June 8, 2023 - Introduced by Representatives Vos, August, Swearingen and Zimmerman, cosponsored by Senators LeMahieu, Feyen and Testin. Referred to Committee on State Affairs.
AB304,,22An Act to repeal 125.06 (13), 125.28 (2) (e), 125.29 (2) (b) 1. and 2., 125.29 (3) (g), 125.51 (3) (am), 125.51 (3m) (a), 125.52 (7) and 125.68 (4) (c) 3m.; to renumber 125.02 (16), 125.04 (8), 125.29 (2) (b) 3. and 125.58 (2); to renumber and amend 125.02 (6), 125.045 (2), 125.045 (3), 125.09 (1), 125.29 (3) (h), 125.30 (3), 125.33 (9), 125.52 (1) (b) 1., 125.52 (1) (b) 2. and 125.53 (1); to amend 125.02 (12), 125.02 (13), 125.02 (14m), 125.02 (23), 125.03 (title), 125.03 (1) (a), 125.03 (1) (b), 125.03 (2), 125.04 (3) (a) (intro.), 125.04 (3) (a) 1., 125.04 (3) (b), 125.04 (3) (bm) (intro.), 125.04 (3) (c), 125.04 (3) (d) 1., 125.04 (3) (d) 2., 125.04 (3) (e) 2., 125.04 (3) (h), 125.04 (3) (j), 125.04 (4), 125.04 (5) (a) 5., 125.04 (5) (d) 1., 125.04 (5) (d) 2., 125.04 (5) (d) 3. a., 125.04 (6) (g), 125.04 (8) (title), 125.04 (8) (b), 125.04 (12) (a), 125.045 (title), 125.045 (1), 125.06 (1), 125.06 (3g), 125.06 (11m), 125.07 (1) (b) 4., 125.07 (3) (a) 3., 125.07 (3) (a) 10., 125.07 (3) (a) 16., 125.07 (4) (f) 3., 125.105 (1), 125.12 (1) (a), 125.12 (1) (c), 125.12 (4) (title), 125.12 (4) (ag) (intro.), 125.12 (5) (title), 125.12 (5) (a), 125.12 (5) (b), 125.12 (5) (c), 125.12 (6) (a), 125.12 (6) (b), 125.12 (6) (c), 125.12 (6) (cm), 125.12 (6) (d), 125.12 (6) (dm), 125.12 (6) (e), 125.13, 125.14 (2) (c), 125.14 (2) (d), 125.14 (2) (e), 125.14 (2) (f), 125.14 (3) (b), 125.145, 125.15 (1), 125.17 (6) (a) (intro.), 125.19 (1), 125.20 (5) (c) and (d), 125.26 (2m), 125.26 (2s) (b), 125.27 (1) (a), 125.27 (2) (a) 1. (intro.), 125.27 (2) (a) 2., 125.27 (3) (b), 125.27 (5) (b) and (f), 125.275 (1), 125.275 (2) (b), 125.275 (3), 125.28 (1) (a), 125.28 (1) (b), 125.28 (2) (b) (intro.), 125.28 (2) (b) 1. a., 125.28 (2) (b) 1. b., 125.28 (2) (b) 1. c., 125.28 (2) (b) 2., 125.28 (4), 125.28 (5) (b), 125.28 (5) (d) 3., 125.28 (5) (e), 125.29 (1), 125.29 (3) (intro.), 125.29 (3) (c), 125.29 (3) (e), 125.29 (3) (f), 125.29 (3) (i), 125.29 (6), 125.295 (1) (intro.), 125.295 (1) (a), 125.295 (1) (g), 125.295 (2) (a) 1., 125.295 (2) (a) 2., 125.295 (2) (a) 4., 125.295 (2) (a) 6. (intro.), 125.295 (2) (a) 6. a., 125.295 (2) (a) 6. b., 125.295 (2) (a) 6. c., 125.295 (2) (b), 125.295 (2) (c), 125.295 (4), 125.295 (5), 125.30 (1), 125.30 (2), 125.30 (4), 125.30 (5), 125.32 (2), 125.32 (6) (a), 125.33 (2) (a), 125.33 (2) (d), 125.33 (12), 125.34 (6), 125.51 (1) (a), 125.51 (2) (am), 125.51 (2) (e) 3., 125.51 (3) (a), 125.51 (3) (b), 125.51 (3) (bm), 125.51 (3) (bs) 2., 125.51 (3) (f), 125.51 (3m) (c), 125.51 (3r) (a) 3., 125.51 (3r) (b), 125.51 (4) (a) 1., 125.51 (4) (e) 1., 125.51 (5) (a) 1., 125.51 (5) (a) 4., 125.51 (5) (b) 2., 125.51 (5) (b) 4., 125.51 (5) (c) 1., 125.51 (5) (d) 2., 125.51 (5) (f) 2. and 5., 125.52 (1) (a), 125.52 (2), 125.535 (1), 125.535 (2), 125.535 (3) (b) 2., 125.535 (3) (c), 125.54 (1), 125.54 (3), 125.54 (5), 125.54 (6), 125.54 (7) (a) 2., 125.54 (7) (c) 3., 125.54 (7) (d), 125.545 (title), 125.545 (1) (a), 125.545 (1) (d), 125.545 (1) (e), 125.545 (2) (a) 1., 125.545 (2) (a) 