The Alcoholic Beverage Control Act, administered by the Department of Alcoholic Beverage Control, prohibits any licensee from giving any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, but permits alcoholic beverages to be provided in consumer contests and sweepstakes subject to specified conditions. Existing law permits the department to issue a special temporary on-sale or off-sale beer or wine license to certain nonprofit corporations that entitles the licensee to sell beer or wine, as specified. Existing law generally makes it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the Department of Justice that conducts a raffle pursuant to certain requirements.

This bill would authorize a nonprofit corporation issued a special temporary on-sale or off-sale beer or wine license and that also obtains a raffle registration to offer, provide, or award alcoholic beverages as a prize in a raffle.

The Alcoholic Beverage Control Act, administered by the Department of Alcoholic Beverage Control, prohibits any licensee from giving any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, but permits alcoholic beverages to be provided in consumer contests and sweepstakes subject to specified conditions. Existing law permits the department to issue a special temporary on-sale or off-sale beer or wine license to certain nonprofit corporations that entitles the licensee to sell beer or wine, as specified. Existing law generally makes it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the Department of Justice that conducts a raffle pursuant to certain requirements.

This bill would authorize a nonprofit corporation issued a special temporary on-sale or off-sale beer or wine license and that also obtains a raffle registration to offer, provide, or award alcoholic beverages as a prize in a raffle.

The Alcoholic Beverage Control Act, administrated by the Department of Alcoholic Beverage Control, prohibits any licensee from giving any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, but permits alcoholic beverages to be provided in consumer contests and sweepstakes subject to specified conditions. Existing law permits the department to issue a special temporary on-sale or off-sale beer or wine license to certain nonprofit corporations that entitles the licensee to sell beer or wine, as specified. Existing law generally makes it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the Department of Justice that conducts a raffle pursuant to certain requirements.

This bill would provide that a charitable organization, as defined, that has obtained a raffle registration from the Department of Justice and to which has been issued a special temporary on-sale or off-sale beer or wine license, may hold a raffle involving a prize of alcoholic beverages without violating the Alcoholic Beverage Control Act. authorize a nonprofit corporation issued a special temporary on-sale or off-sale beer or wine license and that also obtains a raffle registration to offer, provide, or award alcoholic beverages as a prize in a raffle.

The Alcoholic Beverage Control Act, administrated by the Department of Alcoholic Beverage Control, prohibits any licensee from giving any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, but permits alcoholic beverages to be provided in consumer contests and sweepstakes subject to specified conditions. Existing law permits the department to issue a special temporary on-sale or off-sale beer or wine license to certain nonprofit corporations that entitles the licensee to sell beer or wine, as specified. Existing law generally makes it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the Department of Justice that conducts a raffle pursuant to certain requirements.

This bill would provide that a charitable organization, as defined, that has obtained a raffle registration from the Department of Justice and to which has been issued a special temporary on-sale or off-sale beer or wine license, may hold a raffle involving a prize of alcoholic beverages without violating the Alcoholic Beverage Control Act.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 522

Author:(Cunningham)

As Amended Ver:July 6, 2017

Majority vote

Original Committee Reference: G.O.

SUMMARY: Allows a nonprofit corporation that has been issued a special temporary on-sale or off-sale beer or wine license pursuant to the Alcoholic Beverage Control Act (Act) and that has also obtained a raffle registration from the Department of Justice (DOJ), to offer, provide, or award alcoholic beverages as a prize in a raffle.

The Senate amendments authorize a nonprofit corporation issued a special temporary on-sale or off-sale beer or wine license and that also obtains a raffle registration to offer, provide, or award alcoholic beverages as a prize in a raffle.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

Background

Charitable raffles: Charitable raffles have been legal in the State of California since July 1, 2001, with the successful passage of SB 639 (McPherson), Chapter 778, Statutes of 2000, and voter approval of Proposition 17.

Despite their previous illegality, raffles had long been a popular fundraising tool used by various nonprofit organizations. Thus in 2000, local law enforcement authorities and members of the nonprofit community decided to sponsor legislation to legalize some raffles and bring the then illegal raffles out of the shadows and provide for regulation of these types of raffles.

Specifically, Penal Code Section 320.5, permits qualified charities to conduct raffles to raise funds for beneficial or charitable purposes in the state. Only eligible private, tax-exempt nonprofit organizations qualified to conduct business in California for at least one year prior to conducting the raffle may conduct raffles to raise funds for the organization and charitable or beneficial purposes in California. Unless specifically exempted, a nonprofit organization must register with the Attorney General's Registry of Charitable Trusts prior to conducting the raffle and file an aggregate financial disclosure report for all raffles held during the reporting year.

As noted, a raffle is a type of lottery in which prizes are awarded to people who pay for a chance to win. Each person enters the game of chance by submitting a detachable coupon or stub from the paper ticket purchased. At least 90% of the gross receipts from raffle ticket sales must be used by the eligible tax-exempt organization to benefit or support beneficial or charitable purposes in California.

