THE NATIONAL WINE POLICY BULLETIN

DECEMBER 2015 - JANUARY 2016

There are a number of issues we are following on our members’ behalf, with talking points, as well as a round-up of state issues from around the country. Questions? Contact Michael Kaiser, Director of Public Affairs at [email protected]. To see past installments, login to wineamerica.org. Need help logging in? Email Tara at [email protected] or call at 202-223-5175. For WineAmerica members only. Do not distribute.

FEDERAL

Legislation: Congress wrapped up their work for 2015 with the passage of the Fiscal Year 2016 Omnibus Appropriations Bill, sending it to the President’s desk for final signature. The bill fully funds the federal government until September 30, 2016. The bi-partisan agreement features several provisions relevant to the American wine industry.

TTB Funding: The bill features $106,439,000 in appropriations funding for TTB. This is $5,000,000 more than last fiscal year, with that money dedicated to label and formula approval.

COOL Repeal: The bill repeals the mandatory country of origin labeling requirements for certain cuts of beef and pork. The repeal of the COOL rule will protect the American wine industry from costly tariffs placed on wine exported into Canada and Mexico.

Tax Filing Requirements: Alcohol producers liable for not more than $50,000 per year in federal excise taxes to file and pay such taxes on a quarterly basis, rather than by month. Additionally, those producers liable for not more than $1,000 per year may pay taxes annually, rather than quarterly. The provision also exempts such producers from IRS bonding requirements.

Definition of Hard Cider: The provision defines hard cider for purposes of alcohol excise taxes as a wine with an alcohol content of between 0.5 percent and 8.5 percent alcohol by volume, with a carbonation level that does not exceed 6.4 grams per liter, which is derived primarily from apples, apple juice concentrate, pears, or pear juice concentrate, in combination with water. The previous alcohol content limit for hard cider was 0.5 percent to 7 percent.

Market Access Funding: The bill fully funds the USDA Market Access Program (MAP) at $200 million. MAP funds are key for states expanding their wine sales into foreign markets.

THE STATES

NEW YORK E-commerce Regulation: Gov. Andrew Cuomo (D) last month vetoed AB 5920-A (Steck, D-Colonie), a bipartisan bill that would have given wine and liquor retailers in the state more freedom to sell their products through online transactions. The bill was adopted in response to the Liquor Authority’s battle with Albany-area store Empire Wine. In his veto message, Cuomo said that the measure would have made it more difficult for the State Liquor Authority to crack down on businesses who direct ship to customers in states where out-of-state purchases are banned, making New York a “haven for entities intent on breaking other state’s laws.” However, he also acknowledged the need to update state alcohol and beverage laws related to ecommerce, and stipulated that the state Liquor Authority host a series of roundtable discussions on the issue beginning in March. The Liquor Authority is currently overseeing another task force charged with reforming that state’s ABC laws, which is expected to conclude its work and deliver proposals to the governor this spring.

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

DELAWARE Direct Shipping: The NAWR last month called for revisions to HB 134 (Hudson, R-Wilmington), a direct shipping bill that would restrict Delaware consumers’ access to wine. As currently written, the proposal, which is now sitting in the House Economic Development Committee, would only allow Delaware residents to order wine shipments from U.S. wineries, but not wine retailers, wine stores, auction houses or foreign wineries, limiting access to international brands.

MARYLAND Premises Regulation: The Maryland Wineries Association (MWA) is currently supporting legislation to allow breweries, wineries and distilleries in Maryland to coexist on the same premises. Since its inception, the MWA has grown to a membership of 75 wineries.

PENNSYLVANIA Privatization: In December, the Pennsylvania Senate passed legislation backed by Gov. Tom Wolf (D). Under the bill, holders of an R (restaurant) License, which include some restaurants, bars, hotels, supermarkets and delis, would be able to sell up to four bottles of wine to a customer. Additionally, the proposal would allow wineries to ship its products directly to Pennsylvania consumers, and would allow casinos to serve liquor, wine and beer around the clock, up from 19 hours per day. The retail of hard liquor would still be confined to about 600 state-owned stores, though the bill would also give state- owned stores more flexibility in setting hours and marketing products to improve sales. It is unclear whether the provision will be able to pass the House, where majority Republicans are pushing for stronger privatization measures that include deregulating hard liquor sales and opening wine sales up to beer distributors. House lawmakers have demanded that the issue be further settled as part of a bipartisan budget deal.

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

MISSISSIPPI Wine in Grocery Stores: Lobbyists and lawmakers in Mississippi are gearing up for a legislative battle over allowing grocery stores in the state to sell wine. Looking for Wine, a coalition group that includes corporate partners like Wal-Mart and Kroger grocery stores as well as Mississippi residents, has been fighting the Mississippi Hospitality Beverage Association to expand wine into grocery stores, an effort that has gained traction in the state in recent years. State Rep. Scott DeLano (R-Biloxi), who last year introduced a bill legalizing grocery-store wine sales that died in committee, hopes this year that the state legislature takes an even broader look at revising the Alcohol Beverage Control model, which places a host of regulations on businesses that sell alcohol. The push to expand wine retail is focused on counties in the state where alcohol sales are legal, but not in the thirty-six where they are prohibited.

TENNESSEE Wine in Grocery Stores: Tennessee lawmakers have passed a measure allowing state grocery stores to apply to begin stocking and selling wine. Stores are required to have their aisles prepared and applications for a permit submitted to the Tennessee Alcoholic Beverage Commission before July 1. Grocery stores within 500 feet of liquor stores must obtain written permission by those stores before they are able to begin selling wine. However, should a liquor store deny granting a neighboring grocery store permission, the liquor stores are required to stop selling products such as cigarettes, ice, mixers and more that have allowed them to boost business and remain competitive with large grocery stores. At this time, no Tennessee grocery stores have filed for a permit to sell wine.