3. b., 125.545 (2) (b), 125.545 (2) (c), 125.545 (3) (a) 1., 125.545 (3) (a) 2., 125.545 (3) (b), 125.545 (3) (c), 125.545 (4), 125.545 (5), 125.545 (6) (title) and (a) 1. and 2., 125.545 (6) (a) 3., 125.545 (6) (a) 4., 125.545 (6) (b), 125.545 (7), 125.55 (1), 125.56 (2) (a), 125.56 (2) (c), 125.56 (2) (d), 125.58 (1), 125.60 (1), 125.61 (1), 125.61 (3), 125.61 (4), 125.62 (1), 125.62 (3), 125.63 (1), 125.63 (3), 125.65 (1), 125.65 (4) (intro.), 125.65 (4) (e), 125.65 (6), 125.65 (10), 125.68 (2), 125.68 (4) (c) 1., 125.68 (4) (c) 3., 125.68 (9) (f), 125.68 (10) (a) and (b), 125.69 (4) (e), 125.69 (7), 139.01 (4), 139.01 (6), 139.03 (5) (a), 139.04 (4), 139.06 (3), 139.08 (3), 139.08 (4), 139.11 (1), 139.11 (4) (a) 2., 139.11 (4) (b) 2., 139.22, 139.25 (9), 185.043 (2), 227.52 (1), 230.08 (2) (e) 11. and 346.657 (1); to repeal and recreate 125.25 (2) (b), 125.26 (2) (b), 125.29 (2) (a) and 125.69 (1); and to create 15.433 (2), 19.42 (13) (q), 20.923 (4) (c) 7., 125.02 (1g), 125.02 (5g), 125.02 (6) (b), 125.02 (6d), 125.02 (6g), 125.02 (16) (bm), 125.025, 125.04 (3) (k), 125.04 (8) (b), 125.045 (2) (b), 125.045 (3) (b), 125.09 (1) (b) and (c), 125.11 (3), 125.12 (4) (ag) 9., 125.12 (5) (bm), 125.175, 125.20, 125.21, 125.22, 125.23, 125.24, 125.27 (7), 125.28 (2) (b) 1. g., h. and i., 125.28 (2) (b) 1. j., 125.29 (2) (a) 6., 125.29 (3) (dm), 125.29 (3) (h) 3., 125.29 (7) and (8), 125.295 (1) (fm), 125.295 (2) (a) 6. g., 125.30 (2) (d), 125.30 (3) (b), 125.30 (3) (c), 125.30 (3) (c) 5., 125.32 (3m) (L), 125.33 (2) (hr), 125.33 (9) (c), 125.51 (3) (bg), 125.51 (4) (v) 5., 125.52 (1) (b) 3., 4. and 5., 125.52 (4) and (5), 125.53 (1) (a) 3., 4., 5. and 6., 125.53 (3) and (4), 125.535 (3) (b) 3., 125.535 (3) (d) and (e), 125.535 (7), 125.545 (1) (ar), 125.545 (1) (cm), 125.545 (1) (em), 125.545 (2) (a) 4., 125.545 (3) (a) 2m., 125.545 (6) (a) 2m., 125.545 (6) (a) 3m., 125.58 (2) (b) and (c), 125.58 (5), 125.69 (1) (a) 5., (b) 5., (c) 9. and (d) 5., 125.69 (9), 139.01 (2p) and 139.08 (5) of the statutes; relating to: creating the Division of Alcohol Beverages attached to the Department of Revenue; the regulation of alcohol beverages and enforcement of alcohol beverage laws; interest restrictions relating to, and authorized activities of, brewers, brewpubs, wineries, manufacturers, rectifiers, wholesalers, and retailers; shipping alcohol beverages by means of fulfillment houses and common carriers; the consumption of alcohol beverages in a public place; creating a no-sale event venue permit; creating an operator’s permit; liquor licenses transferred from one municipality to another; retailers’ authorized activities; liquor license quotas; the safe ride program; the presence of underage persons and conduct of other business on licensed premises; the occupational tax on alcohol beverages; repealing a rule promulgated by the Department of Revenue; granting rule-making authority; and providing a penalty. AB304,,33Analysis by the Legislative Reference Bureau This bill does all of the following:
1. Creates the Division of Alcohol Beverages (division) attached to the Department of Revenue and transfers DOR’s alcohol beverage regulation and enforcement functions to the division.
