Amended in Senate July 13, 2015

Amended in Senate June 30, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1295

Introduced by begin delete Assembly Member Gray end delete begin insert Assembly Members Dodd, Gray, and Levine end insert

February 27, 2015

begin delete An act to amend Sections 19596.2 and 19604 of the Business and Professions Code, relating to horse racing. end delete begin insert An act to amend Sections 23363.1, 23771, and 23772, of, and to add Article 6 (commencing with Section 23500) to Chapter 3 of Division 9 of, the Business and Professions Code, relating to alcoholic beverages end insert begin insert . end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 1295, as amended, begin delete Gray end delete   begin insert Dodd end insert . begin delete Horse racing: out-of-state thoroughbred races: advance deposit wagering. end delete begin insert Craft distillers: licenses. end insert

begin insert

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.

end insert begin insert

This bill, the Craft Distillers Act of 2015, would authorize the department to issue a craft distiller’s 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 distiller’s 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.

end insert begin insert

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.

end insert begin insert

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.

end insert begin insert

Existing law prohibits a distilled spirits manufacturer’s or distilled manufacturer’s agent’s license from being held by a person that holds any ownership or interest in any distilled spirits wholesaler’s, rectifier’s, or retailer’s license, as specified.

end insert begin insert

This bill would additionally prohibit a distilled spirits manufacturer’s or distilled manufacturer’s agent’s license from being held by a person that holds any ownership or interest in a craft distiller’s license.

end insert begin delete

(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.

end delete begin delete

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.

end delete begin delete

(2) The Horse Racing Law authorizes advance deposit wagering to be conducted, with the approval of the California Horse Racing Board. That law requires the board to develop and adopt rules to license and regulate all phases of operation of advance deposit wagering for advance deposit wagering providers operating in California and authorizes a racing association, a fair, a satellite wagering facility, or a minisatellite wagering facility to enter into an agreement with an advance deposit wagering provider to accept and facilitate the placement of any wager at its facility that a California resident could make through that advance deposit wagering provider.

end delete begin delete

The Horse Racing Law also requires that amounts distributed under these advance deposit wagering provisions be proportionally reduced by an amount equal to 0.00295 multiplied by the amount handled on advance deposit wagers originating in California for each racing meeting, except for harness racing meetings, provided that the amount of this reduction not exceed $2,000,000. That law requires that the method used to calculate the reduction in proportionate share be approved by the board and deducted and distributed in specified amounts, including 50% of the money to the board to establish and to administer jointly with the organization certified as the majority representative of California-licensed jockeys, a defined contribution retirement plan for California-licensed jockeys who retired from racing on or after January 1, 2009.

end delete begin delete

This bill would provide that a person becomes a participant in the retirement plan when he or she is licensed as a jockey in California.

end delete

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 23363.1 of the end insert begin insert Business and Professions
Code end insert begin insert is amended to read: end insert

23363.1.  

(a) A distilled spirits manufacturer’s license begin insert or a
craft distiller’s license end insert authorizes the licensee to conduct tastings
of distilled spirits produced or bottled by, or produced or bottled
for, the licensee, on or off the licensee’s premises.

(b) (1) Distilled spirits tastings may be conducted by the
licensee off the licensee’s premises only for an event sponsored
by a nonprofit organization. A distilled spirits manufacturer shall
not sell or solicit sales of distilled spirits at such event. The
sponsoring organization shall first obtain a permit from the
department.

(2) For purposes of this subdivision, “nonprofit organization”
does not include any community college or other institution of
higher learning, as defined in the Education Code, nor does it
include any officially recognized club, fraternity, or sorority,
whether or not that entity is located on or off the institution’s
campus.

(c) Tastings on the licensee’s premises shall be subject to the
following conditions:

(1)  begin delete Tastings end delete begin insert The total volume end insert of begin insert tastings of end insert distilled spirits shall
not exceed begin delete one-fourth of end delete one begin delete ounce end delete and begin delete shall be limited to no more
than six tastes end delete begin insert one-half ounces end insert per individual per day.

(2) Tastings shall only include the products that are authorized
to be produced or bottled by or for the licensee.

(3) A person under 21 years of age shall not serve tastes of
distilled spirits.

begin delete end delete begin delete

(4) Tastings of distilled spirits shall not be given in the form of
a cocktail or a mixed drink.

end delete begin delete end delete

(d) Notwithstanding Section 25600, the licensee may provide
distilled spirits without charge for any tastings conducted pursuant
to this section. The licensee may charge for tastings conducted by
the licensee on its licensed premises.