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

INDIANA Sunday Sales: A new proposal spearheaded by Indiana House Public Policy Chairman Tom Dermody (R- La Porte) seeks to lift Indiana’s eight-decade-old ban on Sunday carryout alcohol sales. Dermody’s latest attempt to overturn the last “blue law” still in effect in the country would impose fewer new restrictions on grocery stores and pharmacies than a proposal that failed in the legislature last year. The new bill would require grocery stores and pharmacies to keep alcohol in a separate area or limit alcohol displays to a single section of the store not adjacent to products such as toys, school supplies or candy. Employee handling alcohol sales will need to be at least 21 years old, with mandatory alcohol training and permits. Retailers balked at last year’s failed bill after provisions were included that would have further limited areas for wine and beer and required liquor to be kept behind the sales counter. Though the push to lift the ban has been led by grocery chains and convenience stores, it has been met with resistance by liquor stores, who are concerned with increased overhead costs without substantial additional revenue. According to the Indiana Association of Beverage Retailers, which represents liquor store owners in the state, the bill as written “gives big box retailers capabilities to sell alcohol as if it were milk” to the disadvantage of smaller businesses.

MICHIGAN (MICHIGAN WINE AND GRAPE COUNCIL) State Funding: State Sen. Goeff Hansen has introduced SB 671 to reorganize the state’s Grape and Wine Industry Council as the Grape, Wine Brewing and Distilling Industries Council. The council will consist of state and governor appointees and will be chaired by the director of the department of agriculture and rural development. The council will increase the scope of its activities to include providing research and information on growing, handling, selling and best business practices to the brewing and distilling as well as wine and grape-growing industries, and will administer and oversee financial aid programs to encourage desirable planting.

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

ARIZONA Direct Shipping: Sen. Nancy Barto (R-Phoenix) has sponsored a new bill that would let Arizona residents place wine orders by phone or online. Prepared by Napa Valley-based advocacy group Free the Grapes, the proposed legislation would allow Arizonans of legal age to have no more than 216 bottles – the equivalent of 18 cases – of wine shipped directly to their home or business from wineries in or out of state. The bill stipulates that wineries must verify their customers’ ages, done by delivery personnel when the wine is received.

This legislation would allow wineries of varying sizes to gain equal footing in terms of direct shipping availability. Under current law, wineries must keep their operations small – producing under 20,000 gallons per year – in order to directly ship to customers in Arizona and take orders over the phone and online. The proposal, modeled after legislation that Free the Grapes has introduced in other states, would require wineries wanting to ship to Arizona residents to obtain a direct-shipping license, the cost of which is unclear from the proposal. Should the bill pass, Arizona would join 43 other states that allow direct wine shipping. COLORADO Wine in Grocery Stores: A statewide outreach effort launched last week aimed to generate support and advocacy for bringing beer and wine to Colorado grocery stores. The coalition, Your Choice Colorado, initiated a “75 Stores in 75 Days” campaign to engage with shoppers and discuss the benefits of selling full-strength wine and beer in neighborhood grocery stores. Colorado is currently one of only eight states in which the sale of beer and wine in grocery stores is still illegal. The group hopes to change state laws through either legislation or a ballot initiative. According to a spokesperson, ballot proposals to lift the state ban have been filed for a potential statewide vote in November 2016.

TEXAS (TEXAS WINE AND GRAPE GROWERS ASSOCIATION) Compliance: The Texas Commission on Environmental Quality (TCEQ) has released a new Regulatory Guidance document outlining the responsibilities of Texas wineries to ensure complaint in areas relating to:

· Drinking water · Treatment or disposal of wastewater · Disposing of waste · Disturbing one or more acre of land during construction · Stormwater Texas wineries are either part of a public water system or well water system. TCEQ enforces the water for human consumption – drinking, hand washing, dish washing – and the water for winemaking. After referrals from the State Health Department on a number of businesses and the past problems at companies such as Blue Bell and Chipotle, TCEQ decided to begin winery inspections. The rules in place did not adequately address the business of wineries. With the help of the Texas Wine and Grape Growers Association, the guidelines were updated and distributed to all Texas wineries. A copy of the new guidelines are attached. The Texas Alcoholic Beverage Commission (TABC) has created a new Winery and Wine Bottler Report, due monthly to report excise tax. The new report is a result of the last Texas legislative session to ensure compliance to the 35,000 gallon cap. Most winery Point of Sale systems do not capture the information now required. The Texas Wine and Grape Growers Association had input as the new report was being developed and is hosting a conference call on February 2 to train wineries.

WASHINGTON (WASHINGTON WINE INSTITUTE) State Legislature: The 2016 legislative session has officially commenced. Last year, state lawmakers adopted two-year operating, capital and transportation budgets, making this session a “supplemental budget” year. This gives the legislators 60 days to make any small adjustments to their adopted budgets and consider whether to develop, remove or modify any taxes, regulations or other policies that can be agreed upon. The WWI has secured support from key state legislators and has submitted their 2016 priority legislation for official consideration. This legislation would allow wineries, for a $75 annual fee, to make sales of their wine for off-premise consumption at special-occasion licensed events, such as non-profit or charity functions. They anticipate that a hearing will be scheduled soon and that the proposal will be received favorably by the legislature.