2. Makes changes relating to the retail sales authority of brewers, wineries, manufacturers, and rectifiers, as well as changes relating to other authorized activities of brewers, wineries, manufacturers, and rectifiers.
3. Expands or modifies the authority of brewers, wineries, manufacturers, and rectifiers to provide free taste samples on retail premises.
4. Increases the limits on the amount of fermented malt beverages (beer) a brewpub may manufacture and self-distribute.
5. Makes changes relating to restrictions on holding certain common interests applicable to manufacturers, rectifiers, wineries, brewers, brewpubs, wholesalers, and retailers.
6. Specifies requirements for certain production arrangements between alcohol beverage producers.
7. Creates permits issued to, and imposes requirements and restrictions on, fulfillment houses and common carriers.
8. Makes changes relating to the state’s jurisdiction over out-of-state persons holding Wisconsin alcohol beverage permits and persons who unlawfully ship alcohol beverages into another state.
9. Modifies provisions relating to the consumption of alcohol beverages in a public place and creates a no-sale event venue permit issued by the division to property owners authorizing the permittee to rent real property for use as an event venue at which beer and wine are consumed, on no more than six days per year, if certain requirements are met. The bill also creates a liquor license quota exception for qualifying persons who opt to obtain a retail license instead of a no-sale event venue permit.
10. Allows “Class C” retail licenses to be issued to establishments other than restaurants.
11. Modifies the applicable penalty when a beer retailer purchases beer from a source other than a wholesaler.
12. Broadens membership eligibility and operational authority of cooperative wholesalers and allows new cooperative wholesalers to be formed for a limited period.
13. Eliminates the limit on the number of manufacturers’, rectifiers’, or liquor wholesalers’ permits one person may hold and allows a beer wholesaler to transfer its wholesaler’s permit to a different location within the state.
14. Increases the amount of the safe ride program surcharge and requires municipalities to provide information to retailers about the safe ride program.
15. Makes changes relating to the occupational tax liability of producers of alcohol beverages.
16. Changes the definition of “fermented malt beverages.”
17. Establishes a $500 fee for permits issued by the division if no fee is currently charged for the permit.
18. Creates an operator’s permit issued by the division that is similar to an operator’s license (commonly referred to as a bartender’s license) issued by a municipality.
19. Allows a municipality to transfer a retail liquor license that is subject to the quota system to another municipality in the same county.
20. Creates a closing hour exception for certain retailers in southeast Wisconsin during a 2024 national political convention.
21. Modifies a licensing exception applicable to beer provided on brewery premises.
22. Allows a retail license to be issued for an axe throwing facility and allows an underage person, without a parent or guardian, to be on these licensed premises.
23. Specifies that, subject to certain conditions, a “Class B” retailer may prepare and store mixed drinks up to 48 hours prior to sale to consumers.
Background
Under current law, alcohol beverages are generally distributed to consumers under a three-tier distribution system: the producer sells to a wholesaler, the wholesaler sells to a retailer, and the retailer sells to a consumer. With specific exceptions, no person may sell outside the three-tier system and no person may sell alcohol beverages to a consumer unless the seller possesses a license or permit authorizing the sale. Also under current law, DOR issues permits to alcohol beverage producers that authorize specified activities, while municipalities issue retail licenses to alcohol beverage retailers. With limited exceptions, a retail licensee may not purchase alcohol beverages from, or possess alcohol beverages purchased from, any person other than a wholesaler.
