The Alcoholic Beverage Control Act contains various provisions regulating the application for, the issuance of, the suspension of, and the conditions imposed upon, alcoholic beverage licenses by the Department of Alcoholic Beverage Control. Existing law provides for various annual fees for the issuance of alcoholic beverage licenses, depending upon the type of license issued.

This bill, the Craft Distillers Act of 2015, would authorize the department to issue a craft distillers license to manufacture distilled spirits, subject to specified conditions, including that the licensee manufacture no more than 100,000 gallons of distilled spirits per fiscal year, excluding brandy the craft distiller manufactures or has manufactured for them. The bill would allow the craft distillers licensee to sell distilled spirits to specified consumers, to own interests in on-sale retail licenses, and to sell beer, wines, brandies, and distilled spirits to consumers for consumption on the premises of a bona fide eating place, as provided. The bill would impose an original fee and an annual renewal fee for the license, which would be deposited in the Alcohol Beverage Control Fund.

The Alcoholic Beverage Control Act authorizes a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on the licensed premises, under specified conditions, including that tasting not be given in the form of a cocktail or mixed drink.

This bill would extend that authorization to a licensed craft distiller and would revise the tasting conditions by allowing a tasting to be given in the form of a cocktail or mixed drink.

Existing law prohibits a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in any distilled spirits wholesalers, rectifiers, or retailers license, as specified.

This bill would additionally prohibit a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in a craft distillers license.

The Alcoholic Beverage Control Act contains various provisions regulating the application for, the issuance of, the suspension of, and the conditions imposed upon, alcoholic beverage licenses by the Department of Alcoholic Beverage Control. Existing law provides for various annual fees for the issuance of alcoholic beverage licenses, depending upon the type of license issued.

This bill, the Craft Distillers Act of 2015, would authorize the department to issue a craft distillers license to manufacture distilled spirits, subject to specified conditions, including that the licensee manufacture no more than 100,000 gallons of distilled spirits per fiscal year, excluding brandy the craft distiller manufactures or has manufactured for them. The bill would allow the craft distillers licensee to sell distilled spirits to specified consumers, to own interests in on-sale retail licenses, and to sell beer, wines, brandies, and distilled spirits to consumers for consumption on the premises of a bona fide eating place, as provided. The bill would impose an original fee and an annual renewal fee for the license, which would be deposited in the Alcohol Beverage Control Fund.

The Alcoholic Beverage Control Act authorizes a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on the licensed premises, under specified conditions, including that tasting not be given in the form of a cocktail or mixed drink.

This bill would extend that authorization to a licensed craft distiller and would revise the tasting conditions by allowing a tasting to be given in the form of a cocktail or mixed drink.

Existing law prohibits a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in any distilled spirits wholesalers, rectifiers, or retailers license, as specified.

This bill would additionally prohibit a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in a craft distillers license.

The Alcoholic Beverage Control Act contains various provisions regulating the application for, the issuance of, the suspension of, and the conditions imposed upon, alcoholic beverage licenses by the Department of Alcoholic Beverage Control. Existing law provides for various annual fees for the issuance of alcoholic beverage licenses, depending upon the type of license issued.

This bill, the Craft Distillers Act of 2015, would authorize the department to issue a craft distillers license to manufacture or produce distilled spirits, subject to specified conditions, including that the licensee manufacture or produce no more than 100,000 gallons of distilled spirits per fiscal year, excluding brandy the craft distiller manufactures or has manufactured for them. The bill would allow the craft distillers licensee to sell distilled spirits to specified consumers, to own interests in on-sale retail licenses, and to sell beer, wines, brandies, and distilled spirits to consumers for consumption on the premises of a bona fide eating place, as provided. The bill would impose an original fee and an annual renewal fee for the license, which would be deposited in the Alcohol Beverage Control Fund.

The Alcoholic Beverage Control Act authorizes a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on the licensed premises, under specified conditions, including that tasting not be given in the form of a cocktail or mixed drink.

This bill would extend that authorization to a licensed craft distiller and would revise the tasting conditions by allowing a tasting to be given in the form of a cocktail or mixed drink.

Existing law prohibits a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in any distilled spirits wholesalers, rectifiers, or retailers license, as specified.

This bill would additionally prohibit a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in a craft distillers license.

The Alcoholic Beverage Control Act contains various provisions regulating the application for, the issuance of, the suspension of, and the conditions imposed upon, alcoholic beverage licenses by the Department of Alcoholic Beverage Control. Existing law provides for various annual fees for the issuance of alcoholic beverage licenses, depending upon the type of license issued.

This bill, the Craft Distillers Act of 2015, would authorize the department to issue a craft distillers license to manufacture or produce distilled spirits, subject to specified conditions, including that the licensee manufacture or produce no more than 100,000 gallons of distilled spirits per year, excluding brandy the craft distiller manufactures or has manufactured for them. The bill would allow the craft distillers licensee to sell distilled spirits to specified consumers, to own interests in on-sale retail licenses, and to sell beer, wines, brandies, and distilled spirits to consumers for consumption on the premises of a bona fide eating place, as provided. The bill would impose an original fee and an annual renewal fee for the license, which would be deposited in the Alcohol Beverage Control Fund.

The Alcoholic Beverage Control Act authorizes a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on the licensed premises, under specified conditions, including that tasting not be given in the form of a cocktail or mixed drink.

This bill would extend that authorization to a licensed craft distiller and would revise the tasting conditions by allowing a tasting to be given in the form of a cocktail or mixed drink.

Existing law prohibits a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in any distilled spirits wholesalers, rectifiers, or retailers license, as specified.

This bill would additionally prohibit a distilled spirits manufacturers or distilled spirits manufacturers agents license from being held by a person that holds any ownership or interest in a craft distillers license.

(1)The Horse Racing Law authorizes a thoroughbred racing association or fair to distribute the audiovisual signal and accept wagers on the results of out-of-state thoroughbred races conducted in the United States during the calendar period the association or fair is conducting a race meeting, including days on which there is no live racing being conducted by the association or fair, without the consent of the organization that represents horsemen and horsewomen participating in the race meeting and without regard to the amount of purses. Under that law, the total number of thoroughbred races imported by associations or fairs on a statewide basis under these provisions are required to not exceed 50 per day on days when live thoroughbred or fair racing is being conducted in the state, with the exception of prescribed races, including races imported into the combined central and southern zones when there is no live thoroughbred or fair racing being conducted in the combined central and southern zones.

This bill would additionally provide that the limitation of 50 imported races per day does not apply to races imported into the combined central and southern zones when there is live thoroughbred or fair racing being conducted in those zones but no live thoroughbred or fair racing is being conducted in the northern zone.

The Horse Racing Law authorizes a thoroughbred racing association or fair to distribute the audiovisual signal and accept wagers on the results of out-of-state thoroughbred races conducted in the United States during the calendar period the association or fair is conducting a race meeting, including days on which there is no live racing being conducted by the association or fair, without the consent of the organization that represents horsemen and horsewomen participating in the race meeting and without regard to the amount of purses. Under that law, the total number of thoroughbred races imported by associations or fairs on a statewide basis under these provisions are required to not exceed 50 per day on days when live thoroughbred or fair racing is being conducted in the state, with the exception of prescribed races, including races imported into the combined central and southern zones when there is no live thoroughbred or fair racing being conducted in the combined central and southern zones.

This bill would additionally provide that the limitation of 50 imported races per day does not apply to races imported into the combined central and southern zones when there is live thoroughbred or fair racing being conducted in those zones but no live thoroughbred or fair racing is being conducted in the northern zone.

(Without Reference to File)

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1295

Author:(Levine, et al.)

As Amended Ver:September 4, 2015

Majority vote

(G.O.)

Original Committee Reference: G.O.

SUMMARY: Creates a new "craft distiller's license" in the Alcoholic Beverage Control Act (ABC Act) with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production. This bill also modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1.5 ounce tasting that may also include a non-alcoholic mixer.

The Senate amendments delete the Assembly version of this bill, and instead:

1. Enact the Craft Distillers Act of 2015 (Act) which allows the Department of Alcoholic Beverage Control (ABC) to issue a craft distiller's license to a person that has facilities and equipment for the purposes of, and is engaged in, the commercial manufacture of distilled spirits. The craft distiller's license authorizes the licensee to do all of the following:

   1. Manufacture up to 100,000 gallons of distilled spirits per fiscal year (July 1 through June 30), exclusive of brandy production.

   2. Package, rectify, mix, flavor, color, label, and export only those distilled spirits manufactured by the licensee.

   3. Only sell distilled spirits that are manufactured and packaged by the licensee solely to a wholesaler, manufacturer, winegrower, manufacturer's agent, or rectifier that holds a license authorizing the sale of distilled spirits or to persons that take delivery of those distilled spirits within this state for delivery or use outside the state.

   4. Deal in warehouse receipts.

2. Specify that both "original" and "annual" craft distiller's license fees shall be consistent with the existing distilled spirits manufacturer's license fee. Also, provides that all such fees must be deposited in the ABC Control Fund.

3. Provide for annual reporting requirements as to the amount of distilled spirits manufactured by a licensed craft distiller and stipulates that if the report to ABC establishes that the licensee no longer qualifies to hold a craft distiller's license, ABC must renew the license as a distilled spirits manufacturer's license.

4. Prohibit the issuance of a craft distiller's license to any person, any officer, director, employee, or agent of such person, or any person who is affiliated with, directly or indirectly, a person that manufactures or has manufactured for them more than 100,000 gallons of distilled spirits per year within or outside the state, excluding brandy it manufactures or has manufactured for them pursuant to a brandy manufacturer license or to any person that is affiliated with, directly or indirectly, a wholesaler.

5. Allow a licensed craft distiller to sell to a consumer participating in a distilled spirits tasting, on the distiller's licensed premises, up to the equivalent of 2.25 liters of distilled spirits in any combination of prepackaged containers per day.

6. Authorize a licensed craft distiller to hold an ownership interest in up to three on-sale licenses (restaurants) provided that one of the restaurants is located at the distilling premises and that the other on-sale premises would be required to sell other distilled spirits products and be subject to other limits similar to current law allowing wineries to have an interest in on-sale licenses. Also, provides that a licensed craft distiller that has an interest in one or more on-sale retail licenses pursuant to this Act may continue to hold that interest in the event the licensee no longer qualifies as a craft distiller, provided that the interest was first obtained at a time when the licensee did hold a craft distiller's license pursuant to this Act.

7. Authorize a licensed craft distiller to sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place located on the licensed premises or on premises owned by the licensee that are contiguous licensed premises operated by and for the licensee, provided that any alcoholic beverage products not manufactured by the licensee are purchased from a licensed wholesaler.

8. Authorize a licensed craft distiller to have upon its licensed premises all beer, wines, and distilled spirits, regardless of source, for sale or service to guests during private events not open to the general public, provided that any alcoholic beverages sold at the event that are not manufactured or produced and bottled by, or manufactured or produced and packaged for, the licensed craft distiller are purchased only from a licensed wholesaler.