(e) This section shall not relieve the holder of a distilled spirits
manufacturer’s license of any civil or criminal liability arising out
of a violation of Section 25602.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Article 6 (commencing with Section 23500) is added
to Chapter 3 of Division 9 of the end insert begin insert Business and Professions Code end insert begin insert ,
to read: end insert

begin insert

 

Article begin insert 6. end insert   Craft Distiller’s Licenses

 

begin insert 23500. end insert   

This act shall be known, and may be referenced as, the
Craft Distillers Act of 2015.

begin insert 23501. end insert   

The Legislature hereby finds and declares all of the
following:

(a) The regulation and licensing of the sale of alcoholic
beverages in this state has operated for over 80 years under what
is commonly referred to as the “three-tier system,” which generally
prohibits vertical integration within the distilled spirits industry.
This system has helped in protecting against undue marketing
influences within the distilled spirits industry and assisted the
goals of promoting temperance and reasonable regulation of the
sale of distilled spirits within the state. In addition, this system has
helped create thousands of jobs and billions of dollars in economic
development within California.

(b) Small craft distillers have begun to operate in this state, and
these craft distillers have begun to increase employment and
provide jobs and economic development in various locations within
the state.

(c) It is the intent of the Legislature, in enacting this act, to
encourage the development of the craft distilling industry within
the state 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.

begin insert 23502. end insert   

(a) The department may 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 distilled spirits. A licensed craft
distiller may manufacture, or have manufactured for them, up to
100,000 gallons of distilled spirits per year, excluding brandy the
craft distiller manufactures or has manufactured for them pursuant
to a brandy manufacturer license.

(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 without the
state.

(4) Deal in warehouse receipts.

(b) A craft distiller’s license shall not be issued 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 without 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.

(c) (1) The fee for an original craft distiller’s license issued
pursuant to this section shall be six hundred dollars ($600) and
shall be adjusted pursuant to subdivisions (b) and (c) of Section
23320.

(2) The annual license fee for a craft distiller’s license shall be
three hundred dollars ($300) and shall be adjusted pursuant to
subdivisions (b) and (c) of Section 23320.

(3) All moneys collected as fees pursuant to this section shall
be deposited in the Alcohol Beverage Control Fund as provided
in Section 25761.

(d) A licensed craft distiller shall report to the department at
the end of each fiscal year, at the time and in the manner
prescribed by the department, the amount of distilled spirits
produced by or for the licensee, excluding brandy produced by or
for the licensee pursuant to a brandy manufacturer license, during
the previous fiscal year.

begin insert 23504. end insert   

Notwithstanding any other provision, a licensed craft
distiller may sell up to the equivalent of three 750-ml bottles per
day of distilled spirits manufactured by the licensee at its premises
to a consumer attending an instructional tasting conducted by the
licensee on its licensed premises pursuant to subdivision (c) of
Section 23363.1.

begin insert 23506. end insert   

(a) Notwithstanding any other provision of this division,
a licensed craft distiller or one or more of its direct or indirect
subsidiaries of which the licensed craft distiller owns not less than
a 51-percent interest, who manufactures or produces, bottles,
processes, imports, or sells distilled spirits under a craft distiller’s
license or any other license issued pursuant to this division, or
any officer or director of, or any person holding any interest in,
those persons may serve as an officer or director of, and may hold
the ownership of any interest or any financial or representative
relationship in, any on-sale license, or the business conducted
under that license, provided that, except in the case of a holder of
on-sale general licenses for airplanes and duplicate on-sale
general licenses for air common carriers, all of the following
conditions are met:

(1) The on-sale licensee purchases all alcoholic beverages sold
and served only from California wholesale licensees.

(2) The number of distilled spirits items by brand offered for
sale by the on-sale licensee that are manufactured, produced,
bottled, processed, imported, or sold by the licensed craft distiller
or by the subsidiary of which the licensed craft distiller owns not
less than 51 percent, or by any officer or director of, or by any
person holding any interest in, those persons does not exceed 15
percent of the total distilled spirits items by brand listed and offered
for sale by the on-sale licensee selling and serving that distilled
spirit. Notwithstanding paragraph (1), distilled spirits sold
pursuant to this provision may be purchased from a California
licensed craft distiller so long as the distilled spirits purchased
are produced or bottled by, or produced and packaged for, the
same licensed craft distiller that holds an interest in the on-sale
license and such direct sales do not involve more than two on-sale
licenses in which the licensed craft distiller or any person holding
an interest in the licensed craft distiller holds any interest, directly
or indirectly, either individually or in combination or together
with each other in the aggregate.

