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Pennsylvania's cider producers are raising a glass to Congress, which has signed off on lower tax rates that could help those businesses expand their offerings.The next time they make a toast, the producers may be doing it with cider that has more bubbles or a higher level of alcohol.
The tax changes tackle part of what cider-makers describe as a tangle of arbitrary state and federal rules that don't sync with the natural process of turning apples into hard cider.
Under federal law, any cider that has more than 7 percent alcohol by volume faces the higher tax rate charged to wine producers. For drinks with high levels of carbonation, the tax rate rises more sharply: instead of paying 22.6 cents per gallon, the charge is at least $3.30 per gallon, the rate paid by producers of champagne.
A hard cider naturally tends to top those measures. So cideries may dilute their products with water or raw, unfermented cider, or use expensive equipment to attempt to stop the fermentation process before alcohol levels get too high.
But with the legislative change tucked into a massive tax bill Capitol Hill approved last week, local cideries say they'll have more flexibility in trying new products without facing higher costs.
"It takes away a lot of the fear," said Geoffrey Deen, founder of Hardball Cider in Mount Bethel. "You can breathe a little easier as far as what you're allowed to do."
Hard cider has deep cultural roots in the U.S., stretching back to the earliest English settlers. At a time when drinking water was not always sanitary and scarce resources needed to be conserved, fermenting apples into cider was one way to have something safe to drink while also preventing waste.
In recent years, cider's popularity has followed a similar trajectory to the booming craft-beer market. National hard cider sales tripled between 2007 and 2012 to about $600 million, according to IBISWorld, a market-analysis company.
Pennsylvania, which ranks fourth in apple production behind New York, Washington state and Michigan, is catching on to the trend. The PA Cider Guild, formed last year, lists about 30 producers on its website.
New York's top ranking played a role in the cider rules getting tucked into the massive tax bill. One of the state's U.S. senators, Democrat Chuck Schumer, had urged approval of the changes, which are estimated to cost $12 million over the next decade.
"Apples that would otherwise be sold at a loss or thrown away are now ripe for the cider press," Schumer said in a statement.
For Deen, who has been selling hard cider for about six months and plans to open a tasting room in the spring, entering the growing market was a natural progression. The Bangor Area High School and Moravian College graduate said his family had been producing sweet cider at their farm for years.
In branding the company — which has an apple stitched as a baseball for its logo — Deen blended that history of cider production and his passion for baseball, the sport he played competitively through college.
The recent federal changes open an array of possibilities for tweaking or adding to the company's line of ciders, Deen said. Higher alcohol levels mean sweet apples — which have more sugar to ferment into alcohol — could be used, or a current cider may get a makeover with more carbonation and a different taste.
"I can't wait," Deen said. "I have a notebook full of ideas."
Some cideries, such as Frecon Farms in Boyertown, already have been producing some ciders with higher levels of alcohol and carbonation.
The tax change will save the business money, which co-owner Steve Frecon said will help to prevent those costs from becoming "an anchor around our necks" as the operation seeks to expand.
"This gives us some breathing room," said Frecon, who traveled to Washington, D.C., earlier this year to help lobby for tweaking the tax provisions.
While cider producers welcomed the federal changes, they said their businesses still face challenges at the state level.
Pennsylvania alcohol laws prevent any cider with more than 5.5 percent alcohol by volume from being sold at beer distributors with other lower-alcohol ciders. Those drinks can be sold alongside wines, but that requires a different business license.
Some cideries had restricted their products to meet the state rules, which remain lower than the new federal limits, said Joe Getz, owner of Kurant Cider near Lansdale and vice president of the Pennsylvania Cider Guild, a trade organization that was formed last year.
Getz welcomed the carbonation changes, saying he prefers a cider with more bubbles and that now he will be able to experiment with some new variations.
But it will take state changes to how cideries can distribute their beverages to have a broader impact on his operation.
A bill from state Rep. Mark Mustio of Allegheny County sought to raise the allowable alcohol levels, but it hasn't budged as broader changes to Pennsylvania's liquor system have been tied up in the still-unfinished state budget.
"I hope the state is going to get in line," Getz said. "This shows the Legislature there needs to be changes."
Cider house facts
•The PA Cider Guild formed last year with about 30 producers.
•Pennsylvania apple growers produce 440 million pounds of apples annually, ranking the state fourth nationally.
•Hard-cider sales tripled nationally between 2007 and 2012 to about $600 million.
•Lowering federal tax rates for cider will cost $12 million over the next decade in lost federal revenue.
SOURCES: Pennsylvania Apple Marketing Board; IBISWorld; Joint Committee on Taxation