also include the statement ‘‘Tax label must also include the statement (Approved by the Office of Management and
class 5041(b)(6).’’ This statement may ‘‘Tax class 5041(b)(6).’’ This statement Budget under control number 1513–0088)
appear anywhere on the label. may appear anywhere on the label.
(B) Cross reference. For additional ■ 15. Section 24.270 is revised to read
(ii) Wines that do not require label as follows:
approval—(A) Adequate designation. If labeling rules applicable to wines
the wine is not subject to label approval containing less than 7 percent alcohol § 24.270 Determination of tax.
under 27 CFR part 4 because it either is by volume, see the food labeling
(a) General. The tax on wine is
covered by a certificate of exemption regulations issued by the U.S. Food and
determined at the time of removal from
from label approval or contains less Drug Administration.
a bonded wine premises for
than 7 percent alcohol by volume, its * * * * * consumption or sale. Section 5041 of 26
label must bear a designation that (6) Cross reference. For regulations U.S.C., imposes an excise tax, at the
includes enough information (when requiring a health warning statement on rates prescribed, on all wine (including
viewed with the alcohol content the container of any alcoholic beverage imitation, substandard, or artificial
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statement) to identify the tax class containing not less than one-half of one wine, and compounds sold as wine,
under 26 U.S.C. 5041. The wine must be percent alcohol by volume, see part 16 which contain 24 percent or less of
identified by the term ‘‘wine’’ (or a word of this chapter. alcohol by volume) produced in or
that signifies a type of wine, such as * * * * * imported into the United States. Wine
‘‘cider,’’ ‘‘perry,’’ or ‘‘mead,’’ as (Approved by the Office of Management and containing more than 24 percent of
applicable). If the wine contains more Budget under control numbers 1513–0115 alcohol by volume is classified as
than 0.392 gram of carbon dioxide per and 1513–XXXX) distilled spirits and taxed accordingly.
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![Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations 7665
A wine product containing less than adding, in their place, the numbers (j) If the proprietor is an importer of
one-half of one percent alcohol by ‘‘1513–0009 and 1513–0115’’. wine to which the provisions of § 27.140
volume is not taxable as wine when of this chapter apply, any certification
removed from the bonded wine § 24.301 [Amended] or other records required at the time of
premises. ■ 18. Section 24.301 is amended: release from customs custody under that
(b) Tax determined and paid on the ■ a. In the section heading, by adding section; and
volume of wine. The tax is determined the words ‘‘and bulk still hard cider’’ (k) The amount of carbon dioxide in
and paid on the volume of wine: after the words ‘‘still wine’’; artificially carbonated hard cider or
(1) In bottles or other containers filled ■ b. In the first sentence of the sparkling hard cider.
according to United States measure introductory text, by adding the words
(Sec. 201, Pub. L. 85–859, 72 Stat. 1381, as
recorded to the nearest 10th gallon; or, ‘‘or bulk still hard cider’’ after the words
amended (26 U.S.C. 5367))
(2) In bottles or other containers filled ‘‘still wine’’ each time they appear;
■ c. In the second sentence of the (Approved by the Office of Management and
according to metric measure, on the Budget under control number 1513–0115 and
volume of wine in United States wine introductory text, by adding the words
‘‘or for hard cider’’ after the words ‘‘still 1513–XXXX)
gallons to the nearest 10th gallon; or
(3) In the case of pipeline removals, wine’’; § 24.306 [Amended]
■ d. In the third sentence of the
on the volume of bulk wine removed ■ 20. Section 24.306 is amended by
recorded to the nearest whole gallon, introductory text, by adding the words
‘‘and bulk still hard cider’’ after the adding in the words ‘‘and bulk still hard
five-tenths gallon being converted to the cider’’ after the words ‘‘still wine’’ in
next full gallon. words ‘‘still wine’’;
■ e. In paragraph (b), by adding the the last sentence, and, in the Office of
(c) Tax rates imposed on wine. The Management and Budget control
words ‘‘or sparkling hard cider’’ after
following taxes are imposed on wine: number reference, by removing the
the words ‘‘sparkling wine’’; and
(1) Tax class 5041(b)(1). On still ■ f. In the Office of Management and number ‘‘1512–0298’’ and adding, in its
wines containing not more than 14 Budget control number reference, by place, the number ‘‘1513–0115’’.
