The National Wine Policy Bulletin

THE NATIONAL WINE POLICY BULLETIN

APRIL 2014

There are a number of issues we are following on our member’s behalf, with talking points, as well as a round-up of state issues from around the country. FEDERAL

GMO: Rep. Mike Pompeo (R-KS) will be introducing a bill backed by the Grocery Manufacturers Association that will create a voluntary federal labeling system for foods that are not genetically modified. The FDA would gain regulatory oversight of GMOs and would create federal rules to avoid various differing state laws and rules.

TTB: TTB Issues Ruling Clarifying Bottling Taxpaid Wine in Growlers.

The TTB issued a ruling clarifying the bottling of taxpaid wine in growlers. This has become a common practice by some retailers (such as Whole Foods) in certain states. The TTB has not been clear leading up to this ruling on exactly what the rules are for selling wine in growlers.

According to the ruling: The filling of wine growlers or similar containers with taxpaid wine for consumption off of the premises is considered bottling or packing under the Internal Revenue Code of 1986, as amended (IRC), and any person who engages in this activity must first qualify as a taxpaid wine bottling house and also must comply with all requirements applicable to taxpaid wine bottling houses, including labeling and recordkeeping requirements under the IRC and the regulations in 27 CFR part 24.

It is the official position of the TTB, that the filling of growlers with taxpaid wine for the purpose of consumption off premises is an activity that can only be conducted lawfully by a “qualified taxpaid bottling house.” The Internal Revenue Code of 1986, as amended, regulates the bottling, rebottling, packing and repacking of taxpaid wine by any person. Retailers and proprietors of wine premises are required by law to qualify as a taxpaid wine bottling house prior to conducting such operations.

According to TTB, federal law allows the filling of growlers with wine under the following conditions for wineries or retailers:

1. Receive a permit from TTB to operate as a “taxpaid wine bottling house” 2. The Growler to be filled may be no larger in capacity than four liters 3. The Growler may be brought by the customer or purchased on-premise before filling 4. The filling of the Growler must be for the purpose of off-premise consumption. 5. The winery or retailer must keep specific records concerning tax paid wine, received, dispensed and removed from the premises.

Wineries are required to hold a “basic permit” with TTB and obtain Certificates of Label Approval (COLAs) for labels that they produce, retailers are not required to hold a TTB license. A retailer that applies to be a taxpaid bottling house would then be subject to TTB jurisdiction and record-keeping requirements. Wineries or retailers that obtain the additional TTB permit would not need to obtain COLAs for growlers that are filled, at least as long as they are not pre-packaged for the consumers.

This document is intended for WineAmerica members and members of the State and Regional Associations Advisory Council. Please do not distribute without express permission. Questions, contact Tara Marie Good at [email protected].

To read the entire ruling please go here: http://www.ttb.gov/rulings/2014-3.pdf

FDA: The FDA published a Notice of Proposed Rulemaking (NPRM) in early March that would affect wines below 7% ABV and beers containing no malted barley or hops. According to the NPRM, there would be a mandatory declaration of added sugars on the Nutrition Facts label. They acknowledge that the sugar is converted into alcohol during the fermentation process and would mandate manufacturers to keep records of all relevant scientific data and information about the added sugar content before and after fermentation. The FDA acknowledges that they do not have adequate knowledge to the process and seeks comments from the industry by May 26, 2014.

USDA: The USDA announced new plans to focus on small to mid-size farms at the National Farmers Union convention. Agriculture Secretary Tom Vilsack said that efforts will include improved access to USDA resources, educational tools focused on opportunities for farmers engaged in local and regional food systems, and an expanded budget to grant funds for training, development, and socially-disadvantaged farmers. A fact sheet outlining modifications to the USDA’s Farm Service Agency (FSA) Farm Loans Programs can be accessed at http://www.usda.gov/documents/2014-farm-bill-changes-to-flp.pdf.