Under current law, Class “A” and “Class A” licenses authorize the retail sale of, respectively, beer and intoxicating liquor in original packages for consumption off the licensed premises. Intoxicating liquor includes wine and distilled spirits. Class “A” and “Class A” licenses are often issued together for grocery stores or liquor stores. A Class “B” license authorizes the retail sale of beer for consumption on or off the premises. Except when issued to a winery, a “Class B” license authorizes the retail sale of intoxicating liquor for consumption on the licensed premises and, subject to restrictions, the retail sale of intoxicating liquor for consumption off the licensed premises. Class “B” and “Class B” licenses are often issued together for restaurants or taverns. A “Class C” license, which may be issued only for a restaurant, authorizes the retail sale of wine for consumption on the premises.
Under current law, DOR issues permits to manufacturers (commonly referred to as distillers), rectifiers, wineries, brewers, and brewpubs. DOR also issues permits to beer wholesalers, intoxicating liquor wholesalers, out-of-state beer shippers, and out-of-state intoxicating liquor shippers. Out-of-state shippers are suppliers located outside this state that ship alcohol into this state. DOR also issues direct wine shippers’ permits to in-state and out-of-state wineries that authorize the permittee to ship wine directly to individuals in this state. In addition, DOR issues Class “B” and “Class B” retail permits under limited circumstances.
Division of Alcohol Beverages
The bill creates the division, attached to DOR, and transfers DOR’s alcohol beverage regulation and enforcement functions, including issuance of alcohol beverage permits, to the division. The bill also creates within the division separate bureaus dedicated to enforcement, legal services, and education and community outreach. The administrator of the division may appoint special agents and other employees necessary to carry out the permitting, audit, education, legal, and enforcement functions of the division. The administrator and employees of the division may not be employed by or have a financial interest in the alcohol beverage industry and are subject to the standards of conduct and conflict of interest prohibitions for state public officials.
Retail sales by brewers, wineries, manufacturers, and rectifiers
Under current law, a brewer’s permit issued by DOR authorizes the brewer to, among other activities, manufacture beer and, if the brewer manufactures 300,000 or fewer barrels of beer per year, self-distribute its beer directly to retailers. A brewer’s permit also authorizes the brewer to sell at retail, without a retail license, at the brewery premises and at one off-site retail outlet 1) the brewer’s own beer, for consumption on or off the premises; 2) certain other Wisconsin-made beer, for consumption on or off the premises, if the brewer purchases the beer from a wholesaler or another brewer; and 3) intoxicating liquor, for consumption on the premises, if the brewer held a retail intoxicating liquor license on June 1, 2011, and if the brewer purchases the intoxicating liquor from a wholesaler. The brewer may also provide free taste samples at the brewery premises and the brewer’s off-site retail outlet. A brewer may not hold a retail beer license. A brewer may not operate a restaurant except at the brewery premises and the brewer’s off-site retail outlet.
Under current law, a winery permit issued by DOR authorizes the winery to, among other activities, manufacture wine and provide taste samples of its wine on the winery premises. A winery may also hold one retail license—either a “Class A” or “Class B” license—which may be issued for the winery premises or another location, but the winery may not hold other specified retail interests. A “Class B” license issued to a winery is limited compared to other “Class B” licenses because it authorizes the retail sale of wine for consumption on or off the premises but does not authorize the retail sale of distilled spirits. A “Class B” license may be issued to a winery only if the winery is capable of producing at least 5,000 gallons of wine per year in no more than two locations. If a retail license is issued to a winery, the winery may provide wine made by the winery directly to its own retail premises, without the wine first passing through a wholesaler.
Under current law, a manufacturer’s permit or rectifier’s permit issued by DOR authorizes the permittee to, respectively, manufacture or rectify intoxicating liquor. Current law prohibits a manufacturer or rectifier from holding an interest in a retail liquor license, but a manufacturer’s permit or rectifier’s permit authorizes the manufacturer or rectifier to make retail sales, without a retail license, of intoxicating liquor manufactured or rectified on the manufacturer’s or rectifier’s premises, for consumption on or off the premises. Subject to limitations, a manufacturer or rectifier may also provide free taste samples of intoxicating liquor manufactured or rectified on the premises, for consumption on the premises.
