Amended in Senate July 16, 2015

Amended in Senate July 13, 2015

Amended in Senate June 30, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1295

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

begin insert

(Principal coauthor: Assembly Member Nazarian)

end insert begin insert

(Coauthor: Assembly Member Dodd)

end insert begin insert

(Coauthors: Senators Hill, Wieckowski, and Wolk)

end insert

February 27, 2015

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.

LEGISLATIVE COUNSEL’S DIGEST

AB 1295, as amended, begin delete Dodd end delete   begin insert Levine end insert . Craft distillers: licenses.

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 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.

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 manufacturer’s or distilled begin insert spirits end insert 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.

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

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

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

SECTION 1.  

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

23363.1.  

(a) A distilled spirits manufacturer’s license or a craft
distiller’s license 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) The total volume of tastings of distilled spirits shall not
exceed one and one-half ounces 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.

(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.

SEC. 2.  

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

 

Article 6.  Craft Distiller’s Licenses

 

23500.  

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

23501.  

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.

23502.  

(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.

23504.  

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.

23506.  

(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)  begin delete A end delete begin insert Notwithstanding any other provision of this division, a end insert
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.

23508.  

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.

SEC. 3.  

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

23771.  

A distilled spirits license of any kind, except a distilled
spirits manufacturer’s, a craft distiller’s, or a distilled spirits
manufacturer’s agent’s license, shall not be issued to any person,
or to any officer, director, employee, or agent of any person that
manufactures distilled spirits within or without this state.

SEC. 4.  

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

23772.  

(a) A distilled spirits manufacturer’s or distilled spirits
manufacturer’s agent’s license shall not be held by any person that
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 craft
distiller’s, distilled spirits wholesaler’s, rectifier’s, or retailer’s
license.

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

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

(2) Club license (issued under Article 4 (commencing at Section
23425) of Chapter 3).

(3) Veterans’ club license (issued under Article 5 (commencing
at Section 23450) of Chapter 3).

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