9. Specify that in the event the licensee no longer qualifies as a craft distiller due to the amount of distilled spirits reported to ABC, the licensee may continue to hold the privileges granted by this act.

10. Modify an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1.5 ounce tasting that may also include a non-alcoholic mixer. Also, deletes the provision in existing law that prohibits tastings of distilled spirits from being given in the form of a cocktail or a mixed drink.

11. Make other conforming and technical changes and contains legislative findings relative to the fact that small craft distillers have increased economic activity and job growth in the state. Also, declare legislative intent, in enacting this Act, to further encourage development of the craft distilling industry by enacting various limited exemptions to the general provisions of the three-tier system, while also continuing to uphold and support the three-tier system as the appropriate mechanism for regulating and licensing the sale of distilled spirits in California.

EXISTING LAW:

1. Establishes ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state.

2. Separates the alcoholic beverage industry into three component parts, or tiers, (referred to as the "tied-house" law or "three-tier" system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: a) promote the state's interest in an orderly market; b) prohibit the vertical integration and dominance by a single producer in the marketplace; c) prohibit commercial bribery and protect the public from predatory marketing practices; and, d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the "three-tier" system.

3. Permits a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on or off the licensee's premises. Tastings conducted by the licensee off the licensee's premises must be for an event sponsored by a nonprofit organization, as defined, and only if persons attending the event are affiliated with the sponsor. Tastings on the licensee's premises are limited to six, one-quarter ounce tastings, per individual per day and the law authorizes the distiller to charge for tastings. The law also provides that distilled spirits tastings shall not be given in the form of a cocktail or a mixed drink. Additionally, existing law makes it explicit that no distilled spirits shall be sold or solicited for sale in that portion of the premises where the distilled tasting is being conducted.

4. Permits an on sale retail licensee of wine or distilled spirits to conduct "instructional" consumer tastings on the licensed retail premises provided the following conditions are met: a) no more than one-quarter ounce of distilled spirits is offered in one tasting; b) no more than one ounce of wine is offered in one tasting; and, c) no more than three tastings are offered to an individual in one day. An instruction may include the history, nature, values and characteristics of the product being offered, and the methods of presenting and serving the product.

5. Authorizes beer manufacturers and wholesalers to offer beer samples (not to exceed eight ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

6. Permits a licensed winegrower, manufacturer, importer, or wholesaler to provide samples of the alcoholic beverages that are authorized to be sold by the licensee in accordance with rules prescribed by the ABC. A retail licensee, however, is not authorized to provide any free samples of alcoholic beverages. Moreover, ABC regulations provide that samples of alcoholic beverages may only be given away to licensees or employees of licensees who are in a position to purchase the product or who are in need of additional information about the product, as specified.

7. Permits a licensed winegrower or brandy manufacturer to be issued an off-sale general license. Existing law also permits wineries to sell their products to consumers on their licensed premises and directly to licensed, on-sale and off-sale retailers (e.g., restaurants and liquor stores). Additionally, existing law provides for a brewpub-restaurant license, issued to a bona fide public eating-place, which authorizes the sale of beer, wine, and distilled spirits for consumption on the premises and the sale of beer produced by the brewpub-restaurant licensee for consumption on the premises. The license also authorizes the sale of beer produced by the licensed brewpub-restaurant licensee to a licensed beer and wine wholesaler. The brewpub-restaurant licensee must purchase all beer, wine, or distilled spirits for sale on the licensed premises from a licensed wholesaler or winegrower, except for the beer produced by the brewpub-restaurant licensee on the licensed premises. Furthermore, the law also requires the brewpub-restaurant licensee to offer for sale on the licensed premises other commercially available beers available from licensed wholesalers.

8. Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

AS PASSED BY THE ASSEMBLY, this bill provided that the limitation of 50 imported races per day does not apply to races imported into the combined central and southern zones when there is live thoroughbred or fair racing being conducted in those zones but no live thoroughbred or fair racing is being conducted in the northern zone.

FISCAL EFFECT: According to the Senate Appropriations Committee, unknown, potentially significant costs to ABC offset by fee revenue. (Special Fund)

COMMENTS: This bill was substantially amended in the Senate and the Assembly-approved provisions of this bill were deleted.

Background: Existing "tied-house" law separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. Tied house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the "house" of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer's products.

According to the Distilled Spirits Council of the United States, the distilled spirits industry had steady growth in the United States (U.S.) in 2014. The Council reported that supplier sales were up 4% in 2014 and total U.S. volume growth increased 2.2% to 210 million cases. Consumer interest in industry innovations and premium products from distilled spirits producers of all sizes contributed to another year of steady growth in 2014. There are at least 350 craft distilleries in the United States today – a figure projected to pass 500 in 2015. The craft spirits industry holds economic development opportunities in tourism, manufacturing, revitalization, exporting and more. Craft spirits is a $10.2 billion market and growing fast.

Currently, beer producers and wineries in California can operate restaurants and brewpubs on their licensed premises – many of California's craft distillers have expressed interest in the restaurant business and would like the same privileges. This bill will allow California's licensed craft distillers to open restaurants on their licensed premises, as specified. Currently, distillers in California are authorized to conduct tastings on their licensed premises however they're precluded from selling the products to consumers – this bill will allow craft distillers to sell their products directly to consumers (in limited quantities). Specifically, this bill enacts the Craft Distillers Act of 2015 and creates a new "craft distiller's license" applicable to individuals who produce less than 100,000 gallons of distilled spirits annually, exclusive of brandy, with the following privileges:

1. Craft distillers may sell to consumers participating in a distilled spirits tasting, on the distiller's licensed premises, up to the equivalent of 2.25 liters of distilled spirits in any combination of prepackaged containers per day/per consumer;

2. Craft distillers may host private events at their premises, provided that any alcoholic beverages served at the event that are not manufactured by the craft distiller are purchased from a licensed wholesaler.

3. Craft distillers may own an interest in up to three on-sale licenses provided that one of the restaurants is located on the licensed distilling premises and that the other on-sale licensed retail premises offer competing brands of alcoholic beverages in addition to the products the craft distiller manufactures.

In addition, this bill modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1.5 ounce tasting that may also include a non-alcoholic mixer.

Purpose of the bill: According to the author's office, this bill is intended to provide greater licensing equity between small craft distilled spirits manufacturers and beer and wine producers. The author's office states this bill will remove an onerous restriction in law that prevents distillers from selling their products directly to consumers. Wineries and breweries were also not allowed to do so under original prohibition tied-house laws but over time, the Legislature carved-out various exceptions for the beer and wine industry which have helped small wineries and craft brewers prosper in California. The author's office believes this bill is a logical continuation of those efforts and changes in law. The author's office states, "The goal of this bill is to allow modest, limited sales to the nearly 50 small craft distillers throughout the state in order to help them further establish artisanal brands – by allowing an initial sale at the tasting room, the public can take a product with them and share California brands."

The author's office claims that 40 states currently allow distillers to sell their products to consumers and cites the following recent legislative action outside of California: 1) In 2014, the State of Arizona established a craft-liquor distillery license which allows distillers to sell directly to consumers; 2) In 2013, the State of Indiana allowed craft distillers to sell a range of products directly to consumers by the drink or bottle; 3) In 2013, the State of Florida allowed distilleries to sell two bottles a year directly to customers; 4) In 2008, the State of Oregon allowed craft distillers to offer samples of their products at their distillery or at a separate tasting room. Additionally, Oregon allowed distilleries to apply for a license as a retail outlet agent to sell bottled products manufactured at the distillery directly to consumers; and, 5) In 2008, the State of Washington allowed craft distilleries to conduct on-site tasting and sales and also sell product of its own production for consumption off the premises, up to two liters per customer per day.

According to ABC, there are currently 104 distilled spirits manufacturer's licenses that would be eligible to apply for the new on-sale distilled tasting license. Licensees will be required to pay an application fee of $600 and an annual renewal fee of $300 for the craft distiller's license.

Prior/Related Legislation: AB 1233 (Levine) of the current legislative session, allows a licensed distilled spirits manufacturer to sell up to three bottles of product authorized to be produced or bottled by or for the licensee to each person at a tasting on the licensee's premises. (Referred to interim study by the Assembly policy committee)

AB 933 (Skinner), Chapter 366, Statutes of 2013. Granted licensed distilled spirits manufacturers and licensed brandy manufacturers the privilege to conduct consumer tastings on their licensed premises and to charge for those tastings.

AB 949 (Quirk) of the 2013-14 Regular Session. Would have authorized licensed distilled spirits manufacturers to charge consumers for tastings and would have imposed additional conditions on the provision of tastings by the licensee, including limiting the size and number of tastes. Also, would have provided that a distilled spirits manufacturer's license authorizes the licensee to serve and sell food, general merchandise, and nonalcoholic beverages for consumption on or off the licensed premises. (Held in the Assembly Rules Committee)

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002422

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1295

Author:(Levine, et al.)

As Amended Ver:September 4, 2015

Majority vote

Original Committee Reference: G.O.

SUMMARY: Creates a new "craft distiller's license" in the Alcoholic Beverage Control Act (ABC Act) with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production. This bill also modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1.5 ounce tasting that may also include a non-alcoholic mixer.

The Senate amendments delete the Assembly version of this bill, and instead:

1. Enacts the Craft Distillers Act of 2015 (Act) which allows the Department of Alcoholic Beverage Control (ABC) to issue a craft distiller's license to a person that has facilities and equipment for the purposes of, and is engaged in, the commercial manufacture of distilled spirits. The craft distiller's license authorizes the licensee to do all of the following:

   1. Manufacture up to 100,000 gallons of distilled spirits per fiscal year (July 1 through June 30), exclusive of brandy production.

   2. Package, rectify, mix, flavor, color, label, and export only those distilled spirits manufactured by the licensee.

   3. Only sell distilled spirits that are manufactured and packaged by the licensee solely to a wholesaler, manufacturer, winegrower, manufacturer's agent, or rectifier that holds a license authorizing the sale of distilled spirits or to persons that take delivery of those distilled spirits within this state for delivery or use outside the state.

   4. Deal in warehouse receipts.

2. Specifies that both "original" and "annual" craft distiller's license fees shall be consistent with the existing distilled spirits manufacturer's license fee. Also, provides that all such fees must be deposited in the ABC Control Fund.

3. Provides for annual reporting requirements as to the amount of distilled spirits manufactured by a licensed craft distiller and stipulates that if the report to ABC establishes that the licensee no longer qualifies to hold a craft distiller's license, ABC must renew the license as a distilled spirits manufacturer's license.

4. Prohibits the issuance of a craft distiller's license to any person, any officer, director, employee, or agent of such person, or any person who is affiliated with, directly or indirectly, a person that manufactures or has manufactured for them more than 100,000 gallons of distilled spirits per year within or outside the state, excluding brandy it manufactures or has manufactured for them pursuant to a brandy manufacturer license or to any person that is affiliated with, directly or indirectly, a wholesaler.