percent alcohol by volume, $1.07, per removing the number ‘‘1512–0298’’ and
wine gallon; § 24.308 [Amended]
adding, in its place, the number ‘‘1513–
(2) Tax class 5041(b)(2). On still 0115’’. ■ 21. Section 24.308 is amended by
wines containing more than 14 percent adding the words ‘‘or bottle fermented
■ 19. Section 24.302 is amended by:
and not exceeding 21 percent alcohol by ■ a. Revising the introductory text and sparkling hard cider’’ after the words
volume, $1.57 per wine gallon; paragraphs (a), (d), (e), (g), (i), and (j); ‘‘bottle fermented sparkling wine’’ in
(3) Tax class 5041(b)(3). On still ■ b. Adding paragraph (k); and the last sentence of paragraph (a), and,
wines containing more than 21 percent ■ c. Revising the Office of Management in the Office of Management and Budget
and not exceeding 24 percent alcohol by and Budget control number reference. control number reference, by removing
volume, $3.15 per wine gallon; The revisions and addition read as the number ‘‘1512–0298’’ and adding, in
(4) Tax class 5041(b)(4). On follows: its place, the number ‘‘1513–0115’’.
champagne and other sparkling wines,
$3.40 per wine gallon; § 24.302 Effervescent wine record. § 24.319 [Amended]
(5) Tax class 5041(b)(5). On A proprietor who produces or ■ 22. Section 24.319 is amended by
artificially carbonated wines, $3.30 per receives effervescent wine in bond shall adding the words ‘‘or still hard cider’’
wine gallon; and maintain records showing the after the words ‘‘still wine’’, and, in the
(6) Tax class 5041(b)(6). On hard transaction date and details of Office of Management and Budget
cider, 22.6 cents per wine gallon. See production, receipt, storage, removal, control number reference, by removing
§ 24.331 for the definition of hard cider and any loss incurred. Records will be the number ‘‘1512–0298’’ and adding, in
for purposes of determining eligibility maintained for each specific process its place, the number ‘‘1513–0115’’.
for the hard cider tax class. used (bulk or bottle fermented, injection
■ 23. Subpart P, consisting of §§ 24.331
(d) Small domestic producer tax of carbon dioxide) and by the specific
kind of wine, e.g., grape, apple, pear, and 24.332, is added to read as follows:
credit. For eligibility for the small
producer tax credit, see §§ 24.278 and cherry, hard cider. The record will Subpart P—Eligibility for the Hard
24.279. contain the following: Cider Tax Rate
(a) The volume of still wine or still
(Sec. 201, Pub. L. 85–859, 72 Stat. 1331, and
Sec. 335, Pub. L. 114–113, 129 Stat. 3109, as
hard cider filled into bottles or § 24.331 Wine eligible for the hard cider
amended (26 U.S.C. 5041)) pressurized tanks prior to secondary tax rate.
fermentation or prior to the addition of A wine removed on or after January
§ 24.290 [Amended] carbon dioxide; 1, 2017 is eligible for the hard cider tax
■ 16. Section 24.290(a) is amended by * * * * * rate listed in § 24.270 if:
adding the words ‘‘or still hard cider’’ (d) The volume of bottle fermented (a) It contains no more than 0.64 gram
after the words ‘‘still wine’’ in the first sparkling wine or bottle fermented of carbon dioxide per 100 milliliters of
sentence. sparkling hard cider in process, wine;
transferred and received; (b) It is derived primarily from apples
§ 24.291 [Amended] (e) The volume returned to still wine or pears, or from apple juice concentrate
■ 17. Section 24.291 is amended: or still hard cider; or pear juice concentrate and water, as
mstockstill on DSK3G9T082PROD with RULES
■ a. In the first sentence of paragraph * * * * * described in § 24.332(a);
(a), by adding the words ‘‘or still hard (g) The volume of finished (c) It contains no fruit product or fruit
cider’’ after the words ‘‘still wine’’; and, effervescent wine bottled or packed flavoring other than apple or pear, as
■ b. In the Office of Management and (amount produced); described in § 24.332(b) and (c); and
Budget control number reference, by * * * * * (d) It contains at least one-half of 1
removing the numbers ‘‘1512–0058, (i) An explanation of any unusual percent and less than 8.5 percent
1512–0292 and 1512–0298’’, and transaction; alcohol by volume.