The bill eliminates most current law provisions relating to retail sales authority for brewers, wineries, manufacturers, and rectifiers and replaces them with provisions creating a more uniform standard of retail sales authority for these producers. Under the bill, a brewer, winery, manufacturer, or rectifier (producer) may, under its division-issued permit, make retail sales on the production premises and establish full-service retail outlets depending on the producer’s production volume. The bill authorizes a producer to make retail sales of its own products on the production premises, for on-premises or off-premises consumption. If the producer meets specified production thresholds, the bill also allows the producer to engage in full-service retail sales on the production premises and to establish from one to three full-service retail outlets away from the production premises at which full-service retail sales may be made. “Full-service retail sales” are sales of beer and intoxicating liquor, for on-premises or off-premises consumption, and the provision of taste samples. Alcohol beverages not produced by the producer must be purchased from a wholesaler or other person authorized to distribute the alcohol beverages under current law. To operate a full-service retail outlet, a producer must obtain approval from the division, which the division must grant unless the producer has violated a provision of law related to full-service retail outlets. In addition, a producer may not commence sales of alcohol beverages at a full-service retail outlet unless, prior to commencing such sales, the producer receives approval from the municipality in which the retail outlet is located. Applications for a municipality’s approval must be made on a form prescribed by the division. A municipality’s approval must be based on the same standards and criteria that the municipality has established by ordinance for the evaluation and approval of retail license applications. A municipality may limit the scope of alcohol beverages offered for sale at a full-service retail outlet only with respect to alcohol beverages that are not of the same type as those produced by the producer. Retail sales on the production premises and at full-service retail outlets must be supervised by the permit holder or a person holding an operator’s license or operator’s permit (discussed further below). A producer may operate a restaurant at any full-service retail outlet and on the production premises.
Under the bill, if a brewer is not eligible to establish a full-service retail outlet, the brewer maintains the current-law authorization to establish an off-site retail outlet at which it may sell its own beer for on-premises or off-premises consumption. In addition, if the brewer held a retail intoxicating liquor license on June 1, 2011, for its brewery premises or an off-site retail outlet, the brewer may make retail sales of intoxicating liquor for on-premises consumption at this formerly licensed location.
The bill eliminates the authorization for a winery to hold a retail license, which authorization is replaced with the retail sales authority described above. The bill also eliminates the prohibition against a brewer operating a restaurant in a location other than the brewery premises and the brewer’s off-site retail outlet.
Closing hours for retail sales by brewers, wineries, manufacturers, and rectifiers
Under current law, with limited exceptions, a retailer operating under a Class “B” or “Class B” license may not remain open between the hours of 2 a.m. and 6 a.m. on weekdays or between 2:30 a.m. and 6 a.m. on Saturday and Sunday, and a municipality may not impose different closing hours by ordinance. The hours during which a Class “B” licensed retailer may make sales for off-premises consumption are more limited, with these sales prohibited from midnight to 6 a.m., although a municipality may, by ordinance, impose more restrictive hours for these sales. Current law does not specify closing hours or permissible hours of sale for retail sales by brewers, manufacturers, or rectifiers.
Under the bill, a full-service retail outlet of a producer is subject to the same closing hours, and restrictions on the hours in which sales for off-premises consumption may be made, that are applicable to a Class “B” licensee in the same municipality with respect to all alcohol beverages sold at the retail outlet. These limitations also apply to the producer’s production premises, except that the production premises are not required to be closed for nonretail activities. The bill also specifies that no member of the public or invited guests may be present on the production premises during the closing hours applicable to a Class “B” licensee.
Under current law, a winery operating under a “Class B” license may not remain open for retail sales of wine between the hours of 9 p.m. and 8 a.m.
The bill eliminates this earlier closing hour for a winery.
Other authorized activities of brewers, wineries, manufacturers, and rectifiers
Under the bill, the permit of a brewer, winery, manufacturer, or rectifier also authorizes the following activities:
1. The transportation by the producer of its alcohol beverages between the production premises and any depot, warehouse, or full-service retail outlet maintained by the producer or other premises for which the producer holds a permit.