5. Allows a licensed craft distiller to sell to a consumer participating in a distilled spirits tasting, on the distiller's licensed premises, up to the equivalent of 2.25 liters of distilled spirits in any combination of prepackaged containers per day.

6. Authorizes a licensed craft distiller to hold an ownership interest in up to three on-sale licenses (restaurants) provided that one of the restaurants is located at the distilling premises and that the other on-sale premises would be required to sell other distilled spirits products and be subject to other limits similar to current law allowing wineries to have an interest in on-sale licenses. Also, provides that a licensed craft distiller that has an interest in one or more on-sale retail licenses pursuant to this Act may continue to hold that interest in the event the licensee no longer qualifies as a craft distiller, provided that the interest was first obtained at a time when the licensee did hold a craft distiller’s license pursuant to this Act.

7. Authorizes a licensed craft distiller to sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place located on the licensed premises or on premises owned by the licensee that are contiguous licensed premises operated by and for the licensee, provided that any alcoholic beverage products not manufactured by the licensee are purchased from a licensed wholesaler.

8. Authorizes a licensed craft distiller to have upon its licensed premises all beer, wines, and distilled spirits, regardless of source, for sale or service to guests during private events not open to the general public, provided that any alcoholic beverages sold at the event that are not manufactured or produced and bottled by, or manufactured or produced and packaged for, the licensed craft distiller are purchased only from a licensed wholesaler.

9. Specifies that in the event the licensee no longer qualifies as a craft distiller due to the amount of distilled spirits reported to ABC, the licensee may continue to hold the privileges granted by this act.

10. Modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer. Also, deletes the provision in existing law that prohibits tastings of distilled spirits from being given in the form of a cocktail or a mixed drink.

11. Makes other conforming and technical changes and contains legislative findings relative to the fact that small craft distillers have increased economic activity and job growth in the state. Also, declares legislative intent, in enacting this Act, to further encourage development of the craft distilling industry by enacting various limited exemptions to the general provisions of the three-tier system, while also continuing to uphold and support the three-tier system as the appropriate mechanism for regulating and licensing the sale of distilled spirits in California.

EXISTING LAW:

1. Establishes ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state.

2. Separates the alcoholic beverage industry into three component parts, or tiers, (referred to as the "tied-house" law or "three-tier" system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: a) promote the state's interest in an orderly market; b) prohibit the vertical integration and dominance by a single producer in the marketplace; c) prohibit commercial bribery and protect the public from predatory marketing practices; and, d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the "three-tier" system.

3. Permits a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on or off the licensee's premises. Tastings conducted by the licensee off the licensee's premises must be for an event sponsored by a nonprofit organization, as defined, and only if persons attending the event are affiliated with the sponsor. Tastings on the licensee's premises are limited to six, one-quarter ounce tastings, per individual per day and the law authorizes the distiller to charge for tastings. The law also provides that distilled spirits tastings shall not be given in the form of a cocktail or a mixed drink. Additionally, existing law makes it explicit that no distilled spirits shall be sold or solicited for sale in that portion of the premises where the distilled tasting is being conducted.

4. Permits an on sale retail licensee of wine or distilled spirits to conduct "instructional" consumer tastings on the licensed retail premises provided the following conditions are met: a) no more than 1/4 ounce of distilled spirits is offered in one tasting; b) no more than one ounce of wine is offered in one tasting; and, c) no more than three tastings are offered to an individual in one day. An instruction may include the history, nature, values and characteristics of the product being offered, and the methods of presenting and serving the product.

5. Authorizes beer manufacturers and wholesalers to offer beer samples (not to exceed eight ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

6. Permits a licensed winegrower, manufacturer, importer, or wholesaler to provide samples of the alcoholic beverages that are authorized to be sold by the licensee in accordance with rules prescribed by the ABC. A retail licensee, however, is not authorized to provide any free samples of alcoholic beverages. Moreover, ABC regulations provide that samples of alcoholic beverages may only be given away to licensees or employees of licensees who are in a position to purchase the product or who are in need of additional information about the product, as specified.

7. Permits a licensed winegrower or brandy manufacturer to be issued an off-sale general license. Existing law also permits wineries to sell their products to consumers on their licensed premises and directly to licensed, on-sale and off-sale retailers (e.g., restaurants and liquor stores). Additionally, existing law provides for a brewpub-restaurant license, issued to a bona fide public eating-place, which authorizes the sale of beer, wine, and distilled spirits for consumption on the premises and the sale of beer produced by the brewpub-restaurant licensee for consumption on the premises. The license also authorizes the sale of beer produced by the licensed brewpub-restaurant licensee to a licensed beer and wine wholesaler. The brewpub-restaurant licensee must purchase all beer, wine, or distilled spirits for sale on the licensed premises from a licensed wholesaler or winegrower, except for the beer produced by the brewpub-restaurant licensee on the licensed premises. Furthermore, the law also requires the brewpub-restaurant licensee to offer for sale on the licensed premises other commercially available beers available from licensed wholesalers.

8. Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

AS PASSED BY THE ASSEMBLY, this bill provided that the limitation of 50 imported races per day does not apply to races imported into the combined central and southern zones when there is live thoroughbred or fair racing being conducted in those zones but no live thoroughbred or fair racing is being conducted in the northern zone.

FISCAL EFFECT: According to the Senate Appropriations Committee, unknown, potentially significant costs to ABC offset by fee revenue. (Special Fund)

COMMENTS: This bill was substantially amended in the Senate and the Assembly-approved provisions of this bill were deleted.

Background: Existing "tied-house" law separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. Tied house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the "house" of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer's products.

According to the Distilled Spirits Council of the United States, the distilled spirits industry had steady growth in the United States (U.S.) in 2014. The Council reported that supplier sales were up 4% in 2014 and total U.S. volume growth increased 2.2% to 210 million cases. Consumer interest in industry innovations and premium products from distilled spirits producers of all sizes contributed to another year of steady growth in 2014. There are at least 350 craft distilleries in the United States today – a figure projected to pass 500 in 2015. The craft spirits industry holds economic development opportunities in tourism, manufacturing, revitalization, exporting and more. Craft spirits is a $10.2 billion market and growing fast.

Currently, beer producers and wineries in California can operate restaurants and brewpubs on their licensed premises – many of California's craft distillers have expressed interest in the restaurant business and would like the same privileges. This bill will allow California's licensed craft distillers to open restaurants on their licensed premises, as specified. Currently, distillers in California are authorized to conduct tastings on their licensed premises however they're precluded from selling the products to consumers – this bill will allow craft distillers to sell their products directly to consumers (in limited quantities). Specifically, this bill enacts the Craft Distillers Act of 2015 and creates a new "craft distiller's license" applicable to individuals who produce less than 100,000 gallons of distilled spirits annually, exclusive of brandy, with the following privileges:

1. Craft distillers may sell to consumers participating in a distilled spirits tasting, on the distiller's licensed premises, up to the equivalent of 2.25 liters of distilled spirits in any combination of prepackaged containers per day/per consumer;

2. Craft distillers may host private events at their premises, provided that any alcoholic beverages served at the event that are not manufactured by the craft distiller are purchased from a licensed wholesaler.

3. Craft distillers may own an interest in up to three on-sale licenses provided that one of the restaurants is located on the licensed distilling premises and that the other on-sale licensed retail premises offer competing brands of alcoholic beverages in addition to the products the craft distiller manufactures.

In addition, this bill modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1.5 ounce tasting that may also include a non-alcoholic mixer.

Purpose of the bill: According to the author's office, this bill is intended to provide greater licensing equity between small craft distilled spirits manufacturers and beer and wine producers. The author's office states this bill will remove an onerous restriction in law that prevents distillers from selling their products directly to consumers. Wineries and breweries were also not allowed to do so under original prohibition tied-house laws but over time, the Legislature carved-out various exceptions for the beer and wine industry which have helped small wineries and craft brewers prosper in California. The author's office believes this bill is a logical continuation of those efforts and changes in law. The author's office states, "The goal of this bill is to allow modest, limited sales to the nearly 50 small craft distillers throughout the state in order to help them further establish artisanal brands – by allowing an initial sale at the tasting room, the public can take a product with them and share California brands."

The author's office claims that forty states currently allow distillers to sell their products to consumers and cites the following recent legislative action outside of California: 1) In 2014, the State of Arizona established a craft-liquor distillery license which allows distillers to sell directly to consumers; 2) In 2013, the State of Indiana allowed craft distillers to sell a range of products directly to consumers by the drink or bottle; 3) In 2013, the State of Florida allowed distilleries to sell two bottles a year directly to customers; 4) In 2008, the State of Oregon allowed craft distillers to offer samples of their products at their distillery or at a separate tasting room. Additionally, Oregon allowed distilleries to apply for a license as a retail outlet agent to sell bottled products manufactured at the distillery directly to consumers; and, 5) In 2008, the State of Washington allowed craft distilleries to conduct on-site tasting and sales and also sell product of its own production for consumption off the premises, up to two liters per customer per day.

According to ABC, there are currently 104 distilled spirits manufacturer's licenses that would be eligible to apply for the new on-sale distilled tasting license. Licensees will be required to pay an application fee of $600 and an annual renewal fee of $300 for the craft distiller's license.

Prior/Related Legislation: AB 1233 (Levine) of the current legislative session allows a licensed distilled spirits manufacturer to sell up to three bottles of product authorized to be produced or bottled by or for the licensee to each person at a tasting on the licensee's premises. (Referred to interim study by the Assembly policy committee)

AB 933 (Skinner), Chapter 366, Statutes of 2013. Granted licensed distilled spirits manufacturers and licensed brandy manufacturers the privilege to conduct consumer tastings on their licensed premises and to charge for those tastings.

AB 949 (Quirk) of the 2013-14 Regular Session. Would have authorized licensed distilled spirits manufacturers to charge consumers for tastings and would have imposed additional conditions on the provision of tastings by the licensee, including limiting the size and number of tastes. Also, would have provided that a distilled spirits manufacturer's license authorizes the licensee to serve and sell food, general merchandise, and nonalcoholic beverages for consumption on or off the licensed premises. (Held in the Assembly Rules Committee)

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002316

 THIRD READING  

Bill No: AB 1295

Author: Levine (D), et al.

Amended: 9/4/15 in Senate

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 10-1, 7/14/15

AYES: Hall, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire

NOES: Vidak

NO VOTE RECORDED: Berryhill, Runner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/17/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY VOTES: Not relevant

SUBJECT: Craft distillers: licenses

SOURCE: Author

DIGEST: This bill creates a new “craft distiller’s license” in the Alcoholic Beverage Control (ABC) Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production. This bill also modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer.

Senate Floor Amendments of 9/4/15 make clarifying and technical changes with respect to reporting requirements, the amount of spirits that can be sold to a consumer per day and implementation matters relative to the Department of ABC.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state.

2. Separates the alcoholic beverage industry into three component parts, or tiers, (referred to as the “tied-house” law or “three-tier” system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the marketplace; (c) prohibit commercial bribery and protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.