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![7666 Federal Register / Vol. 82, No. 13 / Monday, January 23, 2017 / Rules and Regulations
(Sec. 335, Pub. L. 114–113, 129 Stat. 3109, as other than apple or pear, TTB will Signed: December 7, 2016.
amended (26 U.S.C. 5041)) consider such factors as the labeling and John J. Manfreda,
§ 24.332 Hard cider materials. advertising of the product. Any written Administrator.
or pictorial reference to a fruit flavor Approved: January 4, 2017.
This section pertains to wine that is
other than apple or pear in the labeling Timothy E. Skud,
eligible for the hard cider tax rate as set
or advertising of a wine that contains a Deputy Assistant Secretary (Tax, Trade and
out in § 24.331.
(a) Apples and pears. Wine will be flavoring will be treated as evidence that Tariff Policy).
considered to be derived primarily from the wine contains a flavoring that [FR Doc. 2017–00333 Filed 1–19–17; 8:45 am]
apples or pears, or from apple juice imparts a fruit flavor other than apple or BILLING CODE 4810–31–P
concentrate or pear juice concentrate pear and thus the wine is not eligible for
and water, if the apple juice, pear juice, the hard cider tax rate. The use of
or combination of apple and pear juice, spices, honey, hops, or pumpkins as a DEPARTMENT OF LABOR
or the equivalent amount of concentrate flavoring will not make a wine ineligible
of apple and/or pear juice reconstituted for the hard cider tax rate. Office of the Secretary
to the original brix of the juice prior to (Sec. 335, Pub. L. 114–113, 129 Stat. 3109, as
concentration, or any combination amended (26 U.S.C. 5041)) 29 CFR Part 70
thereof, represents more than 50 percent RIN 1290–AA30
of the volume of the finished product. PART 27—IMPORTATION OF
(b) Fruit products. (1) Wine is not DISTILLED SPIRITS, WINES, AND Revision of FOIA Regulations
eligible for the hard cider tax rate if it BEER
contains any fruit product other than AGENCY: Office of the Secretary,
apple or pear. A fruit product is any Department of Labor.
■ 24. The authority citation for part 27
material derived or made from any fruit ACTION: Final rule.
continues to read as follows:
or part of a fruit, including but not SUMMARY: This final rule amends the
Authority: 5 U.S.C. 552(a), 19 U.S.C. 81c,
limited to, concentrates, extracts, juices, Department of Labor’s regulations under
1202; 26 U.S.C. 5001, 5007, 5008, 5010, 5041,
powders, or wine spirits. the Freedom of Information Act
5051, 5054, 5061, 5121, 5122–5124, 5201,
(2) Notwithstanding the provisions of (‘‘FOIA’’). The regulations have been
5205, 5207, 5232, 5273, 5301, 5313, 5382,
§ 24.332(b)(1), an authorized wine revised to update and streamline the
5555, 6109, 7805.
treating material set forth in § 24.246 language of several procedural
that is derived from a fruit other than ■ 25. Section 27.11 is amended by provisions and to incorporate changes
apple or pear may be used in the adding the definition of ‘‘Hard cider’’ in brought about by the amendments to the
production of wine otherwise eligible alphabetical order to read as follows: FOIA under the OPEN Government Act
for the hard cider tax rate if it is used of 2007 and the FOIA Improvement Act
for a purpose other than flavoring and § 27.11 Meaning of terms.
of 2016. Additionally, the regulations
it is either used in accordance with the * * * * * have been updated to incorporate
wine treating materials provisions of changes in the agency’s administrative
§ 24.246 (if used in a natural wine), or Hard cider. A wine that meets the
eligibility requirements set forth in structure.
