The National Wine Policy Bulletin

THE NATIONAL WINE POLICY BULLETIN

MARCH 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

TTB: The TTB issued a revised interim policy on gluten free labeling on fermented beverages to prevent misleading labels. According to new regulations, producers that use grains during their production process cannot label their beverage as gluten-free, though they can advertise their product as “treated to remove gluten” or other similarly worded phrases. Producers who use inherently free gluten products such as grapes can still use a gluten free label.

CDC: The Centers for Disease Control is becoming more concerned with doctors not discussing drinking practices with patients. CDC Director Thomas Frieden states that it should be a part of a routine check-up. The Affordable Care Act of 2010 will require new insurance policies to include an alcohol screening with no patient co-pay.

Farm Bill: USDA is planning a six month roll out of the 2014 Farm Bill. They have scheduled listening sessions in D.C. to update and answer questions from industry partners. WineAmerica will be attending the relevant session. They have announced that starting April 15th producers will be able to apply for Safety Net programs for 2011, 2012, and 2013.

THE STATES

NEW YORK

(New York Wine & Grape Foundation) Damage Relief: U.S. Senator Charles Schumer, D-NY, calls on the USDA for immediate assistance to wineries in the Finger Lakes region. The icy polar vortex has wreaked untold damage on grape vines and buds, though Sen. Schumer says vineyard owners cannot afford to wait to find out. Estimates place losses as high as 50% on potential grape harvest. Sen. Schumer recommends vineyard owners to turn to the Tree Assistance Program, or TAP, as provisioned for by the recently passed Farm Bill to allocate relief funds. He also recommends a declaration of natural disaster so that the USDA can offer low-interest loans to offset bud damage. Anticompetitive Barriers: The at-rest provision remained out of the governors budget but there is still a strong distributor effort to get the legislation passed.

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

CONNECTICUT Taxes: Sen. Kevin Witcos, R-Canton is pushing forward a Finance Committee Bill that will provide for a 6-week pilot program for the exemption of sales tax on wine, beer, and liquor in grocery and package

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]. stores from November 15, 2014 through December 31, 2014. Neighbor states of Rhode Island and Massachusetts repealed their own sales taxes on alcohol and Witcos hopes to make Connecticut competitive and cut liquor border bleeds by following suit.

DELAWARE Direct Shipping: Delaware waits a decision on House Bill 60 first introduced by Rep. Deborah Hudson, R-Fairthorne in 2011, to permit shipping wine to Delaware consumers by licensed wineries. Delaware remains one of the nine states that prohibits direct-to-consumer shipping of wine.

MARYLAND (Maryland Wineries Association) Winery Licensing: Senate Bill 287 backed by Sen Robert Zirkin sets regulations regarding kosher wineries’ permits, production, and shipping. The bill would go into effect July 1, 2014. It is pending action from the Senate Education Health and Environmental Affairs Committee.

Labeling & Advertising: The Maryland Wineries Association, in association with the Wine Institute, has offered an amendment to SB778 which creates a labeling requirement for any food, alcohol, etc., that requires more than 1% genetically engineered ingredients. The amendment exempts wine from the labeling requirement. PENNSYLVANIA Privatization: Gov. Tim Corbett pushes lawmakers to come to a consensus about privatization. Although the issue has been a hot-button topic for some time now, it seems no conclusion will be made in the foreseeable future.

Winery Licensing: The Pennsylvania Liquor Control Board announced a regulatory change that will allow a licensed limited winery to sell wine on their premises for less than what the same wine sells at a Fine Wine & Good Spirits store. They hope the change will stimulate the Pennsylvanian wine economy and offer consumers the best options. The PCLB believes that the previous restriction influenced which wines in-state wineries sold to them. The new regulation went into effect March 1st.

Trade Practice: Marketing director Jim Short at the PCLB notified the board of his retirement. His name among others was listed in a 2012 confidential report as having improperly received gifts and favors from vendors. Short’s timely retirement comes before the announcement of an ethics violation report.