Under current law, a silent auction is not considered a raffle so a charity is not required to register with the Registry of Charitable Trusts before conducting silent auction activities. A silent auction is not a game of chance. Unlike a raffle where multiple participants pay for a chance to win a prize based on a random draw, a silent auction is a sale of an item to the highest bidder.

ABC nonprofit temporary licenses: There are a variety of temporary ABC licenses available for nonprofits. It is common for a nonprofit to seek a combination of the licenses, such as a daily on-sale general license as described in Business and Professions Code (BPC) Section 24045.1 and a special temporary off-sale general license as described in BPC Section 24045.4. This allows a nonprofit to have a full bar and to auction off alcoholic beverages that have been donated to the organization.

Another option is to apply for a special temporary on-sale or off-sale beer or wine license as described in BPC Section 24045.6. This license could be used by a nonprofit hosting an event featuring on-site consumption and also selling alcohol donated to it for off-sale consumption (but not using a silent or live auction to do it).

This bill specifies that a nonprofit corporation that has been issued a special temporary on-sale or off-sale beer or wine license pursuant to the ABC Act and has also obtained a raffle registration from the DOJ, may offer, provide, or award alcoholic beverages as a prize in a raffle.

Purpose of the bill: The author's office states that this bill is a common-sense measure that allows nonprofits to raise money with raffle prizes of donated alcohol. The author states that "many participants in these raffles unknowingly include wine (and other alcoholic beverages) in fundraising raffles without the approval of either the Registry of Charitable Trusts or ABC, and are thus operating within ambiguity in current law."

The author's office believes that a nonprofit should not be punished for mistakenly offering alcoholic beverages as a raffle prize at a charitable event. In summary, the author's office notes, "this measure will clarify existing law and allow nonprofits to engage in fundraising without the fear of running afoul of the law and specified regulations."

According to the author's office, there is an absence of clear guidance and a lack of uniform enforcement regarding whether nonprofit organizations may include donated alcoholic beverages (e.g., bottles of wine) as prizes in fundraising raffles. The DOJ's Registry of Charitable Trusts is responsible for licensing raffles but does not have the authority to issue a license that includes alcoholic beverages. On the other hand, ABC does have the authority to grant licenses for nonprofits to "auction" wine but does not have the authority to control the conduct of raffles.

This bill addresses this issue by specifying in statute that a nonprofit corporation issued a special temporary on-sale or off-sale beer or wine license that obtains a raffle registration from the DOJ may hold a raffle involving a prize of alcoholic beverages.

In support: The Conference of California Bar Associations states that "AB 522 would clarify that nonprofits organizations may offer prizes of alcohol donated by a winegrower, beer manufacturer, distilled spirits manufacturer, distilled spirits manufacturer's agent, or importer, as prizes in charitable raffles conducted pursuant to Penal Code Section 320.5. This bill is needed because current law regarding the legality of such raffles is vague and inconsistently enforced, with some organizations receiving permission from the Department of ABC and others being denied."

In opposition: Alcohol Justice is opposed to AB 522 "because once again, this is the arms race of increasing alcohol availability, this time through combining alcohol consumption with sales of raffle tickets for alcohol prizes."

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 00016210001621

 THIRD READING  

Bill No: AB 522

Author:

:

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 13-0, 6/27/17

AYES: Dodd, Berryhill, Bradford, Cannella, Gaines, Galgiani, Glazer, Hill, Hueso, Lara, Mendoza, Portantino, Vidak

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/11/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Conference of California Bar Associations

DIGEST: This bill authorizes a nonprofit corporation that has been issued a special temporary on-sale or off-sale beer or wine license pursuant to the Alcoholic Beverage Control (ABC) Act and that has also obtained a raffle registration from the Department of Justice (DOJ), to offer, provide, or award alcoholic beverages as a prize in a raffle.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature.
2. Provides, under the ABC Act, for the issuance of various alcoholic beverage licenses, including the imposition of fees, conditions, and restrictions in connection with the issuance of those licenses.
3. Prohibits a licensee from, directly or indirectly, giving any premium, gift, free goods, or other thing of value in connection with the sale, distribution, or sale and distribution of alcoholic beverages.
4. Allows authorized licensees to conduct consumer contests, subject to various conditions, including, among other things, that alcoholic beverages or anything redeemable for alcoholic beverages shall not be awarded as a contest prize. However, this paragraph shall not prohibit a contest in which the prize is cash or cash equivalent, the awarding of cash or cash equivalent, or the inclusion of alcoholic beverages as an incidental part of a prize package.
5. Authorizes the Department of ABC to issue a special temporary on-sale or off-sale beer or wine license to any nonprofit corporation that is exempt from payment of income taxes under Section 23701d or 23701e of the Revenue and Taxation Code and Section 501(c)(3) or 501(c)(6) of the Internal Revenue Code. An applicant for this license shall accompany the application with a fee of $100.
6. Provides that a special temporary on-sale or off-sale beer or wine license shall only entitle the licensee to sell beer or wine bought by, or donated to, the licensee to a consumer and to any person holding a license authorizing the sale of beer or wine.
7. Allows a licensee to donate or sell beer or wine to a nonprofit corporation that obtains a special temporary on-sale or off-sale license, provided that the donation is not made in connection with a sale of an alcoholic beverage.
8. Provides that a special temporary on-sale or off-sale beer or wine license shall be for a period not exceeding 15 days. In the event the license is issued for a period exceeding two days, it shall be used solely for retail sales in conjunction with an identifiable fundraising event sponsored or conducted by the licensee and all bottles of beer or wine sold under this license shall bear a label prominently identifying the event.
9. Specifies that only three special temporary on-sale or off-sale beer or wine licenses shall be issued to any nonprofit in a calendar year.
10. Authorizes the Department of ABC to issue a special temporary off-sale general license to any nonprofit corporation, as specified, which entitles the licensee to sell at auction alcoholic beverages donated to it. The law provides that only three such licenses may be issued to any nonprofit in a calendar year. An applicant for this license shall accompany the application with a fee of $100.
11. Makes, generally, it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the DOJ and conducts a raffle pursuant to specified requirements.
12. Defines a “raffle” as a scheme for the distribution of prizes by chance among persons who have paid money for paper tickets that provide the opportunity to win these prizes and where specified conditions are met.

