I'm a fairly experienced reader of ATF regulations - being a pyrotechnics person, but I am not a lawyer. I have spent a good deal of time across the table from ATF Investigators as well as with my own attorneys to make sure I stay a free man. I read 94-3 as well as 27 CFR 25.11 and here's what I take away from it:
Removing a "small quantity" of water (stated as no more than 0.5%) is "ice beer" and legal. Concentration of beer is what you are talking about and is only legal if you reconstitute it again. "Production" is not a commercial term, and is the only stipulation in the regulations (i,e, "you may produce ...").
So, removal of water from beer is not the same as removing alcohol from beer and thus not distillation - cool...
You will probably at this point not exercise your right to STFU and incriminate yourself for something. If this happens the rest of this "it happened to a friend of mine" story doesn't even apply to you. You will be convicted, lose your job and a lot of nice things. Oh and if they happen to see a drill press or grinder and an AR-15 while looking for other things, you will also be charged with possession of tools and equipment to make an automatic weapon. Yes, seriously.
If you did STFU, hopefully you can afford a smart lawyer, experienced in all this, because a public defender will advise you to plead it out. That lawyer will be expensive and doesn't even want to hear about "I can sue them for false arrest and get your money that way". Nope, he wants cash. He makes his money whether you were too cute by far or not. You also likely can't sell your house or car for that cash because one of those was posted as collateral against your bail bond.
Months will drag by, you will become a raging ******* because of the stress, your wife will leave, your job (if you kept it this long) will eventually grow tired of being nice about it and find some other reason to fire you. Now you are broke, indicted, separated from your family, have no place to call home and no car to drive there.
Fast forward two years (this was a quick process this time) where said friend was acquitted. Would you believe his wife, kids, car, house, money, and job were not handed back to him? The nerve! But he was right all along, surely that means something. At this point you might have the stomach to try to file papers to get back all your things which I am sure have been stored safely in some federal locker somewhere. You still want that fridge back with all the food in it, right?
So, you were right, I was wrong. You can make your crappy "hard beer". That was definitely worth it.