RHODE ISLAND Direct Shipping: Pending HB 7400, sponsored by House Minority Leader Brian Newberry, creates a Wine Direct Shipper License for direct-to-consumer shipments of up to 24 cases of wine per year to residents 21 years and older. Current law limits wine shipments to in-person orders at wineries. The bill is scheduled for hearing by the House Committee on Corporations March 4, 2014, and would be effective immediately upon passage. Wineries could apply for licenses after paying a $100 registration fee. SOUTHEAST Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia FLORIDA Growlers: Sen. Jack Latvala - R continues to push Senate Bill 406 forward, which will increase the existing 32 oz growler regulation to 64 oz, the preferred container size. The bill would also authorize licensed tasting at breweries and remove the prohibition of beer samples at the site of certain vendors. The bill must go through Community Affairs before passing on to Appropriations.

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]. TENNESSEE Retailer Licensing: Tennessee House of Representatives passed House Bill 610 sponsored by Rep. Jon Lundberg, which allows the sale of wine in grocery stores. The Senate’s version of the bill backed by Sen. Bill Ketron, R-Murfreesboro also passed through the Senate. The House Finance Subcommittee approved both House Bill 610 and back-up measure, House Bill 47 and was sent to the governor’s desk. Gov. Bill Haslam previously stated he would sign the bill into law. Tennessee constituents can expect to see the issue on their ballots this fall, and wine on their grocery shelves as soon as July 2016. In response to the bill, liquor stores are asking for a cap on the number of wine outlets that can be opened, as wine makes up 40% of liquor store sales.

VIRGINIA (Virginia Wine Council) Winery Licensing: Senate Bill 51 to ease local restriction on agritourism events passed through both the Senate and House. In absence of negative impact on public health and safety, the bill would prevent local authorities from requiring a special-use permit for events and from stringently regulating noise control. It does not alter the provisions of § 15.2-2288.3 for licensed farm wineries.

Winery Licensing: House Bill 282 introduced by Rep. David Albo passed through House and Senate, and was sent to the desk of Gov. McAuliffe. HB 282 allows contract winemaking facilities to sell the wine it produced even if terms of payment have not been fulfilled in accordance to the contract with the winery that supplied the agricultural products.

Growlers: House Bill 882 sponsored by Rep. Carr allows wines to be sold in growlers or other federally approved reusable containers. The bill also accounts for the sale of ciders in all containers approved for wine. HB 882 passed through the House and Senate and waits for Gov. McAuliffe’s signature.

Winery Licensing: Legislation backed by Sen. McWaters creates a new permit for the ABC that will allow sight-seeing carriers to collect the licensee’s tasting fees from tour participants, for the sole purpose of remitting the collected fees to the establishment conducting the tasting event. Senate Bill 178 waits the signature from Gov. McAuliffe.

Winery Licensing: Senate Bill 430 introduced by Sen. John Watkins creates a new license for breweries that limits local regulation of limited brewery licensees, prohibits the imposition of minimum parking, road access, or road upgrade requirements on any licensed limited brewery. SB 430 is specifically for breweries located on a farm in the Commonwealth of Virginia, manufactures no more than 15,000 barrels of beer per calendar year, and uses the agricultural products grown on their farm in the manufacturing of their beer. The bill passed through the House and Senate and waits Gov. McAuliffe’s signature.

WEST VIRGINIA Retailer Licensing: Senate Bill 580 sponsored by Sen. Bob Beach to allow for the sale of wine at NCAA Division I college sports stadiums failed to make it out of the Senate Finance Committee in time for the closing of the 2014 Regular Legislative Session. The bill, which was expected to go through with little to no objection, was not added to the Senate Finance agenda by Sen. Clarke Barnes, R-Randolph, for lack of exposure to the Senate.

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

MICHIGAN Taxes: Rep. Doug Geiss, D-Taylor, introduced House Bill 5275 in an effort to promote locally grown and produced crop. The legislation would give wine and cider makers a tax credit of 8 cents per gallon for their first 500,000 gallons sold and 4 cents per gallon after that with a max of 15 million gallons, providing that their product was made with at least 40% local products. In 2020, the percentage would raise to 50%. Eligible beverages could print “Michigan farm to glass” on their labels.