2. The sale, shipment, transportation, and delivery, or the sale or transfer, of the producer’s alcohol beverages, in bulk or in any state of packaging, to another producer holding a permit that allows production of the same type of alcohol beverages.
Producers providing taste samples on retail premises
Current law allows Class “A” and “Class A” licensees to provide free taste samples to customers for consumption on the licensed premises, subject to various restrictions such as the size and number of taste samples and hours during which they may be provided. As part of their retail sales authority, Class “B,” “Class B,” and “Class C” licensees may also provide taste samples for consumption on the premises.
Under current law, a brewer may provide free taste samples on Class “A” licensed premises for consumption on the premises, subject to the same limitations applicable to the Class “A” licensee in providing taste samples, including hours and size and number of samples. In addition, the brewer must purchase from the Class “A” licensee the beer that the brewer provides as taste samples.
The bill creates additional authority, and modifies existing authority, for a brewer, winery, manufacturer, or rectifier to provide taste samples on retail licensed premises with the consent of the retail licensee. Under the bill, a winery, manufacturer, or rectifier may provide free taste samples of intoxicating liquor on “Class A,” “Class B,” or “Class C” premises, not exceeding two 3-ounce samples of wine per day per person and one 0.5-ounce sample of distilled spirits per day per person. A brewer may provide free taste samples of beer on Class “A” or Class “B” premises, not exceeding two 3-ounce samples of beer per day per person. A brewer, winery, manufacturer, or rectifier may provide the taste samples to any person who has attained the legal drinking age for consumption on the premises between the hours of 11 a.m. and 7 p.m. The taste samples must be either 1) purchased by the brewer, winery, manufacturer, or rectifier from the retail licensee or 2) produced by the brewer, winery, manufacturer, or rectifier and brought to the retail premises. However, a brewer, winery, manufacturer, or rectifier may not leave at the retail premises any unused alcohol beverages not purchased from the retail licensee.
The bill also eliminates a provision under which a municipality may prohibit a “Class A” licensee from offering free taste samples of wine on its licensed premises.
Brewpubs
Under current law, a person is eligible for a brewpub permit issued by DOR if the person meets certain requirements, including that 1) the person manufactures not more than 10,000 barrels of beer per year and 2) the person operates on the brewpub premises a restaurant for which a retail license is issued and in which the brewpub sells, in addition to its own beer, the beer of another brewer. A brewpub permit authorizes, among other activities, 1) the manufacture of up to 10,000 barrels of beer per year, but the entire manufacturing process must occur on brewpub premises; 2) the retail sale of alcohol beverages through retail licenses issued for the brewpub’s restaurant; and 3) the annual distribution of up to 1,000 barrels of the brewpub’s beer to retailers.
The bill increases, from 10,000 to 20,000 barrels per year, the amount of beer that a brewpub may manufacture and eliminates the requirement that the entire manufacturing process occur on brewpub premises. The bill also authorizes a brewpub to annually distribute up to 2,000 barrels of the brewpub’s beer to retailers. Also under the bill, to meet the requirement that it sell beer other than its own in its restaurant, a brewpub may sell beer manufactured by another brewpub rather than a brewer.
The bill also authorizes a brewpub to sell, ship, transport, and deliver, in bulk or in any state of packaging, beer manufactured by the brewpub to another brewpub.
Interest restrictions
Current law imposes restrictions on the issuance of alcohol beverage licenses and permits and the interests that such licensees or permittees may hold in other licensees or permittees. For example, a Class “B” license may not be issued to a brewer or a beer wholesaler, and a beer wholesaler’s permit may not be issued to a brewer or Class “B” licensee. As another example, a manufacturer, rectifier, or winery may not hold any direct or indirect interest in any wholesale permit or establishment. Current law includes many similar provisions, which generally prohibit one type of licensee or permittee from having a direct or indirect interest in specified other types of licensees or permittees. DOR has promulgated a rule used to implement some of these statutory interest restrictions, which include definitions and examples of direct and indirect interests.