THE STATES

NEW YORK

Industry Funding: Governor Cuomo announced a $1.1 million federal fund through the U.S. Department of Agriculture for the research, protection, and safety of specialty crops in New York state, under the the Specialty Crops Competitiveness Act of 2014, amended by the federal 2014 Farm Bill. To apply for the funding, visit http://www.agriculture.ny.gov/RFPS.html. The deadline for the proposal is May 2, 2014, and announcements of awards will be September 2014.

(New York Wine and Grape Foundation) Industry Infrastructure: Governor Andrew Cuomo has announced plans for a second “Governor’s Wine, Beer, Spirits & Cider Summit” in Albany on April 8. The first summit held in October 2012 resulted in several major regulatory, legislative, and promotional initiatives benefiting the New York grape and wine industry.

NORTHEAST Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont

MARYLAND Retailer Licensing: Baltimore’s Alcoholic beverages Act of 2014 (SB0486 and HB0831) sponsored by Sen. Verna Jones-Rodwell (44th) is under consideration by the House. Effective immediately upon enactment, the new legislation would prohibit the issuance of licenses to sell alcoholic beverages within 300 feet of a substance abuse center, alter procedures for license applications, and make the Liquor Board more transparent, among other amendments. The Liquor Board would be required to digitize all licensee records and have them available for public viewing by July 1, 2015.

PENNSYLVANIA Privatization: Rep. Gene DiGirolamo, R-Bucks County, proposed a new plan to modernize, rather than privatize, Pennsylvania’s existing liquor system. His proposal allows the expansion of Sunday sales and direct-to-consumer shipping, and gives the LCB more pricing flexibility and the ability to build state

stores within grocery stores to allow the sale of alcohol in grocery stores, among other modernization initiatives. Gov. Corbett still supports a full privatization of Pennsylvania’s liquor system. While the Pennsylvania Legislature is still working on efforts to privatize or modernize the liquor system, some grocery stores have found ways to circumvent the sticky regulations. Wegman’s, Giant Food stores, and Weis Markets offer beer in Lancaster County, under the conditions that the beer is in an aisle separate from the store with a dedicated check-out lane and seating.

SOUTHEAST Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia

FLORIDA Beer & Spirits: House Bill 1329 authorizing certain manufacturers for the sale of growlers of malt beverages was passed through the Florida Legislature and is effective October 1, 2014.

KENTUCKY Regulation: Senate Bill 213 sponsored by Sen. Tom Buford, R-Nicholasville, that will allow counties to vote on the sale of Sunday wine at small farm wineries was unanimously passed by the Senate Licensing, Occupations and Administrative Regulations Committee. The bill is now under consideration by the Licensing & Occupations House Committee.

Retailer Licensing: House Bill 475, sponsored by House Speaker Pro Tem Larry Clark-D was passed by the Senate and House and was delivered to the Governor. The bill would allow residents in areas where state park lodges or golf courses are location to petition for the sale of alcoholic beverages in said state parks and golf courses.

LOUISIANA Regulation; House Bill 830 introduced by Rep. Bryan Adams, R-Gretna, will allow wine to be shipped in containers up to 20-liter and 19 and five-tenths-liter containers when sold in or shipped to Louisiana, an increase from the current 18 liter container. The House Judiciary Committee passed the bill unanimously. It heads to the House for a full vote.

TENNESSEE Retailer licensing: Gov. Bill Haslam signed HB 610 into law to allow grocery store sales of wine. The legislation allows cities and counties to hold referendums on the sale of wine in supermarkets. Despite the passage of the legislation, customers will not see wine in grocery stores until July 2016. The two year gap was allotted to liquor stores as a chance to prepare for the new competition, though lawmakers are now considering pushing the date up due to popular opinion. Grocery store giants are initiating petitions to see a vote on whether constituents want to see wine in grocery stores and other retail outlets put on the November ballot. The Tennessee Wine and Spirits Retailers Association (TWSRA) representing Tennessee package stores do not have the financial resources to compete with the clout of grocery giants such as Walmart, and instead will work with local grocers to raise awareness of the consequences of liberalizing alcohol laws.