MINNESOTA Beer & Spirits: Authorization of Sunday liquor sales vis-à-vs House Bill 1946 sponsored by Rep. Jenifer Loon was referred to the Commerce and Consumer Protection Finance and Policy Committee after its first introduction. WISCONSIN Winery Licensing: The Wisconsin Assembly passed a bill that allows unaccompanied minors into wineries if they are participating in a tour. The bipartisan bill is now waiting to be evaluated and signed into law by Governor Scott Walker.

Retailer Licensing: Senators Jauch, L. Taylor, Olsen, Vinehout, and Lehman introduced Senate Bill 535 to allow taste samples of liquor at retail licensed premises in addition to beer and wine, subject to various restrictions. The bill is being reviewed by the Committee on Agriculture, Small Business, and Tourism.

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

KANSAS Beer & Spirits: A bill that would allow homebrewers to share their yield with friends and competition judges in addition to immediate family, so long as there is no compensation, awaits approval from the Senate. The bill has seen little to no opposition, and is being pushed by brewing clubs.

Retailer Licensing: Kansas House Commerce, Labor and Economic Development Committee held a hearing on House Bill 2556, which will allow for the sale of alcohol in groceries stores. Liquor stores are the main opponents to the bill, arguing that Kansas citizens have not shown a demand for more places to buy alcohol. The bill would allow grocery stores to start selling strong beers in July 2017, wines in July 2020, and liquor in July 2024 to give liquor stores a chance to adapt to the increased competition. The bill would also mandate a 10 year license freeze so that licenses from present until 2024 could only be obtained by buying from an existing license holder. This would give liquor stores the opportunity to sell their license and cushion any economic blows.

MISSOURI Beer & Spirits: House Bill 1628 sponsored by Rep. Bart Korman, R-High Hill, would extend tax credits enjoyed by wine and grape producers to microbreweries and distilleries to help industry growth. The bill offers microbreweries and distilleries a state tax credit of 25 percent of the purchase price for all

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]. equipment and material used in the production of their beverage. Individual businesses could claim up to $100,000 per fiscal year with an annual cap of $4 million for all businesses. At the last hearing, committee members expressed concern that industries such as the microbreweries could take the majority of the available $4 million tax credit, leaving other industries little to no available funds.

NEBRASKA (Nebraska Winery & Grape Growers Association) Land Use: Herbicide drift has become a major issue for grape growers in Nebraska. The majority of the state’s growers have suffered some degree from drift damage in recent years. The damage not only affects vines during the year of impact, but effects may carry over into subsequent years. The NWGGA is serving on the Herbicide Drift Task Force appointed by Senator Ken Schilz, chair of the Senate Agriculture Committee. The association is committed to collaborating with the Senator and other stakeholders on developing meaningful outreach and education to help mitigate the losses suffered by the industry due to drift. NWGGA members are also handing out its “So You Live Near A Vineyard” brochure alongside their Passport brochures their tasting rooms in an attempt to educate the general public who can also be a source of drift damage.

Taxes: According to a recent ruling by Senior U.S. District Judge Richard Kopf, the municipality of Pender, Nebraska lies within the borders of the Omaha reservation are are thus subject to the Omaha Tribe’s 10% tax on alcohol purchases and liquor license regulations. Business owners have asked the court for a stay of judgement.

SOUTH DAKOTA Direct Shipping: Senate Bill 114 sponsored by Sen. Corey Brown, R-Gettysburg allowing wineries holding federal permits to ship to South Dakota consumers was approved by the Senate. The bill awaits passage through the House of Representatives. It would require someone of at least 21 years of age to sign the delivery package. South Dakota remains the only Midwest state that does not allow direct-to-consumer shipping, and one of nine states in the U.S. Some wineries are optimistic about an increase in sales, while others remain skeptical that licensing fees would not be worth the cost of shipping one case to a consumer.

TEXAS Beer & Spirits: A bill has been introduced in the state assembly that would give distilleries and microbreweries the same tax credit given to wineries. Distilleries and Microbreweries would be allowed a state tax credit equal to 25% purchase price of all new and used equipment and materials that are used in the distilling of spirits or the brewing of beer.

