BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  SB 1531|
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                              UNFINISHED BUSINESS


          Bill No:  SB 1531
          Author:   Wolk (D)
          Amended:  8/20/12
          Vote:     21

           
           SENATE FLOOR  :  Not relevant

           ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    Alcoholic beverages:  tied-house restrictions

           SOURCE  :     Author


           DIGEST  :    This bill provides a narrow tied-house exception 
          that allows the Napa Valley Opera House (NVOH) to accept 
          wine and monetary donations from wineries located within 
          the Counties of Napa, Sonoma, Lake, and Mendocino.  This 
          exemption sunsets on January 1, 2018.

           Assembly Amendments  delete the Senate version of this bill 
          which related to the determination of the number of retail 
          alcohol licenses and replace it with the above language.

           ANALYSIS  :    

           Existing law  :

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

          2. States that the "Tied-house" Law or "three-tier" system 
             separates the alcoholic beverage industry into three 
             component parts of manufacture (first tier), wholesaler 
             (second tier), and retailer (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.

          3. Prohibits, in general, an alcohol manufacturer, 
             wholesaler, or any officer, director, or agent of any 
             such person from owning, directly, or indirectly, any 
             interest in any on-sale license, or from providing 
             anything of value to retailers, be it free goods, 
             services, or advertising.

          4. Allows wineries, breweries, distilled spirits 
             manufacturers, and importers to donate their product(s) 
             to certain nonprofit organizations (e.g., fraternal 
             orders, social organizations, civic leagues, veterans' 
             organizations, religious groups, horticultural 
             organizations) for the purpose of assisting in 
             fund-raising efforts.

          5. Provides a tied-house exemption for an alcohol licensee 
             to make monetary and alcoholic beverage contributions to 
             a symphony association (San Francisco Symphony) that is 
             a nonprofit charitable corporation or association, under 
             specified conditions.  The symphony association shall 
             hold a retail on-sale license in a portion of its 
             premises and no such gift shall be used in or for the 
             benefit of the symphony association's retail on-sale 
             license, as specified.

          This bill:

          1. Provides that a holder of a winegrower's license whose 
             licensed premises of production are located within the 

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             County of Napa may donate wine to an opera house, if all 
             the following conditions are met:

             A.    The opera house is a nonprofit charitable 
                corporation or association exempt from payment of 
                income taxes under the provisions of the Internal 
                Revenue Code of the United States, as defined. 

             B.    The opera house has been incorporated in the 
                City and County of Napa and produces not less than 
                150 events open to the general public per year.

             C.    The opera house holds a retail on-sale license.

             D.    The donation or monetary donation shall not be 
                conditioned directly or indirectly, in any way, on 
                the purchase, sale, or distribution of any 
                alcoholic beverage manufactured or distributed by 
                the holder of a winegrower's license by the opera 
                house.

             E.    The on-sale retail licensee may sell the donated 
                wine and shall sell or serve other brands of wine 
                in addition to brands produced or marketed by the 
                donating winegrower.

             F.    The opera house may acknowledge and thank a 
                donating winegrower in the opera house's event 
                programs, on the opera house's Internet Web site, 
                and on stage during an event.

          2. Contains language (legislative findings and 
             declarations) relative to the necessity of requiring a 
             separation between manufacturing interests, wholesale 
             interests and retail interests.

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

           SUPPORT :   (Verified  8/22/12)

          Napa Valley Opera House
          Napa Valley Vintners


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           OPPOSITION  :    (Verified  8/22/12)

          California Beer & Beverage Distributors

           ARGUMENTS IN SUPPORT  :    According to the author's office, 
          this bill provides a narrow Tied-house exception by 
          allowing the Napa Valley Opera House (NVOH) to accept wine 
          donated by local wineries located within the County of 
          Napa, under specified conditions.  While the NVOH maintains 
          a license to sell alcoholic beverages, it is prohibited 
          from selling donated wine under the ABC Act.  Like many 
          other non-profit organizations, NVOH has experienced an 
          economic downturn in recent years and is pursuing an avenue 
          to raise funds and support the long-term viability of arts 
          in the Napa community.

          Writing in support, the Napa Valley Opera House states, 
          "the NVOH is in the heart of the Wine country and it's a 
          natural fit for wineries to want to support our 
          programming.  Often the wineries are not in the position to 
          offer financial support, and they choose to donate wine to 
          the NVOH.  This bill would allow the NVOH to sell the 
          donated wine it receives from our local wineries."  
          Tied-house laws restrict the NVOH from selling the donated 
          wine.  The NVOH presents a wide variety of performing arts 
          programming, as well as supporting schools and the local 
          non-profit community by making their theater available for 
          fundraising events and activities.

           ARGUMENTS IN OPPOSITION  :    Writing in opposition of this 
          bill, the California Beer & Beverage Distributors state 
          this exception is contrary to California's Tied-house laws. 
           This bill establishes an exception unlike any other in the 
          ABC Act, and would lead to questionable retailer purchasing 
          decisions.


          DLW:dm  8/22/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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