This bill authorizes a nonprofit corporation that has been issued a special temporary on-sale or off-sale beer or wine license pursuant to the ABC Act and that has also obtained a raffle registration from the DOJ, to offer, provide, or award alcoholic beverages as a prize in a raffle.

Background

Charitable raffles. Charitable raffles have been legal in the State of California since July 1, 2001, with the successful passage of SB 639 (McPherson, Chapter 778, Statutes of 2000) and voter approval of Proposition 17.

Despite their previous illegality, raffles had long been a popular fundraising tool used by various nonprofit organizations. Thus in 2000, local law enforcement authorities and members of the nonprofit community decided to sponsor legislation to legalize some raffles and bring the then illegal raffles out of the shadows and provide for regulation of these types of raffles.

Specifically, Penal Code Section 320.5, permits qualified charities to conduct raffles to raise funds for beneficial or charitable purposes in the state. Only eligible private, tax-exempt nonprofit organizations qualified to conduct business in California for at least one year prior to conducting the raffle may conduct raffles to raise funds for the organization and charitable or beneficial purposes in California. Unless specifically exempted, a nonprofit organization must register with the Attorney General's Registry of Charitable Trusts prior to conducting the raffle and file an aggregate financial disclosure report for all raffles held during the reporting year.

As noted, a raffle is a type of lottery in which prizes are awarded to people who pay for a chance to win. Each person enters the game of chance by submitting a detachable coupon or stub from the paper ticket purchased. At least 90 percent of the gross receipts from raffle ticket sales must be used by the eligible tax-exempt organization to benefit or support beneficial or charitable purposes in California.

Under current law, a silent auction is not considered a raffle so a charity is not required to register with the Registry of Charitable Trusts before conducting silent auction activities. A silent auction is not a game of chance. Unlike a raffle where multiple participants pay for a chance to win a prize based on a random draw, a silent auction is a sale of an item to the highest bidder.

ABC nonprofit temporary licenses. There are a variety of temporary ABC licenses available for nonprofits. It is common for a nonprofit to seek a combination of the licenses, such as a daily on-sale general license as described in Business and Professions Code (BPC) Section 24045.1 and a special temporary off-sale general license as described in BPC §24045.4. This allows a nonprofit to have a full bar and to auction off alcoholic beverages that have been donated to the organization.

Another option is to apply for a special temporary on-sale or off-sale beer or wine license as described in BPC Section 24045.6. This license could be used by a nonprofit hosting an event featuring on-site consumption and also selling alcohol donated to it for off-sale consumption (but not using a silent or live auction to do it).

This bill specifies that a nonprofit corporation that has been issued a special temporary on-sale or off-sale beer or wine license pursuant to the ABC Act and has also obtained a raffle registration from the DOJ, may offer, provide, or award alcoholic beverages as a prize in a raffle.

Comments

Purpose of the bill. The author’s office states that this bill is a common-sense measure that allows nonprofits to raise money with raffle prizes of donated alcohol.

According to the author’s office, “many participants in these raffles unknowingly include wine (and other alcoholic beverages) in fundraising raffles without the approval of either the Registry of Charitable Trusts or the Department of ABC, and are thus operating within ambiguity in current law.”

The author’s office believes that a nonprofit should not be punished for mistakenly offering alcoholic beverages as a raffle prize at a charitable event. In summary, the author’s office notes, “this measure will clarify existing law and allow nonprofits to engage in fundraising without the fear of running afoul of the law and specified regulations.”

Need for clarification. According to the author's office, there is an absence of clear guidance and a lack of uniform enforcement regarding whether nonprofit organizations may include donated alcoholic beverages (e.g., bottles of wine) as prizes in fundraising raffles. The DOJ’s Registry of Charitable Trusts is responsible for licensing raffles but does not have the authority to issue a license that includes alcoholic beverages. On the other hand, the Department of ABC does have the authority to grant licenses for nonprofits to “auction” wine but does not have the authority to control the conduct of raffles.