Recordkeeping & Reporting: Texas sent out notices to all permitted out-of-state wine direct shippers that as of January 1, 2014, the Texas Alcoholic Beverage Commission (TABC) is updating the filing periods for the C-240, Shippers Excise Tax Return. The notice states that permittees shipping less than 4,000 gallons annually to consumers in Texas may begin filing this return on an annual calendar basis, beginning with the 2014 year. Permittees shipping more than 4,000 gallons of wine annually must continue to file this return on a quarterly basis, however the return will reset as a standard quarterly filing, as opposed to the unusual offset quarterly schedule.

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

ARIZONA

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]. Beer & Spirits: The liquor omnibus bill introduced in early February by Sen. Michael McComish was recommended to pass by the Senate Majority Caucus.

Industry Infrastructure: The Arizona Wine Growers Association (AWGA) Legislative Committee has been working diligently with stakeholders to address many legislative issues facing the growing Arizona wine industry. The list of issues includes: defining production, extension of Series 13 license to allow satellite tasting rooms, alternating proprietorships, increase of production ceiling, increasing festival participation limits, and a farm stand license (allow limited tasting room with retail).

Winery Licensing: A consensus liquor bill, also known as an omnibus bill, Senate Bill 1397, was introduced by Senator Michael McComish on February 4. Wine industry items that received stakeholder support were included in SB1397. In anticipation of additional discussions about a production cap increase, the AWGA introduced placeholder legislation to adjust the cap to an unspecified amount.

The goal is to protect the majority of industry models operating today. However, some business models currently operating will have to make changes even if the effort is successful. Every winery license holder in the state of Arizona will be affected by the changes proposed.

Research & Grants: AWGA received a USDA Specialty Crop Block Grant in the amount of $25,000 to conduct a confidential survey of Arizona wine grape production in early 2014. The survey will determine acreage planted, productivity and varietals of wine grapes planted to establish a baseline for future reporting of the economic impact of the wine industry and reporting to USDA and related organizations. AWGA is partnering with NASS to conduct the survey. Upon completion, the information will be provided to the growers and the general public to enhance the profile of the growing wine industry.

COLORADO (Colorado Wine Industry Development Board) Regulation: HB04-1034 the wine packaging bill, allowing for a Tax-Paid Bottling House under CO law, is headed to the Senate.

Regulation: The proposal for a Liquor Commission to take over much of the duty of the Director of Liquor Enforcement, and which contained some startling language to "preserve the integrity of the three-tier system," has been withdrawn. The Wine Institute provided opposition to that proposal that helped sink it.

HAWAII Winery Licensing: House Bill 2484 sponsored by Rep. Angus McKelvey, D and Senate Bill 3042 would allow the sale of growlers and reduce some of the restrictive production limits and high taxes.

Taxes: Senate Bill 3041 introduced by Senators Rosalyn Baker, Will Espero, Brookwood Galuteria, Russell Ruderman, and Brian Taniguchi, will reduce the tax winemakers pay from $1.38 per gallon to 59 cents on the gallon. The bill will also reduce the per wine gallon on distilled spirits produced by small manufacturers from $5.98 to $2.57.

IDAHO Winery Licensing: A new bill protecting Idaho’s wineries has been introduced into the State Senate. In the event that a winery’s license is suspended or revoked for any reason, harvest and bottling operations would not be also shutdown. Winery licenses can be suspended for any number of trivial

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]. reasons such as not receiving the license renewal notice in time, and halting all operations could result in a severe loss for the winery.

NEW MEXICO Beer & Spirits: Senate approves Bill 263 that would allow New Mexico counties the option to levy a liquor tax that would help finance classes for alcoholism and its prevention. The liquor excise tax would increase the price 5 cents on a glass of wine. The bill was referred to the House Business and Industry Committee and waits their consideration.

UTAH Regulation: Rep. Kraig Powell, R-Heber City sponsors House Bill 285 to amend restrictions in place by Utah’s Alcohol Beverage Control Act. The most notorious of these restrictions, often referred to as the “Zion Curtain” would be amended so that restaurants could choose whether or not to pour drinks in plain sight. Amendments that would allow patrons to not be required to order food along with their drink were carved out of the bill to make it more palatable to legislatures. Mormon church leaders urge legislators not change the law under public safety concerns. They point to Utah’s statistics of low alcohol related incidents to bolster their support of Utah’s notoriously conservative alcohol laws.