3. Permits a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on or off the licensee’s premises. Tastings conducted by the licensee off the licensee’s premises must be for an event sponsored by a nonprofit organization, as defined, and only if persons attending the event are affiliated with the sponsor. Tastings on the licensee’s premises are limited to six, one-quarter ounce tastings, per individual per day and the law authorizes the distiller to charge for tastings. The law also provides that distilled spirits tastings shall not be given in the form of a cocktail or a mixed drink. Additionally, existing law makes it explicit that no distilled spirits shall be sold or solicited for sale in that portion of the premises where the distilled tasting is being conducted. (Business and Professions Code Section 23363.1)

4. Permits an on sale retail licensee of wine or distilled spirits to conduct “instructional” consumer tastings on the licensed retail premises provided the following conditions are met: (a) no more than ¼ ounce of distilled spirits is offered in one tasting; (b) no more than one ounce of wine is offered in one tasting; and, (c) no more than three tastings are offered to an individual in one day. An instruction may include the history, nature, values and characteristics of the product being offered, and the methods of presenting and serving the product.

5. Authorizes beer manufacturers and wholesalers to offer beer samples (not to exceed 8 ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

6. Permits a licensed winegrower, manufacturer, importer, or wholesaler to provide samples of the alcoholic beverages which are authorized to be sold by the licensee in accordance with rules prescribed by the ABC. A retail licensee, however, is not authorized to provide any free samples of alcoholic beverages. Moreover, ABC regulations provide that samples of alcoholic beverages may only be given away to licensees or employees of licensees who are in a position to purchase the product or who are in need of additional information about the product, as specified.

7. Permits a licensed winegrower or brandy manufacturer to be issued an off-sale general license. Existing law also permits wineries to sell their products to consumers on their licensed premises and directly to licensed, on-sale and off-sale retailers (e.g., restaurants and liquor stores). Additionally, existing law provides for a brewpub-restaurant license, issued to a bona fide public eating place, which authorizes the sale of beer, wine, and distilled spirits for consumption on the premises and the sale of beer produced by the brewpub-restaurant licensee for consumption on the premises. The license also authorizes the sale of beer produced by the licensed brewpub-restaurant licensee to a licensed beer and wine wholesaler. The brewpub-restaurant licensee must purchase all beer, wine, or distilled spirits for sale on the licensed premises from a licensed wholesaler or winegrower, except for the beer produced by the brewpub-restaurant licensee on the licensed premises. Furthermore, the law also requires the brewpub-restaurant licensee to offer for sale on the licensed premises other commercially available beers available from licensed wholesalers.

8. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Enacts the Craft Distillers Act of 2015 (Act) which authorizes the Department of ABC to issue a craft distiller’s license to a person that has facilities and equipment for the purposes of, and is engaged in, the commercial manufacture of distilled spirits. The craft distiller’s license authorizes the licensee to do all of the following:
   
   

   1. Manufacture up to 100,000 gallons of distilled spirits per fiscal year (July 1 through June 30), exclusive of brandy production.
      
      

   2. Package, rectify, mix, flavor, color, label, and export only those distilled spirits manufactured by the licensee.
      
      

   3. Only sell distilled spirits that are manufactured and packaged by the licensee solely to a wholesaler, manufacturer, winegrower, manufacturer’s agent, or rectifier that holds a license authorizing the sale of distilled spirits or to persons that take delivery of those distilled spirits within this state for delivery or use outside the state.
      
      

   4. Deal in warehouse receipts.
      
      

2. Specifies that both “original” and “annual” craft distiller’s license fees shall be consistent with the existing distilled spirits manufacturer’s license fee. Also, provides that all such fees must be deposited in the ABC Control Fund.
   
   

3. Provides for annual reporting requirements as to the amount of distilled spirits manufactured by a licensed craft distiller and stipulates that if the report to the Department of ABC establishes that the licensee no longer qualifies to hold a craft distiller’s license, the Department of ABC must renew the license as a distilled spirits manufacturer’s license.
   
   

4. Prohibits the issuance of a craft distiller’s license to any person, any officer, director, employee, or agent of such person, or any person who is affiliated with, directly or indirectly, a person that manufactures or has manufactured for them more than 100,000 gallons of distilled spirits per year within or outside the state, excluding brandy it manufactures or has manufactured for them pursuant to a brandy manufacturer license or to any person that is affiliated with, directly or indirectly, a wholesaler.
   
   

5. Allows a licensed craft distiller to sell to a consumer participating in a distilled spirits tasting, on the distiller’s licensed premises, up to the equivalent of 2.25 liters of distilled spirits in any combination of prepackaged containers per day.
   
   

6. Authorizes a licensed craft distiller to hold an ownership interest in up to three on-sale licenses (restaurants) provided that one of the restaurants is located at the distilling premises and that the other on-sale premises would be required to sell other distilled spirits products and be subject to other limits similar to current law allowing wineries to have an interest in on-sale licenses. Also, provides that a licensed craft distiller that has an interest in one or more on-sale retail licenses pursuant to this Act may continue to hold that interest in the event the licensee no longer qualifies as a craft distiller, provided that the interest was first obtained at a time when the licensee did hold a craft distiller’s license pursuant to this Act.
   
   

7. Authorizes a licensed craft distiller to sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place located on the licensed premises or on premises owned by the licensee that are contiguous licensed premises operated by and for the licensee, provided that any alcoholic beverage products not manufactured by the licensee are purchased from a licensed wholesaler.
   
   

8. Authorizes a licensed craft distiller to have upon its licensed premises all beer, wines, and distilled spirits, regardless of source, for sale or service to guests during private events not open to the general public, provided that any alcoholic beverages sold at the event that are not manufactured or produced and bottled by, or manufactured or produced and packaged for, the licensed craft distiller are purchased only from a licensed wholesaler.
   
   

9. Specifies that in the event the licensee no longer qualifies as a craft distiller due to the amount of distilled spirits reported to the Department of ABC, the licensee may continue to hold the privileges granted by this act.
   
   

10. Modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer. Also, deletes the provision in existing law that prohibits tastings of distilled spirits from being given in the form of a cocktail or a mixed drink.
    
    

11. Makes other conforming and technical changes and contains legislative findings relative to the fact that small craft distillers have increased economic activity and job growth in the state. Also, declares legislative intent, in enacting this Act, to further encourage development of the craft distilling industry by enacting various limited exemptions to the general provisions of the three-tier system, while also continuing to uphold and support the three-tier system as the appropriate mechanism for regulating and licensing the sale of distilled spirits in California.

Background

Comments. As noted above, existing “tied-house” law separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. Tied house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products.

As the cocktail culture continues to resonate with consumers looking for specialty or small batch concoctions, entrepreneurs in other states have found tremendous success with a concept that allows craft distillers to offer on-premises food (in other words – brewpubs with a mixology twist).

Currently, beer producers and wineries in California can operate restaurants and brewpubs on their licensed premises – many of California’s craft distillers have expressed interest in the restaurant business and would like the same privileges. This bill will allow California’s licensed craft distillers to open restaurants on their licensed premises, as specified. Currently, distillers in California are authorized to conduct tastings on their licensed premises however they’re precluded from selling the products to consumers – this bill will allow craft distillers to sell their products directly to consumers (in limited quantities). Specifically, this bill enacts the Craft Distillers Act of 2015 and creates a new “craft distiller’s license” applicable to individuals who produce less than 100,000 gallons of distilled spirits annually, exclusive of brandy, with the following privileges:

1. Craft distillers may sell to consumers participating in a distilled spirits tasting, on the distiller’s licensed premises, up to the equivalent of 2.25 liters of distilled spirits in any combination of prepackaged containers per day/per consumer;

2. Craft distillers may host private events at their premises, provided that any alcoholic beverages served at the event that are not manufactured by the craft distiller are purchased from a licensed wholesaler.

3. Craft distillers may own an interest in up to three on-sale licenses provided that one of the restaurants is located on the licensed distilling premises and that the other on-sale licensed retail premises offer competing brands of alcoholic beverages in addition to the products the craft distiller manufactures.

In addition, this bill modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer.

Purpose of AB 1295.  According to the author’s office, this bill is intended to provide greater licensing equity between small craft distilled spirits manufacturers and beer and wine producers. The author’s office states that AB 1295 will remove an onerous restriction in law that prevents distillers from selling their products directly to consumers. Wineries and breweries were also not allowed to do so under original prohibition tied-house laws but over time, the Legislature carved-out various exceptions for the beer and wine industry which have helped small wineries and craft brewers prosper in California. The author’s office believes this bill is a logical continuation of those efforts and changes in law. The author’s office states, “The goal of this bill is to allow modest, limited sales to the nearly 50 small craft distillers throughout the state in order to help them further establish artisanal brands – by allowing an initial sale at the tasting room, the public can take a product with them and share California brands.”

The author’s office claims that forty states currently allow distillers to sell their products to consumers and cites the following recent legislative action outside of California: (a) In 2014, the State of Arizona established a craft-liquor distillery license which allows distillers to sell directly to consumers; (b) In 2013, the State of Indiana allowed craft distillers to sell a range of products directly to consumers by the drink or bottle; (c) In 2013, the State of Florida allowed distilleries to sell two bottles a year directly to customers; (d) In 2008, the State of Oregon allowed craft distillers to offer samples of their products at their distillery or at a separate tasting room.  Additionally, Oregon allowed distilleries to apply for a license as a retail outlet agent to sell bottled products manufactured at the distillery directly to consumers; and, (e) In 2008, the State of Washington allowed craft distilleries to conduct on-site tasting and sales and also sell product of its own production for consumption off the premises, up to 2 liters per customer per day.

Prior/Related Legislation

AB 1233 (Levine, 2015) allows a licensed distilled spirits manufacturer to sell up to three bottles of product authorized to be produced or bottled by or for the licensee to each person at a tasting on the licensee’s premises. (Referred to interim study by the Assembly policy committee)

AB 933 (Skinner, Chapter 366, Statutes of 2013) granted licensed distilled spirits manufacturers and licensed brandy manufacturers the privilege to conduct consumer tastings on their licensed premises and to charge for those tastings.

AB 949 (Quirk, 2013) would have authorized licensed distilled spirits manufacturers to charge consumers for tastings and would have imposed additional conditions on the provision of tastings by the licensee, including limiting the size and number of tastes. Also, would have provided that a distilled spirits manufacturer’s license authorizes the licensee to serve and sell food, general merchandise, and nonalcoholic beverages for consumption on or off the licensed premises. (Held in the Assembly Rules Committee)

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, this bill has unknown and potentially significant costs to the Department of ABC which will be offset by fee revenue. (Special fund)

SUPPORT:

(Verified 9/4/15)

California Artisanal Distillers Guild (source)

Wine and Spirits Wholesalers Association of California, Inc.

OPPOSITION: (Verified 9/4/15)

None received

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

9/8/15 16:26:56

**** END ****

 THIRD READING  

Bill No: AB 1295

Author: Levine (D), et al.