This bill addresses this issue by specifying in statute that a nonprofit corporation issued a special temporary on-sale or off-sale beer or wine license that obtains a raffle registration from the DOJ may hold a raffle involving a prize of alcoholic beverages.

Related/Prior Legislation

AB 774 (Levine, Chapter 107, Statutes of 2015), among other things, extended authorization the Department of ABC to issue a special temporary on-sale or off-sale beer license to a nonprofit corporation that is exempt from payment of income taxes, subject to specified requirements and limitations. Additionally, extended authorization to specified nonprofit corporations that have not been issued a license authorizing the sale of beer to receive and possess beer donated to that nonprofit corporation, if the nonprofit corporation has submitted a license application to sell beer with the Department of ABC.

SB 549 (Hall, Chapter 509, Statutes of 2015) authorized an eligible organization, as defined, to conduct a 50/50 raffle for the purpose of directly supporting a specified beneficial or charitable purpose in California, or financially supporting another private, nonprofit, eligible organization.

SB 778 (Padilla, Chapter 489, Statutes of 2012) permitted an authorized licensee, as defined, to conduct a consumer contest or sweepstakes, as defined, offering the chance to win prizes, if specified conditions are met.

SB 200 (Correa, Chapter 38, Statutes of 2009) authorized eligible organizations to advertise raffles over the Internet.

AB 1964 (Evans, Chapter 71, Statutes of 2008) allowed a nonprofit corporation that has not been issued a license authorizing the possession and sale of alcoholic beverages, to have upon their premises donated wine to be sold at a later event, if the nonprofit has submitted a specified license application with the Department of ABC. The bill also increased the number of times that a special temporary on-sale and off-sale license can be issued from once per year to three times per year.

AB 323 (Evans, Chapter 131, Statutes of 2007), among other things, allowed custom crush wine producers (boutique wineries) to donate and pour their wine at winetasting events conducted by nonprofit organizations.

AB 2927 (Wiggins, Chapter 523, Statutes of 2004) specified that a special temporary license shall be issued only once in a calendar year, and allowed alcohol to be sold at less than the minimum retail price by a nonprofit charitable corporation, as specified.

AB 1505 (Wiggins, Chapter 270, Statutes of 2003) allowed consumers to purchase wine after tasting it at events sponsored by certain nonprofit organizations provided the sales transaction is completed at the winegrower's premises.

SB 88 (Chesbro, Chapter 588, Statutes of 2003) authorized the Department of ABC to issue a wine sales event permit to allow a licensed winegrower to sell bottled wine at festivals, county fairs, civic/cultural celebrations or similar events held by organizations operated for nonprofit purposes, as defined.

SB 639 (McPherson, Chapter 778, Statutes of 2000) permitted raffles to be conducted by private, nonprofit organizations, for the purposes of providing financial support for beneficial charitable works if, among other criteria, at least 90% of the gross receipts from the sale of raffle tickets are used to benefit or provide support for the charitable or beneficial purposes of the conducting nonprofit.

SCA 4 (McPherson, Resolution Chapter 123, Statutes of 1999) placed Proposition 17 on the March 2000 ballot, which was approved by the voters to authorize charitable raffles in California, provided that at least 90 percent of the gross receipts from the raffle go directly to beneficial or charitable purposes, as defined.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

(Verified 7/17/17)

Conference of California Bar Associations (source)

Family Winemakers of California

OPPOSITION: (Verified 7/17/17)

Alcohol Justice

ARGUMENTS IN SUPPORT: The Conference of California Bar Associations states that, “AB 522 would clarify that nonprofits organizations may offer prizes of alcohol donated by a winegrower, beer manufacturer, distilled spirits manufacturer, distilled spirits manufacturer’s agent, or importer, as prizes in charitable raffles conducted pursuant to Penal Code §320.5. This bill is needed because current law regarding the legality of such raffles is vague and inconsistently enforced, with some organizations receiving permission from the Department of ABC and others being denied.”

ARGUMENTS IN OPPOSITION: Alcohol Justice is opposed to AB 522 “because once again, this is the arms race of increasing alcohol availability, this time through combining alcohol consumption with sales of raffle tickets for alcohol prizes.”