used in amounts insufficient to impart
a fruit flavor other than apple or pear (if § 24.331 for the hard cider tax rate set DATES: This final rule is effective
used in a special natural wine or other forth in § 24.270. January 23, 2017.
than standard wine). In determining * * * * * FOR FURTHER INFORMATION CONTACT:
whether the use of wine treating Ramona Branch Oliver, Director, Office
■ 26. Section 27.59 is revised by:
materials derived from a fruit other than of Information Services, 202–693–5391
apple or pear is for a purpose other than ■ a. Designating the current paragraph (this is not a toll free number) or 1–877–
flavoring, TTB will consider such as paragraph (a); 889–5627 (TTY). Individuals with
factors as the labeling and advertising of ■ b. Adding a paragraph heading to hearing or speech impairments may
the product. Any written or pictorial newly designated paragraph (a); access the telephone number above via
reference to a material derived from a TTY by calling the toll-free Federal
■ c. Adding paragraph (b); and
fruit other than apple or pear (other than Information Relay Service at (800) 877–
the inclusion of a wine treating material ■ d. Adding an Office of Management 8839.
in an ingredient labeling statement) in and Budget control number reference. SUPPLEMENTARY INFORMATION: On August
the labeling or advertising of a wine will The designation and additions read as 17, 2016, the Department of Labor
be treated as evidence that the wine follows: published a Notice of Proposed Rule
treating material was added for the Making (NPRM) to revise its existing
purpose of flavoring the wine. § 27.59 Wines. regulations under the FOIA found at 29
(c) Flavorings. Wine is not eligible for (a) General. * * * CFR part 70, to update and streamline
the hard cider tax rate if it contains any the language of several procedural
fruit flavoring other than apple or pear. (b) Hard cider. The container of any provisions and to incorporate changes
For purposes of this section, a fruit wine eligible for the ‘‘hard cider’’ tax brought about by the amendments to the
flavoring other than apple or pear is any class set forth in § 24.270 of this chapter FOIA under the OPEN Government Act
flavoring that imparts the flavor of a must be labeled in accordance with the of 2007, Public Law 110–175, 121 Stat.
mstockstill on DSK3G9T082PROD with RULES
fruit other than apple or pear and requirements applicable to wine 2524, and the FOIA Improvement Act of
includes a natural fruit flavor, an containers removed from wine premises 2016, Public Law 114–185, 130 Stat. 538
artificial fruit flavor, and a natural flavor under § 24.257(a)(4) of this chapter. (See (enacted June 30, 2016). The
that artificially imparts the flavor of a § 24.331 of this chapter for the eligibility Department invited comments through
fruit that is not contained in that flavor. requirements for the hard cider tax rate). October 17, 2016.
In determining whether the use of a (Approved by the Office of Management and Discussion of Comments: Preparation
flavoring imparts the flavor of a fruit Budget under control number 1513–XXXX) of the NPRM and this finalization of the
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Document Created: 2017-01-20 01:29:52
Document Modified: 2017-01-20 01:29:52
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Temporary rule; Treasury decision; cross reference to notice of proposed rulemaking. | |
| Dates | This temporary rule is effective January 23, 2017. | |
| Contact | Kara Fontaine, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., Box 12, Washington, DC 20005; telephone (202) 453-1039 ext. 103. | |
| FR Citation | 82 FR 7653 | |
| RIN Number | 1513-AC31 | |
| CFR Citation | 27
CFR
24 27 CFR 27 | |
| CFR Associated | Administrative Practice and Procedure; Cider; Claims; Electronic Funds Transfers; Excise Taxes; Exports; Food Additives; Fruit Juices; Hard Cider; Labeling; Liquors; Packaging and Containers; Reporting and Recordkeeping Requirements; Research; Scientific Equipment; Spices and Flavorings; Surety Bonds; Vinegar; Warehouses; Wine; Alcohol and Alcoholic Beverages; Beer; Cosmetics; Customs Duties and Inspections; Imports and Reporting and Recordkeeping Requirements |
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