The bill modifies these existing interest restriction provisions. In general, the bill expands these provisions to explicitly apply to “cross-tier” interests, such as a beer wholesaler’s interest in a winery permit or a winery’s interest in a retail beer license. The bill also standardizes language among the various interest restriction provisions, partly by adopting the phrase “an interest in” rather than “a direct or indirect interest in” or “a direct or indirect ownership interest in” and partly by explicitly stating whether the interest restriction applies to retail licensees, retail permittees, beer wholesalers, liquor wholesalers, brewers, brewpubs, wineries, manufacturers and rectifiers, out-of-state beer shippers, and out-of-state liquor shippers. The bill also incorporates the new interest restriction exceptions discussed below. The bill further repeals the DOR rule that guides determinations relating to interest restrictions.
In addition to these changes to existing interest restriction provisions, the bill creates new provisions relating to interest restrictions and creates exceptions to interest restrictions. The bill specifies all of the following:
1. No production permittee may hold any interest in any distribution permittee or in any retail licensee or permittee, except as authorized under current law for a brewpub.
2. No distribution permittee may hold any interest in any retail licensee or permittee or any interest in any production permittee, with an exception for a beer wholesaler holding an interest in a brewer on July 1, 2011.
3. No retail licensee or permittee may hold any interest in any distribution permittee or in any production permittee, except as authorized under current law for a brewpub.
For purposes of these provisions, employment in a nonmanagerial capacity for an alcohol beverage licensee or permittee is not an interest in that licensee or permittee.
The bill defines a “production permittee” as a person holding a permit issued to a brewer, brewpub, manufacturer, rectifier, or winery; a brewer in another state that holds an out-of-state beer shipper’s permit; a manufacturer, rectifier, or winery in another state that holds an out-of-state liquor shipper’s permit; or a restricted individual of any such person. A “restricted individual” is an individual who 1) is identified on a manager’s license or who works or acts in a managerial capacity for an alcohol beverage permittee or licensee; 2) serves as an officer, director, member, manager, or agent of a corporation or limited liability company that holds an alcohol beverage permit or license; or 3) holds more than a 10 percent ownership interest in an alcohol beverage permittee or licensee. The bill defines a “distribution permittee” as a person holding a beer or liquor wholesaler’s permit or a restricted individual of such a person. The bill defines a “retail licensee or permittee” as a person holding a Class “A,” Class “B,” “Class A,” “Class B,” or “Class C” license, a Class “B” or “Class B” permit, or a no-sale event venue permit (discussed further below), or a restricted individual of any such person. The bill also defines a “restricted entity” as an entity holding more than a 10 percent ownership interest in an alcohol beverage permittee or licensee. The bill defines a “restricted investor” as a restricted individual or restricted entity.
The bill also specifies the following three situations, applicable to both new and existing interest restriction provisions under the bill, in which interests are explicitly authorized:
1. An alcohol beverage licensee or permittee may be owned in part by, or grant an ownership interest to, a restricted investor in a different tier if specified requirements are satisfied, including that no restricted investor holds more than a 10 percent ownership interest or is involved in day-to-day operations and the aggregate amount of ownership held by all restricted investors does not exceed 49 percent. Each restricted investor must execute an affidavit swearing to a lack of involvement in the day-to-day operations of the licensee or permittee. A restricted investor who materially violates a representation in the affidavit may be required to forfeit not more than $1,000.
2. An alcohol beverage licensee or permittee, or a restricted individual of a licensee or permittee, may enter into a landlordtenant relationship with another licensee or permittee operating in a different tier if specified requirements are satisfied, including that the landlord has no control over or day-to-day involvement in the business of the tenant.
3. A spouse may have an interest in the alcohol beverage license or permit of the other spouse if specified requirements are satisfied, including that the marriage is governed by a marital property agreement or prenuptial agreement and both spouses execute an affidavit swearing to a lack of involvement in the day-to-day operations of each respective business. A spouse who materially violates a representation in the affidavit may be required to forfeit not more than $1,000.
As discussed above, the bill also eliminates the authority of a winery to hold a retail license and provisions allowing this common interest.
Tied house restrictions
Current law prohibits a brewer, brewpub, or beer wholesaler from furnishing anything of value to a Class “B” licensee, but there are numerous exceptions to this prohibition.
The bill creates an exception under which a brewer, brewpub, or beer wholesaler may enter into a landlordtenant relationship with a Class “B” licensee if the same requirements are satisfied that are referenced in item 2, above, relating to interest restrictions and landlord-tenant relationships.
Production agreements