ASSEMBLY FLOOR: 77-0, 5/11/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Dahle, O'Donnell, Patterson

Prepared by:

7/19/17 15:19:58

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2017 - 2018 Regular

Bill No: 522 Hearing Date: 6/27/2017

SUBJECT: Alcoholic beverages: charitable organizations: raffles

DIGEST: This bill clarifies that a charitable organization, as defined, that has obtained a raffle registration from the Department of Justice (DOJ) and has been issued a special temporary on-sale or off-sale beer or wine license, may hold a raffle involving a prize of alcoholic beverages without violating the Alcoholic Beverage Control (ABC) Act.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature.
2. Provides, under the ABC Act, for the issuance of various alcoholic beverage licenses, including the imposition of fees, conditions, and restrictions in connection with the issuance of those licenses.
3. Prohibits a licensee from, directly or indirectly, giving any premium, gift, free goods, or other thing of value in connection with the sale, distribution, or sale and distribution of alcoholic beverages.
4. Allows authorized licensees to conduct consumer contests, subject to various conditions, including, among other things, that alcoholic beverages or anything redeemable for alcoholic beverages shall not be awarded as a contest prize. However, this paragraph shall not prohibit a contest in which the prize is cash or cash equivalent, the awarding of cash or cash equivalent, or the inclusion of alcoholic beverages as an incidental part of a prize package.
5. Authorizes the Department of ABC to issue a special temporary on-sale or off-sale beer or wine license to any nonprofit corporation that is exempt from payment of income taxes under Section 23701d or 23701e of the Revenue and Taxation Code and Section 501(c)(3) or 501(c)(6) of the Internal Revenue Code. An applicant for this license shall accompany the application with a fee of $100.
6. Provides that a special temporary on-sale or off-sale beer or wine license shall only entitle the licensee to sell beer or wine bought by, or donated to, the licensee to a consumer and to any person holding a license authorizing the sale of beer or wine.
7. Allows a licensee to donate or sell beer or wine to a nonprofit corporation that obtains a special temporary on-sale or off-sale license, provided that the donation is not made in connection with a sale of an alcoholic beverage.
8. Provides that a special temporary on-sale or off-sale beer or wine license shall be for a period not exceeding 15 days. In the event the license is issued for a period exceeding two days, it shall be used solely for retail sales in conjunction with an identifiable fundraising event sponsored or conducted by the licensee and all bottles of beer or wine sold under this license shall bear a label prominently identifying the event.
9. Specifies that only three special temporary on-sale or off-sale beer or wine licenses shall be issued to any nonprofit in a calendar year.
10. Authorizes the Department of ABC to issue a special temporary off-sale general license to any nonprofit corporation, as specified, which entitles the licensee to sell at auction alcoholic beverages donated to it. The law provides that only three such licenses may be issued to any nonprofit in a calendar year. An applicant for this license shall accompany the application with a fee of $100.
11. Generally, makes it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the DOJ and conducts a raffle pursuant to specified requirements.
12. Defines a “raffle” as a scheme for the distribution of prizes by chance among persons who have paid money for paper tickets that provide the opportunity to win these prizes and where specified conditions are met.

This bill clarifies that a charitable organization, as defined, that has obtained a raffle registration from the DOJ and has been issued a special temporary on-sale or off-sale beer or wine license, may hold a raffle involving a prize of alcoholic beverages without violating the ABC Act.

Background

Purpose of the bill. The author’s office states that this bill is a common-sense measure that would allow nonprofits to raise money with raffle prizes of donated alcohol.

According to the author’s office, “many participants in these raffles unknowingly include wine (and other alcoholic beverages) in fundraising raffles without the approval of either the Registry of Charitable Trusts or the Department of ABC, and are thus operating within ambiguity in current law.”

The author’s office believes that a nonprofit should not be punished for mistakenly offering alcoholic beverages as a raffle prize at a charitable event. In summary, the author’s office notes, “this measure will clarify existing law and allow nonprofits to engage in fundraising without the fear of running afoul of the law and specified regulations.”

Charitable raffles. Charitable raffles have been legal in the State of California since July 1, 2001, with the successful passage of SB 639 (McPherson, Chapter 778, Statutes of 2000) and voter approval of Proposition 17.

Despite their previous illegality, raffles had long been a popular fundraising tool used by various nonprofit organizations. Thus in 2000, local law enforcement authorities and members of the nonprofit community decided to sponsor legislation to legalize some raffles and bring the then illegal raffles out of the shadows and provide for regulation of these types of raffles.

Specifically, Penal Code Section 320.5, permits qualified charities to conduct raffles to raise funds for beneficial or charitable purposes in the state. Only eligible private, tax-exempt nonprofit organizations qualified to conduct business in California for at least one year prior to conducting the raffle may conduct raffles to raise funds for the organization and charitable or beneficial purposes in California. Unless specifically exempted, a nonprofit organization must register with the Attorney General's Registry of Charitable Trusts prior to conducting the raffle and file an aggregate financial disclosure report for all raffles held during the reporting year.

As noted, a raffle is a type of lottery in which prizes are awarded to people who pay for a chance to win. Each person enters the game of chance by submitting a detachable coupon or stub from the paper ticket purchased. At least 90 percent of the gross receipts from raffle ticket sales must be used by the eligible tax-exempt organization to benefit or support beneficial or charitable purposes in California.

Under current law, a silent auction is not considered a raffle so a charity is not required to register with the Registry of Charitable Trusts before conducting silent auction activities. A silent auction is not a game of chance. Unlike a raffle where multiple participants pay for a chance to win a prize based on a random draw, a silent auction is a sale of an item to the highest bidder.