Beer & Spirits: House Bill 338 backed by Rep. Gage Froerer, R-Huntsville, to increase the number of available liquor licenses hit a roadblock when it reached the House Revenue and Taxation Committee. Major concerns surrounded whether increasing the number of available liquor licenses would result an increase underage drinkers and unhealthy drinking habits. Further discontent stemmed from the fact that the liquor licenses would not mandate the partition that blocks customers from seeing drinks poured, known as the Zion Curtain. Rep. Froerer maintained the bill would be beneficial for economic development.

CALIFORNIA Water Rights: The $160 million federal relief fund for California is followed by Gov. Jerry Brown’s signature on a $687 million drought relief bill that will free up the state’s water supply and aid residents who faced hardship because of the drought. Provisions of the bill also more strictly enforce water regulations with more severe penalties to those who violate them. The legislation, SB 103 and 104, passed through both houses with bipartisan support. However, legislators agree that the new package is just the beginning of addressing California’s water situation.

OREGON (Oregon Winegrowers Association) Privatization: Debates on privatizing Oregon’s liquor system still have not reached a consensus. Senate Bill 1559, the result of a series of meeting organized by Oregon Liquor Control Commission Chairman Rob Patridge, offers a hybrid bill that would allow retailers with 10,000 plus sq. ft. to offer products like Captain Morgan and Absolut Vodka while maintaining state control over liquor sales. Recent amendments from a budget subcommittee removed possibility of a task force from the bill. The legislation would allow state liquor enforcers to use the state’s law enforcement database rather than a third party database.

Support of privatization from the public fluctuates, with concerns of potential liquor price hikes and increased underage drinking accompanying privatization or modernization measures. Winemakers and small-craft breweries are worried about getting elbowed out of shelf space.

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]. WASHINGTON (Washington Wine Institute) Privatization: Research on the effects of Washington’s foray into privatization was funded by the Public Health Law Research: Making the Case for Laws That Improve Health Program, directed by Linda Becker. Though there have been some unflattering reports on increased liquor thefts, underage drinking, alcohol related incidents, and liquor prices, numbers also show an increase in 9.7% increase in alcohol tax revenues from $242 million to $265 million.

Beer & Spirits: Senators Janea Holmquist Newbry, Steve Hobbs, and Marko Liias introduced Senate Bill 6547 to lower the liquor sales tax to combat the loss of sales from liquor border bleed. The measure would lower the excise tax from 20.5% to 6.5% over the next 8 years. The bill is not expected to get far as it is two weeks from the closing of the legislative session but will start a dialogue about the issue. Currently, the state makes $500 million from liquor sale revenues in comparison to the $300 million they made before privatization.

Growlers: SHB 1742 passed through the House committee and allows wineries to fill and sell "growlers" of wine of their own production from their additional tasting locations. (Washington law allows for a winery production premise plus two additional tasting locations.) The containers will have to meet Federal requirements.

Growlers: HB 1008 allowing for the sale of ciders in growlers passed through the House. Companion bill SB 6442 would allow sales of cider containing less than 7% alcohol to be sold at certain retail establishments where beer growlers are currently sold.

Regulation: SB 5310 would create a senior center license so that senior centers could serve alcohol on site without needing to obtain a "charitable event" license from the Liquor Control Board. The proposed legislation would offer a yearly license of $750, with which senior centers could serve wine, beer, and spirits on their premises. HB 2302 would allow a "snack bar" licensee to sell wine by the glass in addition to beer by the bottle or can. HB 2680 would establish a caterer's license to sell wine, beer and spirits without needing to be connected to a restaurant. HB 1805 would allow culinary classes to serve and sell wine at their instructional courses. SB 6514 would clarify that qualified farmers markets may provide samples of and sell Washington wine. SB 5045 would create a permit to allow day spas to offer or supply without charge wine or beer by the individual glass to a customer for consumption on the premises. With the Regular Session of the Legislature scheduled to adjourn on March 13, stay tuned for a report on final action.