Amended: 7/16/15 in Senate

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 10-1, 7/14/15

AYES: Hall, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire

NOES: Vidak

NO VOTE RECORDED: Berryhill, Runner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/17/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 79-0, 5/14/15 - See last page for vote

SUBJECT: Craft distillers: licenses

SOURCE: California Artisanal Distillers Guild

DIGEST: This bill creates a new “craft distiller’s license” in the Alcoholic Beverage Control (ABC) Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production. This bill also modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state.

2. Separates the alcoholic beverage industry into three component parts, or tiers, (referred to as the “tied-house” law or “three-tier” system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the marketplace; (c) prohibit commercial bribery and protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.

3. Permits a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on or off the licensee’s premises. Tastings conducted by the licensee off the licensee’s premises must be for an event sponsored by a nonprofit organization, as defined, and only if persons attending the event are affiliated with the sponsor. Tastings on the licensee’s premises are limited to six, one-quarter ounce tastings, per individual per day and the law authorizes the distiller to charge for tastings. The law also provides that distilled spirits tastings shall not be given in the form of a cocktail or a mixed drink. Additionally, existing law makes it explicit that no distilled spirits shall be sold or solicited for sale in that portion of the premises where the distilled tasting is being conducted. (Business and Professions Code Section 23363.1)

4. Permits an on sale retail licensee of wine or distilled spirits to conduct “instructional” consumer tastings on the licensed retail premises provided the following conditions are met: (a) no more than ¼ ounce of distilled spirits is offered in one tasting; (b) no more than one ounce of wine is offered in one tasting; and, (c) no more than three tastings are offered to an individual in one day. An instruction may include the history, nature, values and characteristics of the product being offered, and the methods of presenting and serving the product.

5. Authorizes beer manufacturers and wholesalers to offer beer samples (not to exceed 8 ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

6. Permits a licensed winegrower, manufacturer, importer, or wholesaler to provide samples of the alcoholic beverages which are authorized to be sold by the licensee in accordance with rules prescribed by the ABC. A retail licensee, however, is not authorized to provide any free samples of alcoholic beverages. Moreover, ABC regulations provide that samples of alcoholic beverages may only be given away to licensees or employees of licensees who are in a position to purchase the product or who are in need of additional information about the product, as specified.

7. Permits a licensed winegrower or brandy manufacturer to be issued an off-sale general license. Existing law also permits wineries to sell their products to consumers on their licensed premises and directly to licensed, on-sale and off-sale retailers (e.g., restaurants and liquor stores). Additionally, existing law provides for a brewpub-restaurant license, issued to a bona fide public eating place, which authorizes the sale of beer, wine, and distilled spirits for consumption on the premises and the sale of beer produced by the brewpub-restaurant licensee for consumption on the premises. The license also authorizes the sale of beer produced by the licensed brewpub-restaurant licensee to a licensed beer and wine wholesaler. The brewpub-restaurant licensee must purchase all beer, wine, or distilled spirits for sale on the licensed premises from a licensed wholesaler or winegrower, except for the beer produced by the brewpub-restaurant licensee on the licensed premises. Furthermore, the law also requires the brewpub-restaurant licensee to offer for sale on the licensed premises other commercially available beers available from licensed wholesalers.

8. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Enacts the Craft Distillers Act of 2015 (Act) which authorizes the Department of ABC to issue a craft distiller’s license to a person that has facilities and equipment for the purposes of, and is engaged in, the commercial manufacture of distilled spirits. The craft distiller’s license authorizes the licensee to do all of the following:
   
   

   1. Manufacture or produce (or have manufactured for them) up to 100,000 gallons of distilled spirits, exclusive of brandy production.
      
      

   2. Package, rectify, mix, flavor, color, label, and export distilled spirits whether manufactured or produced by the licensee or any other person.
      
      

   3. Only sell distilled spirits that are packaged by or for the licensee solely to a wholesaler, manufacturer, winegrower, manufacturer’s agent, or rectifier that holds a license authorizing the sale of distilled spirits or to persons that take delivery of those distilled spirits within this state for delivery or use outside the state.
      
      

   4. Deal in warehouse receipts.
      
      

2. Provides that the original fee for a craft distiller’s license shall be $600 dollars, the annual fee shall be $300, and the fees must be deposited in the ABC Control Fund.
   
   

3. Prohibits the issuance of a craft distiller’s license to any person, any officer, director, employee, or agent of such person, or any person who is affiliated with, directly or indirectly, a person that manufactures or has manufactured for them more than 100,000 gallons of distilled spirits per year within or outside the state, excluding brandy it manufactures or has manufactured for them pursuant to a brandy manufacturer license.
   
   

4. Allows a licensed craft distiller to sell up to three 750-ml bottles per day directly to a consumer who participates in a distilled spirits tasting on the distiller’s licensed premises.
   
   

5. Authorizes a licensed craft distiller to hold an ownership interest in up to three on-sale licenses (restaurants) provided that one of the restaurants is located at the distilling premises and that the other on-sale premises would be required to sell other distilled spirits products and be subject to other limits similar to current law allowing wineries to have an interest in on-sale licenses. Also, provides that a licensed craft distiller that has an interest in one or more on-sale retail licenses pursuant to this Act may continue to hold that interest in the event the licensee no longer qualifies as a craft distiller, provided that the interest was first obtained at a time when the licensee did hold a craft distiller’s license pursuant to this Act.
   
   

6. Authorizes a licensed craft distiller to sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place located on the licensed premises or on premises owned by the licensee that are contiguous licensed premises operated by and for the licensee, provided that any alcoholic beverage products not manufactured by the licensee are purchased from a licensed wholesaler.
   
   

7. Authorizes a licensed craft distiller to have upon its licensed premises all beer, wines, and distilled spirits, regardless of source, for sale or service to guests during private events not open to the general public, provided that any alcoholic beverages sold at the event that are not manufactured or produced and bottled by, or manufactured or produced and packaged for, the licensed craft distiller are purchased only from a licensed wholesaler.
   
   

8. Modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer. Also, deletes the provision in existing law that prohibits tastings of distilled spirits from being given in the form of a cocktail or a mixed drink.
   
   

9. Makes other conforming and technical changes and contains legislative findings relative to the fact that small craft distillers have increased economic activity and job growth in the state. Also, declares legislative intent, in enacting this Act, to further encourage development of the craft distilling industry by enacting various limited exemptions to the general provisions of the three-tier system, while also continuing to uphold and support the three-tier system as the appropriate mechanism for regulating and licensing the sale of distilled spirits in California.

Background

Comments. The enactment of the 21^st Amendment to the U.S. Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition. Accordingly, states were granted the authority to establish alcoholic beverage laws and administrative structures to regulate the sale and distribution of alcoholic beverages.

As noted above, existing “tied-house” law separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. Tied house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products.

As the cocktail culture continues to resonate with consumers looking for specialty or small batch concoctions, entrepreneurs in other states have found tremendous success with a concept that allows craft distillers to offer on-premises food (in other words – brewpubs with a mixology twist).

Currently, beer producers and wineries in California can operate restaurants and brewpubs on their licensed premises – many of California’s craft distillers have expressed interest in the restaurant business and would like the same privileges. This bill will allow California’s licensed craft distillers to open restaurants on their licensed premises, as specified. Currently, distillers in California are authorized to conduct tastings (in limited quantities) on their licensed premises however they’re precluded from selling the products to consumers – this bill will allow craft distillers to sell their products directly to consumers. Specifically, this bill enacts the Craft Distillers Act of 2015 and creates a new “craft distiller’s license” applicable to individuals who produce less than 100,000 gallons of distilled spirits annually, exclusive of brandy, with the following privileges:

1. Craft distillers may sell up to three 750ml bottles of distilled spirits per person/per day directly to consumers who participate in a distilled spirits tasting at the distillers premises;

2. Craft distillers may host private events at their premises, provided that any alcoholic beverages served at the event that are not manufactured by the craft distiller are purchased from a licensed wholesaler.

3. Craft distillers may own an interest in up to three on-sale licenses provided that one of the restaurants is located on the licensed distilling premises and that the other on-sale licensed retail premises offer competing brands of alcoholic beverages in addition to the products the craft distiller manufactures.

In addition, this bill modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer.

Purpose of AB 1295.  According to the author’s office, this bill is intended to provide greater licensing equity between small craft distilled spirits manufacturers and beer and wine producers. The author’s office states that AB 1295 will remove an onerous restriction in law that prevents distillers from selling their products directly to consumers. Wineries and breweries were also not allowed to do so under original prohibition tied-house laws but over time, the Legislature carved-out various exceptions for the beer and wine industry which have helped small wineries and craft brewers prosper in California. The author’s office believes this bill is a logical continuation of those efforts and changes in law. The author’s office states, “The goal of this bill is to allow modest, limited sales to the nearly 50 small craft distillers throughout the state in order to help them further establish artisanal brands – by allowing an initial sale at the tasting room, the public can take a product with them and share California brands.”

The author’s office claims that forty states currently allow distillers to sell their products to consumers and cites the following recent legislative action outside of California: (a) In 2014, the State of Arizona established a craft-liquor distillery license which allows distillers to sell directly to consumers; (b) In 2013, the State of Indiana allowed craft distillers to sell a range of products directly to consumers by the drink or bottle; (c) In 2013, the State of Florida allowed distilleries to sell two bottles a year directly to customers; (d) In 2008, the State of Oregon allowed craft distillers to offer samples of their products at their distillery or at a separate tasting room.  Additionally, Oregon allowed distilleries to apply for a license as a retail outlet agent to sell bottled products manufactured at the distillery directly to consumers; and, (e) In 2008, the State of Washington allowed craft distilleries to conduct on-site tasting and sales and also sell product of its own production for consumption off the premises, up to 2 liters per customer per day.

Prior/Related Legislation

AB 1233 (Levine, 2015) allows a licensed distilled spirits manufacturer to sell up to three bottles of product authorized to be produced or bottled by or for the licensee to each person at a tasting on the licensee’s premises. (Referred to interim study by Assembly policy committee)

AB 933 (Skinner, Chapter 366, Statutes of 2013) granted licensed distilled spirits manufacturers and licensed brandy manufacturers the privilege to conduct consumer tastings on their licensed premises and to charge for those tastings.

AB 949 (Quirk, 2013) would have authorized licensed distilled spirits manufacturers to charge consumers for tastings and would have imposed additional conditions on the provision of tastings by the licensee, including limiting the size and number of tastes. Also, would have provided that a distilled spirits manufacturer’s license authorizes the licensee to serve and sell food, general merchandise, and nonalcoholic beverages for consumption on or off the licensed premises. (Held in Assembly Rules Committee)

AB 686 (Quirk, 2013) would have authorized distilled spirits manufacturers to sell general merchandise, food, nonalcoholic beverages, and distilled spirits to consumers for consumption on the licensed premises where sold. (Held in the Senate Governmental Organization Committee at author’s request)

SB 1068 (Hancock, 2010) would have added a new provision to the ABC Act authorizing a licensed distiller that distills fewer than 50,000 gallons of spirits annually to self-distribute to consumers and licensed retailers (e.g., restaurants, liquor stores). (Held in the Senate Governmental Organization Committee at author’s request)

SB 1022 (Strickland, Chapter 281, Statutes of 2010) expanded an existing tied-house exception within the ABC Act to enable licensed distilled spirits “rectifiers” to donate or sell their products to specified nonprofit entities for the purpose of assisting in fund-raising efforts.