VIRGINIA Winery Licensing: HB 282 introduced by Rep. David Albo allows a contract winemaking facility to sell the wine it produced if the terms of payment have not been fulfilled in accordance with the contract with the winery that supplied the grapes or other agricultural products. The bill was signed by Gov. McAuliffe and is effective July 1, 2014.

Winery Licensing: SB 178 sponsored by Sen. Jeffrey McWaters creates a new ABC permit allowing

sightseeing carriers and motor carriers transporting individuals to a licensed winery, brewery, or restaurant to collect the licensee’s tasting fees from tour participants, for the licensee. The routes must be registered with the DMV. The bill was sent to Gov. McAuliffe’s desk and waits his signature.

Beer & Spirits: SB 430 sponsored by Sen. John Watkins creates a new limited brewery license for breweries that manufacture no more than 15,000 barrels of beer per calendar year, are located on a farm in the Commonwealth, and use agricultural products that are grown on the farm in the manufacture of their beer. The bill limits local regulation of limited brewery licenses and specifically allows for limited breweries to be exempt from the imposition of minimum parking, road access, or road upgrade requirements. The bill passed both House and Senate and awaits the signature of Gov. McAuliffe.

Winery Licensing: HB 268 sponsored by Rep. Robert Orrock and SB 51 sponsored by Sen. Richard Stuart (identical bills) protect farm activities at agricultural operations from local regulations in the absence of substantial impacts on the public welfare and requires localities to take into account the economic impact of any proposed regulations. The bill does not alter the provisions of §15.2-2288.3. SB 51 was signed into by Gov. McAuliffe and HB 268 was delivered to his desk.

GREAT LAKES Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin

MICHIGAN Michigan Grape and Wine Industry Council Taxes: HB 5275: A hearing was held on March 25 to hear testimony from industry members regarding proposed tax credits for beverage alcohol producers using Michigan fruit.

Hard Cider: The Michigan Grape and Wine Industry Council voted to list hard cider producers in its listings as “producers of Michigan wine” starting in June 2014.

Land Use: The Council is investigating the mechanisms needed to relieve wineries of local sourcing requirements in the event that a winery experiences sufficient yield losses in cold-damaged vineyards to require the purchase of out of state fruit or wine.

MINNESOTA Retailer Licensing: Minnesota is unlikely to see a full repeal of the Sunday liquor sale restriction this year, as proposed by Sen. Roger Reinert’s SF 225, despite Gov. Dayton’s support of the bill. However, similar bills that would allow local municipalities to vote on the whether or not to keep the sales ban (SF 2031), and address the needs of craft brewers to sell 64 oz growlers and to keep their doors open 7 days a week are more palatable to legislatures.

MIDWEST Arkansas, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, Texas

NEBRASKA Retailer Licensing: The Lincoln City Council is considering repealing a law that requires children of 15 years and youngers to be accompanied by adults after 9 PM in businesses that serve alcohol. The law is currently not being enforced, though council members are reluctant to repeal the law without a replacement ordinance. Under this law, teens are banned from establishments such as bowling alleys or restaurants that have an on-sale liquor license after 9 PM, regardless of whether or not alcohol is

being served at the time.

SOUTH DAKOTA Distribution: Sen. Corey Brown’s SB 114 to allow direct-to-consumer shipping was voted against by the House Commerce and Energy Committee. Representatives’ concerns of the bill included apprehension of delivering alcohol to minors and the potential disadvantage to South Dakota retailers and wholesalers from out-of-state competition.