ABC nonprofit temporary licenses. There are a variety of temporary ABC licenses available for nonprofits. It is common for a nonprofit to seek a combination of the licenses, such as a daily on-sale general license as described in Business and Professions Code (BPC) §24045.1 and a special temporary off-sale general license as described in BPC §24045.4. This allows a nonprofit to have a full bar and to auction off alcoholic beverages that have been donated to the organization.

Another option is to apply for a special temporary on-sale or off-sale beer or wine license as described in BPC §24045.6. This license could be used by a nonprofit hosting an event featuring on-site consumption and also selling alcohol donated to it for off-sale consumption (but not using a silent or live auction to do it).

This bill would allow a nonprofit, that has been issued this special temporary on-sale or off-sale beer or wine license, to hold a raffle involving a prize of alcoholic beverages, as long as the nonprofit has also obtained a raffle registration from the DOF.

Need for clarification. According to the author's office, there is an absence of clear guidance and a lack of uniform enforcement regarding whether nonprofit organizations may include donated alcoholic beverages (e.g., bottles of wine) as prizes in fundraising raffles. The DOJ’s Registry of Charitable Trusts is responsible for licensing raffles but does not have the authority to issue a license that includes alcoholic beverages. On the other hand, the Department of ABC does have the authority to grant licenses for nonprofits to ‘auction’ wine but does not have the authority to control the conduct of raffles.

This bill would address this issue by specifying in statute that a nonprofit issued a special temporary on-sale or off-sale beer or wine license that obtains a raffle registration from the DOJ may hold a raffle involving a prize of alcoholic beverages.

Prior/Related Legislation

AB 774 (Levine, Chapter 107, Statutes of 2015) among other things, extended authorization the Department of ABC to issue a special temporary on-sale or off-sale beer license to a nonprofit corporation that is exempt from payment of income taxes, subject to specified requirements and limitations. Additionally, extended authorization to specified nonprofit corporations that have not been issued a license authorizing the sale of beer to receive and possess beer donated to that nonprofit corporation, if the nonprofit corporation has submitted a license application to sell beer with the Department of ABC.

SB 549 (Hall, Chapter 509, Statutes of 2015) authorized an eligible organization, as defined, to conduct a 50/50 raffle for the purpose of directly supporting a specified beneficial or charitable purpose in California, or financially supporting another private, nonprofit, eligible organization.

SB 778 (Padilla, Chapter 489, Statutes of 2012) permitted an authorized licensee, as defined, to conduct a consumer contest or sweepstakes, as defined, offering the chance to win prizes, if specified conditions are met.

SB 200 (Correa, Chapter 38, Statutes of 2009) authorized eligible organizations to advertise raffles over the Internet.

AB 1964 (Evans, Chapter 71, Statutes of 2008) allowed a nonprofit corporation that has not been issued a license authorizing the possession and sale of alcoholic beverages, to have upon their premises donated wine to be sold at a later event, if the nonprofit has submitted a specified license application with the Department of ABC. This bill also increased the number of times that a special temporary on-sale and off-sale license can be issued from once per year to three times per year.

AB 323 (Evans, Chapter 131, Statutes of 2007) among other things, allowed custom crush wine producers (boutique wineries) to donate and pour their wine at winetasting events conducted by nonprofit organizations.

AB 2927 (Wiggins, Chapter 523, Statutes of 2004) specified that a special temporary license shall be issued only once in a calendar year, and allowed alcohol to be sold at less than the minimum retail price by a nonprofit charitable corporation, as specified.

AB 1505 (Wiggins, Chapter 270, Statutes of 2003) allowed consumers to purchase wine after tasting it at events sponsored by certain nonprofit organizations provided the sales transaction is completed at the winegrower's premises.

SB 88 (Chesbro, Chapter 588, Statutes of 2003) authorized the Department of ABC to issue a wine sales event permit to allow a licensed winegrower to sell bottled wine at festivals, county fairs, civic/cultural celebrations or similar events held by organizations operated for nonprofit purposes, as defined.

SB 639 (McPherson, Chapter 778, Statutes of 2000) permitted raffles to be conducted by private, nonprofit organizations, for the purposes of providing financial support for beneficial charitable works if, among other criteria, at least 90% of the gross receipts from the sale of raffle tickets are used to benefit or provide support for the charitable or beneficial purposes of the conducting nonprofit.

SCA 4 (McPherson, Resolution Chapter 123, Statutes of 1999) placed Proposition 17 on the March 2000 ballot, which was approved by the voters to authorize charitable raffles in California, provided that at least 90 percent of the gross receipts from the raffle go directly to beneficial or charitable purposes, as defined.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

Conference of California Bar Association (Source)

Family Winemakers of California

OPPOSITION:

Alcohol Justice

ARGUMENTS IN SUPPORT: The Conference of California Bar Associations states that, “AB 522 would clarify that nonprofits organizations may offer prizes of alcohol donated by a winegrower, beer manufacturer, distilled spirits manufacturer, distilled spirits manufacturer’s agent, or importer, as prizes in charitable raffles conducted pursuant to Penal Code §320.5. This bill is needed because current law regarding the legality of such raffles is vague and inconsistently enforced, with some organizations receiving permission from the Department of ABC and others being denied.”