AB 605 (Portantino, Chapter 230, Statutes of 2010), among other things, authorized ABC to issue to the holder of an “off-sale” retail license an “instructional tasting license” for the purpose of furnishing tastings of alcoholic beverages to consumers, subject to certain limitations.

SB 639 (Calderon, 2009) would have created a new on-sale tasting license to allow off-sale retail licensees to furnish tastes of alcoholic beverages to consumers, as specified. (Died on Senate Appropriations Suspense File)

SB 1560 (Yee, Chapter 412, Statutes of 2008) modified an existing tied-house provision that currently permits the issuance or transfer of an “on-sale” retail license to a restaurant, even though a wholesaler licensed to sell alcoholic beverages outside California has an interest in the premises or the license.

AB 2293 (De Leon, Chapter 638, Statutes of 2008) added a new provision to the ABC Act authorizing distilled spirits manufacturers and winegrowers to provide their product offerings directly to consumers (free of charge) during invitation-only events on premises for which a caterer’s permit authorization has been issued.

AB 2426 (Cook, Chapter 461, Statutes of 2008) authorized a person that operates an out-of-state winery and produces a limited amount of distilled spirits in another state to hold an interest in no more than 12 brewpub-restaurant licenses, provided specified conditions are met.

SB 995 (Maldonado, 2007) would have permitted certain alcoholic beverage suppliers to instruct consumers on the premises of an off-sale licensee regarding wine and distilled spirits, respectively, as specified. Also, would have allowed the instruction to include the furnishing of tastings under specified conditions. (Held in the Senate Governmental Organization Committee at author’s request)

AB 2613 (Plescia, 2008) would have authorized specified alcoholic beverage suppliers to offer tastings of wine or distilled spirits at off-sale retail licensed premises (grocery stores and liquor stores) in a restricted area. Also, would have required verification of age at entrance to the restricted area and placed limits on tastings (one-quarter ounce of spirits and one ounce of wine) and limited tastings to three per person each day. (Held in Assembly Appropriations Committee)

SB 1548 (Murray, Chapter 670, Statutes of 2006) authorized beer manufacturers and wholesalers to offer beer samples (not to exceed 8 ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

AB 2285 (V. Brown, Chapter 248, Statutes of 1998) allowed on-sale retail licensees to offer limited tastings of wine or distilled spirits at the licensed establishment.

SB 993 (Burton, Chapter 544, Statutes of 1997), among other things, authorized a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises under specified conditions.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, this bill has unknown and potentially significant costs to the Department of ABC which will be offset by fee revenue. (Special fund)

SUPPORT:

(Verified 8/18/15)

California Artisanal Distillers Guild (source)

Wine and Spirits Wholesalers Association of California, Inc.

OPPOSITION: (Verified 8/18/15)

None received

ASSEMBLY FLOOR: 79-0, 5/14/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Burke

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

8/20/15 14:56:50

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1295 (Levine) - Craft distillers: licenses.

This bill does not meet the criteria for referral to the Suspense File.

Bill Summary:

This bill authorizes the Department of Alcoholic Beverage Control (ABC) to issue a craft distiller’s license to a person that has facilities and equipment for the commercial manufacture of distilled spirits.

Fiscal Impact:

• Unknown, potentially significant costs to the Department of ABC offset by fee revenue. (Special fund)

Background:

The Department of ABC has exclusive authority to administer the provisions of the Alcoholic Beverage Control Act including licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in the state.

Existing law permits a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on or off the licensee’s premises. Additionally, existing law makes it explicit that no distilled spirits be sold or solicited for sale in that portion of the premises where the distilled tasting is being conducted.

Existing law also permits wineries to sell their products to consumers on their licensed premises and directly to licensed, on-sale and off-sale retailers (e.g., restaurants and liquor stores). Existing law also provides for a brewpub-restaurant license, issued to a bona fide public eating place, which authorizes the sale of beer, wine, and distilled spirits for consumption on the premises and the sale of beer produced by the brewpub-restaurant licensee for consumption on the premises.

This bill will allow California’s licensed craft distillers to open restaurants on their licensed premises, as specified. Currently, distillers in California are authorized to conduct tastings (in limited quantities) on their licensed premises however they’re precluded from selling the products to consumers – this bill will allow craft distillers to sell their products directly to consumers. According to the author’s office, this bill is intended to provide greater licensing equity between small craft distilled spirits manufacturers and beer and wine producers.

Proposed Law:

This bill authorizes the Department of ABC to issue a craft distiller’s license to a person that has facilities and equipment for the commercial manufacture of distilled spirits and to be able to conduct tastings on or off the licensee’s premises. The bill establishes an original fee for the craft distiller’s license to be $600, and the annual fee to be $300, in which fees are required to be deposited in the ABC Fund.

This bill authorizes a licensed craft distiller to sell all beers, wines, brandies, or distilled spirits to consumers for consumption at a bona fide eating place on the licensed premises or on premises owned by the licensee, as specified. A licensed craft distiller would be able to sell up to three bottles per day directly to a consumer who participates in a distilled spirits tasting on the distiller’s licensed premises. This bill prohibits the issuance of a craft distiller’s license to any person, or any affiliated person, that manufactures more than 100,000 gallons of distilled spirits per year within or outside the state.

Licensed craft distillers are required to report to the department at the end of each fiscal year the amount of distilled spirits produced by or for the licensee during the previous fiscal year.

Related Legislation:

SB 639 (Calderon, 2009) would have created a new on-sale tasting license to allow off-sale retail licensees to furnish tastes of alcoholic beverages to consumers, as specified. SB 639 failed passage in this Committee.

Staff Comments:

There are currently 104 distilled spirits manufacturer’s licenses that would be eligible to apply for the new on-sale distilled tasting license. Licensees will be required to pay an application fee of $600 and an annual renewal fee of $300 for the craft distiller’s license. The ABC indicates that initial start-up costs to develop the program will be absorbable. Ongoing costs for administration and enforcement resulting from complaints or investigations will potentially be offset by fee revenue.

-- END --

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: AB 1295 Hearing Date: 7/14/2015

SUBJECT: Alcoholic beverages: craft distillers

DIGEST: This bill creates a new “craft distiller’s license” in the Alcoholic Beverage Control (ABC) Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production. This bill also modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state.

2. Separates the alcoholic beverage industry into three component parts, or tiers, (referred to as the “tied-house” law or “three-tier” system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the marketplace; (c) prohibit commercial bribery and protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.

3. Permits a licensed distilled spirits manufacturer to conduct tastings of distilled spirits produced or bottled by, or produced or bottled for, the licensee, on or off the licensee’s premises. Tastings conducted by the licensee off the licensee’s premises must be for an event sponsored by a nonprofit organization, as defined, and only if persons attending the event are affiliated with the sponsor. Tastings on the licensee’s premises are limited to six, one-quarter ounce tastings, per individual per day and the law authorizes the distiller to charge for tastings. The law also provides that distilled spirits tastings shall not be given in the form of a cocktail or a mixed drink. Additionally, existing law makes it explicit that no distilled spirits shall be sold or solicited for sale in that portion of the premises where the distilled tasting is being conducted. (Business and Professions Code Section 23363.1)

4. Permits an on sale retail licensee of wine or distilled spirits to conduct “instructional” consumer tastings on the licensed retail premises provided the following conditions are met: (a) no more than ¼ ounce of distilled spirits is offered in one tasting; (b) no more than one ounce of wine is offered in one tasting; and, (c) no more than three tastings are offered to an individual in one day. An instruction may include the history, nature, values and characteristics of the product being offered, and the methods of presenting and serving the product.

5. Authorizes beer manufacturers and wholesalers to offer beer samples (not to exceed 8 ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

6. Permits a licensed winegrower, manufacturer, importer, or wholesaler to provide samples of the alcoholic beverages which are authorized to be sold by the licensee in accordance with rules prescribed by the ABC. A retail licensee, however, is not authorized to provide any free samples of alcoholic beverages. Moreover, ABC regulations provide that samples of alcoholic beverages may only be given away to licensees or employees of licensees who are in a position to purchase the product or who are in need of additional information about the product, as specified.

7. Permits a licensed winegrower or brandy manufacturer to be issued an off-sale general license. Existing law also permits wineries to sell their products to consumers on their licensed premises and directly to licensed, on-sale and off-sale retailers (e.g., restaurants and liquor stores). Additionally, existing law provides for a brewpub-restaurant license, issued to a bona fide public eating place, which authorizes the sale of beer, wine, and distilled spirits for consumption on the premises and the sale of beer produced by the brewpub-restaurant licensee for consumption on the premises. The license also authorizes the sale of beer produced by the licensed brewpub-restaurant licensee to a licensed beer and wine wholesaler. The brewpub-restaurant licensee must purchase all beer, wine, or distilled spirits for sale on the licensed premises from a licensed wholesaler or winegrower, except for the beer produced by the brewpub-restaurant licensee on the licensed premises. Furthermore, the law also requires the brewpub-restaurant licensee to offer for sale on the licensed premises other commercially available beers available from licensed wholesalers.

8. Existing law defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Enacts the Craft Distillers Act of 2015 (Act) which authorizes the Department of ABC to issue a craft distiller’s license to a person that has facilities and equipment for the purposes of, and is engaged in, the commercial manufacture of distilled spirits. The craft distiller’s license authorizes the licensee to do all of the following:
   
   

   1. Manufacture or produce (or have manufactured for them) up to 100,000 gallons of distilled spirits, exclusive of brandy production.
      
      

   2. Package, rectify, mix, flavor, color, label, and export distilled spirits whether manufactured or produced by the licensee or any other person.
      
      

   3. Only sell distilled spirits that are packaged by or for the licensee solely to a wholesaler, manufacturer, winegrower, manufacturer’s agent, or rectifier that holds a license authorizing the sale of distilled spirits or to persons that take delivery of those distilled spirits within this state for delivery or use outside the state.
      
      

   4. Deal in warehouse receipts.
      
      

2. Provides that the original fee for a craft distiller’s license shall be $600 dollars, the annual fee shall be $300, and the fees must be deposited in the ABC Control Fund.
   
   

3. Prohibits the issuance of a craft distiller’s license to any person, any officer, director, employee, or agent of such person, or any person who is affiliated with, directly or indirectly, a person that manufactures or has manufactured for them more than 100,000 gallons of distilled spirits per year within or outside the state, excluding brandy it manufactures or has manufactured for them pursuant to a brandy manufacturer license.
   