(3) None of the persons specified in this section may have any
of the interests specified in this section in more than two on-sale
licenses.

(b) A licensed craft distiller that has an interest in one or more
on-sale retail licenses pursuant to this section 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 Section 23502.

(c) A craft distiller licensee may sell all beers, wines, brandies,
or distilled spirits to consumers for consumption on the premises
in a bona fide eating place as defined in Section 23038, which is
located on the licensed premises or on premises owned by the
licensee that are contiguous licensed premises and which is
operated by and for the licensee, provided that any alcoholic
beverage products not manufactured or produced by the licensee
must be purchased from a licensed wholesaler. Beer, wine, and
brandy may be used in the preparation of food and beverages in
the bona fide public eating place for consumption on the premises.

begin insert 23508. end insert   

A licensed craft distiller may also have upon its licensed
premises all beers, wines, and distilled spirits, regardless of source,
for sale or service only to guests during private events or private
functions not open to the general public. Alcoholic beverage
products sold at the premises that are not manufactured or
produced and bottled by, or manufactured or produced and
packaged for, the licensed craft distiller shall be purchased by the
licensed craft distiller only from a licensed wholesaler.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 23771 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

23771.  

begin delete No end delete begin insert A end insert distilled spirits license of any kind, except a
distilled spirits begin delete manufacturer’s end delete begin insert manufacturer’s, a craft distiller’s, end insert
or a distilled spirits manufacturer’s agent’s license, shall begin insert not end insert be
issued to any person, or to any officer, director, employee, or agent
of any begin delete person, who end delete begin insert person that end insert manufactures distilled spirits within
or without this begin delete State. end delete begin insert state. end insert

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 23772 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

23772.  

begin delete No end delete begin insert (a) end insert begin insert   end insert begin insert A end insert distilled spirits manufacturer’s or distilled
spirits manufacturer’s agent’s license shall begin insert not end insert be held by any
person begin delete who end delete begin insert that end insert holds any ownership or interest, directly or
indirectly, by stock ownership, interlocking directors, trusteeship,
loan, mortgage, or lien on any personal or real property, or
otherwise, in any begin insert craft distiller’s, end insert distilled spirits begin delete wholesaler's,
rectifier's, end delete begin insert wholesaler’s, rectifier’s, end insert or retailer’s license.

begin delete

The

end delete

begin insert (b) end insert begin insert   end insert begin insert The end insert provisions of this section shall not apply to the financial
or representative relationship between a manufacturer, begin delete wine grower, end delete
begin insert winegrower, end insert manufacturer’s agent, rectifier, distiller, bottler,
importer, or wholesaler, or any officer, director, or agent of begin delete such end delete
begin insert that end insert person, and a person holding only one of the following types
of licenses:

begin delete

(a)

end delete

begin insert (1) end insert  On-sale general license for a bona fide club.

begin delete

(b)

end delete

begin insert (2) end insert  Club license (issued under Article 4 (commencing at Section
23425) of Chapter begin delete 3 of this division). end delete begin insert 3). end insert

begin delete

(c)

end delete

begin insert (3) end insert  Veterans’ club license (issued under Article 5 (commencing
at Section 23450) of Chapter begin delete 3 of this division). end delete begin insert 3). end insert

begin delete

(d)

end delete

begin insert (4) end insert  On-sale license for boats, trains, sleeping begin delete cars end delete begin insert cars, end insert or
airplanes where the alcoholic beverages produced or sold by begin delete such end delete
begin insert the end insert manufacturer, begin delete wine grower, end delete begin insert winegrower, end insert manufacturer’s agent,
rectifier, bottler, importer, or wholesaler or any officer, director,
or agent of begin delete such end delete begin insert that end insert person are not sold, begin delete furnished end delete begin insert furnished, end insert or
given, directly or begin delete indirectly end delete begin insert indirectly, end insert to the on-sale licensee.

All matter omitted in this version of the bill appears in the bill as amended in the Senate, June 30, 2015. (JR11)