ARGUMENTS IN OPPOSITION: Alcohol Justice is opposed to AB 522 “because once again, this is the arms race of increasing alcohol availability, this time through combining alcohol consumption with sales of raffle tickets for alcohol prizes.”

Date of Hearing: May 3, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 522

Author:(Cunningham) – As Introduced Ver:February 13, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill clarifies that a nonprofit issued a special temporary on-sale or off-sale beer and wine license and the proper registration from the Department of Justice may hold a raffle involving a prize of alcoholic beverages.

FISCAL EFFECT:

Negligible state costs.

COMMENTS:

Background and Purpose. The California Constitution permits charitable organizations to conduct raffles to raise contribution money if at least 90% of the gross receipts from the raffle go directly to the beneficial or charitable purposes in California. The Constitution permits the Legislature to amend the percentage of gross receipts required by statute only if enacted with a 2/3 vote of each house.

According to the author's office, AB 522 will clarify whether nonprofits can offer alcoholic beverages as prizes in fundraising raffles. The author notes that there is conflicting guidance that make it unclear if nonprofits can offer such prizes.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 19, 2017

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 522 (

Author:Cunningham) – As Introduced Ver:February 13, 2017

SUBJECT: Alcoholic beverages: charitable organizations: raffles

SUMMARY: Clarifies that a charitable organization, as defined, that has obtained a raffle registration from the Department of Justice (DOJ) and to which has been issued a special temporary on-sale or off-sale beer or wine license, may hold a raffle involving a prize of alcoholic beverages without violating the Alcoholic Beverage Control Act (Act).

EXISTING LAW:

1) Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the 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 and the collection of license fees or occupation taxes for this purpose.

2) Existing law, known as the "tied-house" law or "three-tier" system, separates the alcoholic beverage industry into three component parts of manufacturer (the first tier), wholesaler (the second tier), and retailer (the third tier). The original policy rationale for this body of law was to prohibit the vertical integration of the alcohol industry and to protect the public from predatory marketing practices. Tied-house laws generally prohibit suppliers and retailers from sharing common owners and legally restrict alcohol beverage suppliers' ability to gain control over retailers through indirect means. Generally, other than exemptions 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) Prohibits any licensee from giving any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, but permits alcoholic beverages to be provided in consumer contests and sweepstakes subject to specified conditions.

4) Permits ABC to issue a special temporary on-sale or off-sale beer or wine license to certain nonprofit corporations that entitles the licensee to sell beer or wine, as specified. Wine is an allowable raffle item, but a non-profit would need to register with ABC for a daily special temporary license (cost $100). This would allow the nonprofit organization to serve and accept wine donations as well as allowing patrons to take wine away from the fundraising activity.

5) Authorizes, under the California Constitution, to permit private, nonprofit, eligible organizations to conduct raffles as a funding mechanism to support beneficial and charitable works if at least 90% of the gross receipts from the raffle go directly to beneficial or charitable purposes in California.

6) Generally makes it a misdemeanor for a person to sell chances in a lottery, but excepts from this prohibition a charitable organization that has been registered with the Department of Justice that conducts a raffle pursuant to certain requirements. Defines a "raffle" as a scheme for the distribution of prizes by chance among persons who have paid money for paper tickets that provide the opportunity to win these prizes and where specified conditions are met.

7) Prohibits any raffle to be conducted by means of, or otherwise utilize any gaming machine, apparatus, or device, whether or not that machine, apparatus, or device meets the definition of a slot machine as currently defined in California law.

8) Authorizes, under the California Constitution, for the Legislature to amend the percentage of gross receipts required to be dedicated to beneficial or charitable purposes by a statute passed by a 2/3 vote of each house of the Legislature.

FISCAL EFFECT: Unknown

COMMENTS:

Background. California Penal Code Section 320.5, adopted pursuant to a constitutional amendment approved by voters in 2000, permits qualified charities to conduct raffles to raise funds for beneficial or charitable purposes in the state. Only eligible private, tax-exempt nonprofit organizations qualified to conduct business in California for at least one year prior to conducting the raffle may conduct raffles to raise funds for the organization and charitable or beneficial purposes in California.

Unless specifically exempted, a nonprofit organization must register with the Attorney General's Registry of Charitable Trusts prior to conducting the raffle and file an aggregate financial disclosure report for all raffles held during the reporting year.

A raffle is a type of lottery in which prizes are awarded to people who pay for a chance to win. Each person enters the game of chance by submitting a detachable coupon or stub from the paper ticket purchased. At least 90 percent of the gross receipts from raffle ticket sales must be used by the eligible tax-exempt organization to benefit or support beneficial or charitable purposes in California.

Penal Code section 320.5 does not prohibit individuals affiliated with an organization from participating in a raffle held by the organization. Awarding raffle prizes by use of a gaming machine, apparatus, or device such as a slot machine is prohibited. Operating or conducting a raffle via the Internet is also prohibited. However, the organization conducting the raffle may advertise the raffle on the Internet.