TEXAS (Texas Wine and Grape Growers Association) Industry Infrastructure: TWIGGA spent the last week in meetings with stakeholders to discuss the 2015 Texas Legislative Session. Included in the separate meetings were: AgriLife Governmental Affairs, Texas Alcoholic Beverage Commission, Texas Tech University, and Grayson College. The Association will hold a Legislative Forum on May 8 in Brownfield, TX to report on the meetings and create the legislative plan.

ROCKY MOUNTAIN Alaska, Arizona, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Utah

ARIZONA Taxes: A bill sponsored by Sen. Steve Yarbrough, R-Chandler will reduce the tax of ciders made from pears to the same tax imposed on apple ciders. The tax would drop from 84 cents on the gallon to 16 cents. The bill passed the Senate and passed through the House with an amendment that changes the classification of pears to all pome fruits, to be consistent with future rulings.

IDAHO Taxes: President of the Northwest Grocery Association, Joe Gilliam, said an Idaho Privatization of Liquor Sales Initiative may appear on the November 2015 ballot. The last push for a privatization of liquor sales was in 2012 from the Reagan Republicans group.

CALIFORNIA (Family Winemakers of California) Industry Funding: The wine industry’s bill to allow a grower referendum next spring to extend the Pierce’s Disease Program cleared its first policy hurdle on March 26. AB 1642 passed the Assembly Agriculture Committee unanimously. If enacted and the growers approve an extension then the program will run until 2021 and research on PD and the Glassy-winged Sharpshooter will continue. The bill is co-sponsored by Family Winemakers, California Association of Winegrape Growers and Wine Institute. It has no opposition.

Labeling & Advertising: A bill to require GMO labeling on food products, including alcoholic beverages, was heard on March 26 in Senate Health Committee. A broad array of anti-GMO groups testified in support of Senator Noreen Evans’ bill. Evans represents California’s North Coast wine country. A coalition of agriculture, business and biotech groups vigorously opposed SB 1381. Family Winemakers opposition led to a potential amendment to exempt alcoholic beverages. The right-to-know bill would allow private right of action. The bill barely passed after intense lobbying and a special Democrat caucus. It must clear two other policy committees before a fiscal committee review.

Retailer Licensing: FWC and Wine Institute are co-sponsoring a bill to allow tastings at certified

farmers’ markets. AB 2488 would expand on the original authorization to sell bottled estate grown wine created by an FWC-sponsored bill in 2000.

OREGON Privatization: In a move compared to Costco’s push for Washington’s liquor privatization, grocery giant Fred Meyer donated $500,000 to Oregonians for Competition, Oregon’s campaign for privatization. Attempts to modernize the system through a hybrid bill failed to gain traction in the Oregon legislature and now supporters must collect enough signatures on a petition by early July to see the issue on the November ballot.

WASHINGTON Winery Licensing: Senate Bill 5045 sponsored by Sen. Keiser et al., creates a permit to allow day spas to provide customers a complimentary glass of wine or beer for consumption on the premises. The bill was passed by the House and Senate and was delivered to the governor.

Growlers: SB 6442 and companion bill HB 1008 to allow the sale of cider in growlers were signed into law and is effective June 12, 2014.

Winery Licensing: SB 6514 sponsored by Sen. Kohl-Welles et al., modifies the definition of qualifying farmers markets for the sale of wine and beer. The bill reaffirms that wineries can sell their products and offer free tastings on their premises and permits wineries to sell wines made entirely from Washington grapes at qualifying farmers markets for an annual fee of $75. The bill was delivered to the governor.

Beers & Spirits: In a response to an “unacceptable” rate of spirits thefts (legally defined as two more thefts in a 6-month period), the liquor board is authorized to more strictly regulate spirits retailers to reduce the rate under HB 2155 sponsored by Rep. Dahlquist, Hurst, Hunt, Morrell, and Moscoso. The bill passed the House and Senate and awaits the signature of the governor.

Growlers: SHB 1742 signed into law by Gov. Inslee allows sales of growlers of wine at off-site tasting rooms. The law is effective June 12, 2014.