   

4. Allows a licensed craft distiller to sell up to three 750-ml bottles per day directly to a consumer who participates in a distilled spirits tasting on the distiller’s licensed premises.
   
   

5. Authorizes a licensed craft distiller to hold an ownership interest in up to three on-sale licenses (restaurants) provided that one of the restaurants is located at the distilling premises and that the other on-sale premises would be required to sell other distilled spirits products and be subject to other limits similar to current law allowing wineries to have an interest in on-sale licenses. Also, provides that a licensed craft distiller that has an interest in one or more on-sale retail licenses pursuant to this Act may continue to hold that interest in the event the licensee no longer qualifies as a craft distiller, provided that the interest was first obtained at a time when the licensee did hold a craft distiller’s license pursuant to this Act.
   
   

6. Authorizes a licensed craft distiller to sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place located on the licensed premises or on premises owned by the licensee that are contiguous licensed premises operated by and for the licensee, provided that any alcoholic beverage products not manufactured by the licensee are purchased from a licensed wholesaler.
   
   

7. Authorizes a licensed craft distiller to have upon its licensed premises all beer, wines, and distilled spirits, regardless of source, for sale or service to guests during private events not open to the general public, provided that any alcoholic beverages sold at the event that are not manufactured or produced and bottled by, or manufactured or produced and packaged for, the licensed craft distiller are purchased only from a licensed wholesaler.
   
   

8. Modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer. Also, deletes the provision in existing law that prohibits tastings of distilled spirits from being given in the form of a cocktail or a mixed drink.
   
   

9. Makes other conforming and technical changes and contains legislative findings relative to the fact that small craft distillers have increased economic activity and job growth in the state. Also, declares legislative intent, in enacting this Act, to further encourage development of the craft distilling industry by enacting various limited exemptions to the general provisions of the three-tier system, while also continuing to uphold and support the three-tier system as the appropriate mechanism for regulating and licensing the sale of distilled spirits in California.

Background

Comments. The enactment of the 21^st Amendment to the U.S. Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition. Accordingly, states were granted the authority to establish alcoholic beverage laws and administrative structures to regulate the sale and distribution of alcoholic beverages.

As noted above, existing “tied-house” law separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. Tied house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products.

As the cocktail culture continues to resonate with consumers looking for specialty or small batch concoctions, entrepreneurs in other states have found tremendous success with a concept that allows craft distillers to offer on-premises food (in other words – brewpubs with a mixology twist).

Currently, beer producers and wineries in California can operate restaurants and brewpubs on their licensed premises – many of California’s craft distillers have expressed interest in the restaurant business and would like the same privileges. This bill will allow California’s licensed craft distillers to open restaurants on their licensed premises, as specified. Currently, distillers in California are authorized to conduct tastings (in limited quantities) on their licensed premises however they’re precluded from selling the products to consumers – this bill will allow craft distillers to sell their products directly to consumers. Specifically, this bill enacts the Craft Distillers Act of 2015 and creates a new “craft distiller’s license” applicable to individuals who produce less than 100,000 gallons of distilled spirits annually, exclusive of brandy, with the following privileges:

• Craft distillers may sell up to three 750ml bottles of distilled spirits per person/per day directly to consumers who participate in a distilled spirits tasting at the distillers premises;

• Craft distillers may host private events at their premises, provided that any alcoholic beverages served at the event that are not manufactured by the craft distiller are purchased from a licensed wholesaler.

• Craft distillers may own an interest in up to three on-sale licenses provided that one of the restaurants is located on the licensed distilling premises and that the other on-sale licensed retail premises offer competing brands of alcoholic beverages in addition to the products the craft distiller manufactures.

In addition, this bill modifies an existing provision of law that currently allows distillers to offer six, one-quarter ounce tastings, per individual/per day, to instead permit distillers to combine the current limitation into one single 1½ ounce tasting that may also include a non-alcoholic mixer.

Purpose of AB 1295.  According to the author’s office, this bill is intended to provide greater licensing equity between small craft distilled spirits manufacturers and beer and wine producers. The author’s office states that AB 1295 will remove an onerous restriction in law that prevents distillers from selling their products directly to consumers. Wineries and breweries were also not allowed to do so under original prohibition tied-house laws but over time, the Legislature carved-out various exceptions for the beer and wine industry which have helped small wineries and craft brewers prosper in California. The author’s office believes this bill is a logical continuation of those efforts and changes in law. The author’s office states, “The goal of this bill is to allow modest, limited sales to the nearly 50 small craft distillers throughout the state in order to help them further establish artisanal brands – by allowing an initial sale at the tasting room, the public can take a product with them and share California brands.”

The author’s office claims that forty states currently allow distillers to sell their products to consumers and cites the following recent legislative action outside of California: (a) In 2014, the State of Arizona established a craft-liquor distillery license which allows distillers to sell directly to consumers; (b) In 2013, the State of Indiana allowed craft distillers to sell a range of products directly to consumers by the drink or bottle; (c) In 2013, the State of Florida allowed distilleries to sell two bottles a year directly to customers; (d) In 2008, the State of Oregon allowed craft distillers to offer samples of their products at their distillery or at a separate tasting room.  Additionally, Oregon allowed distilleries to apply for a license as a retail outlet agent to sell bottled products manufactured at the distillery directly to consumers; and, (e) In 2008, the State of Washington allowed craft distilleries to conduct on-site tasting and sales and also sell product of its own production for consumption off the premises, up to 2 liters per customer per day.

Prior/Related Legislation

AB 1233 (Levine, 2015) allows a licensed distilled spirits manufacturer to sell up to three bottles of product authorized to be produced or bottled by or for the licensee to each person at a tasting on the licensee’s premises. (Referred to interim study by Assembly policy committee)

AB 933 (Skinner, Chapter 366, Statutes of 2013) granted licensed distilled spirits manufacturers and licensed brandy manufacturers the privilege to conduct consumer tastings on their licensed premises and to charge for those tastings.

AB 949 (Quirk, 2013) would have authorized licensed distilled spirits manufacturers to charge consumers for tastings and would have imposed additional conditions on the provision of tastings by the licensee, including limiting the size and number of tastes. Also, would have provided that a distilled spirits manufacturer’s license authorizes the licensee to serve and sell food, general merchandise, and nonalcoholic beverages for consumption on or off the licensed premises. (Held in Assembly Rules Committee)

AB 686 (Quirk, 2013) would have authorized distilled spirits manufacturers to sell general merchandise, food, nonalcoholic beverages, and distilled spirits to consumers for consumption on the licensed premises where sold. (Held in this committee at author’s request)

SB 1068 (Hancock, 2010) would have added a new provision to the ABC Act authorizing a licensed distiller that distills fewer than 50,000 gallons of spirits annually to self-distribute to consumers and licensed retailers (e.g., restaurants, liquor stores). (Held in this Committee at author’s request)

SB 1022 (Strickland, Chapter 281, Statutes of 2010) expanded an existing tied-house exception within the ABC Act to enable licensed distilled spirits “rectifiers” to donate or sell their products to specified nonprofit entities for the purpose of assisting in fund-raising efforts.

AB 605 (Portantino, Chapter 230, Statutes of 2010), among other things, authorized ABC to issue to the holder of an “off-sale” retail license an “instructional tasting license” for the purpose of furnishing tastings of alcoholic beverages to consumers, subject to certain limitations.

SB 639 (Calderon, 2009) would have created a new on-sale tasting license to allow off-sale retail licensees to furnish tastes of alcoholic beverages to consumers, as specified. (Died on Senate Appropriations Suspense File)

SB 1560 (Yee, Chapter 412, Statutes of 2008) modified an existing tied-house provision that currently permits the issuance or transfer of an “on-sale” retail license to a restaurant, even though a wholesaler licensed to sell alcoholic beverages outside California has an interest in the premises or the license.

AB 2293 (De Leon, Chapter 638, Statutes of 2008) added a new provision to the ABC Act authorizing distilled spirits manufacturers and winegrowers to provide their product offerings directly to consumers (free of charge) during invitation-only events on premises for which a caterer’s permit authorization has been issued.

AB 2426 (Cook, Chapter 461, Statutes of 2008) authorized a person that operates an out-of-state winery and produces a limited amount of distilled spirits in another state to hold an interest in no more than 12 brewpub-restaurant licenses, provided specified conditions are met.

SB 995 (Maldonado, 2007) would have permitted certain alcoholic beverage suppliers to instruct consumers on the premises of an off-sale licensee regarding wine and distilled spirits, respectively, as specified. Also, would have allowed the instruction to include the furnishing of tastings under specified conditions. (Held in this Committee at author’s request)

AB 2613 (Plescia, 2008) would have authorized specified alcoholic beverage suppliers to offer tastings of wine or distilled spirits at off-sale retail licensed premises (grocery stores and liquor stores) in a restricted area. Also, would have required verification of age at entrance to the restricted area and placed limits on tastings (one-quarter ounce of spirits and one ounce of wine) and limited tastings to three per person each day. (Held in Assembly Appropriations Committee)

SB 1548 (Murray, Chapter 670, Statutes of 2006) authorized beer manufacturers and wholesalers to offer beer samples (not to exceed 8 ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions.

AB 2285 (V. Brown, Chapter 248, Statutes of 1998) allowed on-sale retail licensees to offer limited tastings of wine or distilled spirits at the licensed establishment.

SB 993 (Burton, Chapter 544, Statutes of 1997), among other things, authorized a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises under specified conditions.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

None received

OPPOSITION:

None received

ASSEMBLY THIRD READING

ATR Bill Id:AB 1295

Author:(Gray)

As Introduced Ver:February 27, 2015

Majority vote

SUMMARY: Provides that the limitation of 50 imported races per day does not apply to races imported into the combined central and southern zones when there is live thoroughbred or fair racing being conducted in those zones but no live thoroughbred or fair racing is being conducted in the northern zone.

EXISTING LAW:

1. Grants the California Horse Racing Board (CHRB) the authority to regulate the various forms of horse racing authorized in this state.

2. Authorizes a thoroughbred racing association or fair to distribute the audiovisual signal and accept wagers on the results of out-of-state thoroughbred races conducted in the United States during the calendar period the association or fair is conducting a race meeting, including days on which there is no live racing being conducted by the association or fair, defined.

3. Provides that the total number of thoroughbred races imported by associations or fairs on a statewide basis under these provisions are required to not exceed 50 per day on days when live thoroughbred or fair racing is being conducted in the state, with the exception of prescribed races, including races imported into the combined central and southern zones when there is no live thoroughbred or fair racing being conducted in the combined central and southern zones.

4. Exempts from that 50-race per day limit races imported that are part of the race card of certain prominent races, including the Kentucky Derby, the Kentucky Oaks, the Preakness Stakes, the Belmont Stakes, the Jockey Club Gold Cup, the Travers Stakes, the Breeders' Cup, the Dubai Cup, or the Haskell Invitational.