Under current law, a silent auction is not considered a raffle so a charity is not required to register with the Registry of Charitable Trusts before conducting silent auction activities. A silent auction is not a game of chance. Unlike a raffle where multiple participants pay for a chance to win a prize based on a random draw, a silent auction is a sale of an item to the highest bidder

According to the author's office, there is an absence of clear guidance and a lack of uniform enforcement regarding whether non-profit organizations may include alcoholic beverages as prizes in fundraising raffles. On the one hand, the Registry of Charitable Trusts is responsible for licensing raffles, but does not have the authority to issue a license that includes alcoholic beverages. While ABC grants single-day licenses for non-profits to “auction” wine, having alcohol as a prize violates Business and Professions Code 25600.1 (raffle) or 25600.2 (sweepstakes). Further complicating things, ABC states that it does not have the authority to control the conduct of raffles, since such authority is vested with the Registry.

Purpose of the bill. According to the author's office, many non-profits include wine (and other alcoholic beverages) in fundraising raffles without the approval of either the Registry of Charitable Trusts or ABC, and are thus within ambiguity in current law. Under ABC statutes and regulations, “free goods” are not allowed to be given away, including as prizes for contests, sweepstakes, raffles, etc., in conjunction with the sale or advertisement of alcohol (some exceptions exist for novelty items).

The author states this bill is a common-sense measure that would allow non-profits to raise money with raffle prizes of alcohol donated by a winegrower, beer manufacturer, distilled spirits manufacturer, distilled spirits manufacturer’s agent or an importer.

The author believes that a raffle participant and/or nonprofit should not be punished for mistakenly purchasing or offering alcoholic beverages at a charitable event. AB 522 will clarify existing law and allow non-profits to engage in fundraising without the fear of running afoul of the law and specified regulations.

Proponents contend this bill would allow nonprofits to raise more money than if they conducted a “wine auction” where individuals bid on single bottles of alcohol.

In support. In support, the Conference of California Bar Associations states there is an absence of clear guidance and a lack of uniform enforcement regarding whether non-profit organizations may include donated alcoholic beverages (e.g., bottles of wine) as prizes in fundraising raffles. AB 522 would address this issue by specifying in statute that a nonprofit issued a special temporary on-sale or off-sale beer or wine license that obtains a raffle registration from DOJ may hold a raffle involving a prize of alcoholic beverages. This will eliminate the uncertainty surrounding current law and permit California nonprofits to conduct wine raffles as part of their fundraisers, without fear that they will run afoul of the law.

Prior legislation. SB 549 (Hall), Chapter 509, Statutes of 2015. Authorized an eligible organization, as defined, to conduct a 50/50 raffle for the purpose of directly supporting a specified beneficial or charitable purpose in California, or financially supporting another private, nonprofit, eligible organization.

SB 200 (Correa), Chapter 38, Statutes of 2009. Authorized eligible organizations to advertise raffles over the Internet.

AB 1964 (Evans), Chapter 71, Statutes of 2008. This bill (1) allowed a nonprofit organization to store donated wine on their premises while they are waiting for a license to sell the wine at a later event, and (2) increases the number of times that a special temporary on-sale and off-sale license can be issued from once per year to three times per year.

AB 323 (Evans), Chapter 131, Statutes of 2007. Among other things, modified the Act to enable custom crush wine producers (boutique wineries) to donate and pour their wine at wine tasting events conducted by nonprofit organizations.

SB 88 (Chesbro), Chapter 588, Statutes of 2003. Created a new “wine sales event” permit within the Act to enable licensed winegrowers to sell bottled wine at certain events held by qualified nonprofit organizations if approved by the ABC.

AB 2927 (Wiggins), Chapter 523, Statutes of 2004. Specifies that a special temporary license shall be issued only once in a calendar year, and would allow alcohol to be sold at less than the minimum retail price by a nonprofit charitable corporation, as specified.

AB 1505 (Wiggins), Chapter 270, Statutes of 2003. Provided that wine may be sold or orders solicited, when a wine tasting is held off the winegrower’s premises at an event sponsored by a private nonprofit organization, except that the winegrower would be permitted to accept orders for the sale of wine when the sales transaction is completed at the winegrower’s premises.

SB 639 (McPherson), Chapter 778, Statutes of 2000. Permitted raffles to be conducted by private, nonprofit organizations, for the purposes of providing financial support for beneficial charitable works if, among other criteria, at least 90% of the gross receipts from the sale of raffle tickets are used to benefit or provide support for the charitable or beneficial purposes of the conducting nonprofit.

SCA 4 (McPherson), Resolution Chapter 123, Statutes of 1999. Placed Proposition 17 on the March 2000 ballot, which was approved by the voters to authorize charitable raffles in California, provided that at least 90% of the Gross receipts from the raffle go directly to beneficial or charitable purposes, as defined.

REGISTERED SUPPORT / OPPOSITION:

Support

Conference of California Bar Associations

Family Winemakers of California

Opposition

Alcohol Justice

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