5. Authorizes thoroughbred racing associations or fairs to distribute the audiovisual signal and accept wagers on the results of out-of-state and international thoroughbred races during the calendar period the association or fair is conducting live racing, including days on which there is no live racing being conducted by the association or fair.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Purpose of the bill: Current law limits the number of races that may be imported by a thoroughbred association or fair to no more than 50 races per day on days when live thoroughbred or fair racing is being conducted in this state, with specified exceptions.

This bill is intended to help increase the wagering handle for California's daytime race meets in southern California when no live thoroughbred or fair racing is occurring in northern California.

The author states this bill will provide live thoroughbred or fair race meets with a marketing tool to increase on-track and off-track attendance on the aforementioned days. These extra imported races will give patrons the opportunity to wager on more races to offset the lack of live racing in northern California.

Purses are important to California's racing industry because they provide revenue to horse owners for their racing operations and to breeders through an increase in the value of their breeding stock. When fewer live races are run and/or imported into California for wagering, less money is generated for these two funds.

Satellite Wagering: Satellite wagering via an off-track facility has been legal in California since 1985. It was authorized at a time when California racetracks were beginning to experience declining attendance and handle figures. The industry believed that making the product easier to access not only would expose and market horse racing to potential customers, but also would make it more convenient for the existing patrons to wager more often.

Simulcasting: Simulcasting is the process of transmitting the audio and video signal of a live racing performance from one facility to a satellite for re-transmission to other locations or venues where pari-mutuel wagering is permitted. Simulcasting provides racetracks with the opportunity to increase revenues by exporting their live racing content to as many wagering locations as possible, such as other racetracks, fair satellite facilities and Indian casinos. Revenues are increased because simulcasting provides racetracks that export their live content with additional customers in multiple locations who would not have otherwise been able to place wagers on the live racing event.

Racetrack Attendance: Over the past 25 years, the industry has witnessed a general decline in the number of people attending and wagering at live horse racetracks in California due to a number of factors, including increased competition from other forms of gaming, unwillingness of customers to travel a significant distance to racetracks and the availability of off-track wagering. The declining attendance at live horse racing events has prompted racetracks to rely on revenues from in-state and out-of-state satellite wagering and account wagering.

Related legislation: AB 650 (Perea) of the current legislative session. Would exempt from the 50-imported race per day limitation, races imported that are part of the race card of the Blue Grass Stakes. (Pending on the Assembly floor)

SB 187 (Hall) of the current legislative session. Adds the "Wood Memorial" to the group of stake races in Horse Racing Law which are exempt from the 50-race per day limit on imported races. (Assembly Rules Committee)

Prior legislation: AB 2655 (Hall), Chapter 149, Statutes of 2014. Added the "Apple Blossom Handicap" to the group of stake races in Horse Racing Law which are exempt from the 50-race per day limit on imported races.

AB 2693 (Governmental Organization Committee), Chapter 350, Statutes of 2012. Among other things, added the "Arkansas Derby" to the group of stake races in Horse Racing Law which are exempt from the 50-race per day limit on imported races.

AB 2520 (Hall), Chapter 347, Statutes of 2012. Increased the number of races quarter or harness racing associations are allowed to import for simulcast wagering purposes from eight to 10 per day on live racing days.

AB 707 (Garrick), Chapter 84, Statutes of 2011. Increased from 32 to 50, the limitation on the total number of out-of-state thoroughbred races that may be imported per day by a thoroughbred association or fair that is conducting a live race meet with approval by the CHRB.

SB 899 (Denham), Chapter 279, Statutes of 2010. Deleted the statewide cap on the number of out-of-country thoroughbred races that a thoroughbred racing association or fair may import, simulcast, and on which wagers may be accepted statewide in any given year.

AB 136 (Silva), Chapter 221, Statutes of 2009. Deleted the limitation on the total number of out-of-state or out-of-country harness or quarter horse races that may be imported in a calendar year by a harness or quarter horse racing association.

AB 763 (Chesbro), Chapter 122, Statutes of 2009. Authorized the Humboldt County Fair to offer satellite wagering on eight out-of-state races during the August days when the fair is offering live racing, if specified conditions are met.

AB 3074 (Governmental Organization Committee), Chapter 508, Statutes of 2008. Authorized the CHRB to allow harness racing tracks to accept wagers during the Kentucky Futurity and increased from 23 to 32 the total number of thoroughbred races that may be imported statewide for satellite wagering by associations or fairs.

SB 379 (Denham), Chapter 443, Statutes of 2007. Added the "Dubai World Cup" to a specified day of races that would be exempted from the 23-race day limit on imported races for satellite wagering.

AB 765 (Evans), Chapter 613, Statutes of 2007. Among other things, reauthorized horse racing's Advance Deposit Wagering law, which was due to "sunset" on January 1, 2008.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0000332

Date of Hearing: May 6, 2015

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 1295

Author:(Gray) – As Introduced Ver:February 27, 2015

SUBJECT: Horse racing: out-of-state thoroughbred races: limitation exception

SUMMARY: Provides that the limitation of 50 imported races per day does not apply to races imported into the combined central and southern zones when there is live Thoroughbred or fair racing being conducted in those zones but no live thoroughbred or fair racing is being conducted in the northern zone.

EXISTING LAW:

1) Grants the California Horse Racing Board (CHRB) the authority to regulate the various forms of horse racing authorized in this state.

2) Authorizes a thoroughbred racing association or fair to distribute the audiovisual signal and accept wagers on the results of out-of-state Thoroughbred races conducted in the United States during the calendar period the association or fair is conducting a race meeting, including days on which there is no live racing being conducted by the association or fair, defined.

3) Provides that the total number of Thoroughbred races imported by associations or fairs on a statewide basis under these provisions are required to not exceed 50 per day on days when live Thoroughbred or fair racing is being conducted in the state, with the exception of prescribed races, including races imported into the combined central and southern zones when there is no live Thoroughbred or fair racing being conducted in the combined central and southern zones.

4) Exempts from that 50-race per day limit races imported that are part of the race card of certain prominent races, including the Kentucky Derby, the Kentucky Oaks, the Preakness Stakes, the Belmont Stakes, the Jockey Club Gold Cup, the Travers Stakes, the Breeders' Cup, the Dubai Cup, or the Haskell Invitational.

5) Authorizes Thoroughbred racing associations or fairs to distribute the audiovisual signal and accept wagers on the results of out-of-state and international Thoroughbred races during the calendar period the association or fair is conducting live racing, including days on which there is no live racing being conducted by the association or fair.

FISCAL EFFECT: This bill is keyed non-fiscal by Legislative Counsel.

COMMENTS:

Purpose of the bill: Current law limits the number of races that may be imported by a Thoroughbred association or fair to no more than 50 races per day on days when live Thoroughbred or fair racing is being conducted in this state, with specified exceptions.

This bill is intended to help increase the wagering handle for California's daytime race meets when no live Thoroughbred or fair racing is occurring in northern California. The goal of this bill is to increase purses, racetrack revenue, and breeders' awards in California.

Purses are important to California's racing industry because they provide revenue to horse owners for their racing operations and to breeders through an increase in the value of their breeding stock. When fewer live races are run and/or imported into California for wagering, less money is generated for these two funds.

The author states this bill will provide live Thoroughbred or fair race meets with a marketing tool to increase on-track and off-track attendance on the aforementioned days. These extra imported races will give patrons the opportunity to wager on more races to offset the lack of live racing in northern California.

Satellite Wagering: Satellite wagering via an off-track facility has been legal in California since 1985. It was authorized at a time when California racetracks were beginning to experience declining attendance and handle figures. The industry believed that making the product easier to access not only would expose and market horse racing to potential customers, but also would make it more convenient for the existing patrons to wager more often.

Simulcasting: Simulcasting is the process of transmitting the audio and video signal of a live racing performance from one facility to a satellite for re-transmission to other locations or venues where pari-mutuel wagering is permitted. Simulcasting provides racetracks with the opportunity to increase revenues by exporting their live racing content to as many wagering locations as possible, such as other racetracks, fair satellite facilities and Indian casinos. Revenues are increased because simulcasting provides racetracks that export their live content with additional customers in multiple locations who would not have otherwise been able to place wagers on the live racing event.

Racetrack Attendance: Over the past 25 years, the industry has witnessed a general decline in the number of people attending and wagering at live horse racetracks in California due to a number of factors, including increased competition from other forms of gaming, unwillingness of customers to travel a significant distance to racetracks and the availability of off-track wagering. The declining attendance at live horse racing events has prompted racetracks to rely on revenues from in-state and out-of-state satellite wagering and account wagering.

Related legislation: AB 650 (Perea) of 2015. Would exempt from the 50-imported race per day limitation, races imported that are part of the race card of the Blue Grass Stakes. (Pending in Assembly G.O. Committee)

SB 187 (Hall) of 2015. Adds the "Wood Memorial" to the group of stake races in Horse Racing Law which are exempt from the 50-race per day limit on imported races. (Senate Floor - Consent calendar)

Prior legislation: AB 2655 (Hall), Chapter 149, Statutes of 2014. Added the “Apple Blossom Handicap” to the group of stake races in Horse Racing Law which are exempt from the 50-race per day limit on imported races.

AB 2693 (Governmental Organization), Chapter 350, Statutes of 2012. Among other things, added the “Arkansas Derby” to the group of stake races in Horse Racing Law which are exempt from the 50-race per day limit on imported races.

AB 2520 (Hall), Chapter 347, Statutes of 2012. Increased the number of races quarter or harness racing associations are allowed to import for simulcast wagering purposes from 8 to 10 per day on live racing days.

AB 707 (Garrick), Chapter 84, Statutes of 2011. Increased from 32 to 50, the limitation on the total number of out-of-state thoroughbred races that may be imported per day by a thoroughbred association or fair that is conducting a live race meet with approval by the CHRB.

SB 899 (Denham), Chapter 279, Statutes of 2010. Deleted the statewide cap on the number of out-of-country thoroughbred races that a thoroughbred racing association or fair may import, simulcast, and on which wagers may be accepted statewide in any given year.

AB 136 (Silva), Chapter 221, Statutes of 2009. Deleted the limitation on the total number of out-of-state or out-of-country harness or quarter horse races that may be imported in a calendar year by a harness or quarter horse racing association.

AB 763 (Chesbro), Chapter 122, Statutes of 2009. Authorized the Humboldt County Fair to offer satellite wagering on eight out-of-state races during the August days when the fair is offering live racing, if specified conditions are met.

AB 3074 (Governmental Organization), Chapter 508, Statutes of 2008. Authorized the CHRB to allow harness racing tracks to accept wagers during the Kentucky Futurity and increased from 23 to 32 the total number of thoroughbred races that may be imported statewide for satellite wagering by associations or fairs.

SB 379 (Denham), Chapter 443, Statutes of 2007. Added the “Dubai World Cup” to a specified day of races that would be exempted from the 23-race day limit on imported races for satellite wagering.

AB 765 (Evans), Chapter 613, Statutes of 2007. Among other things, reauthorized horse racing's Advance Deposit Wagering law, which was due to "sunset" on January 1, 2008.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531