BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1554


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1554 (Irwin)


          As Amended  June 29, 2016


          Majority vote


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          |ASSEMBLY:  |76-0  |(April 28,     |SENATE: | 39-0 |(August 16,      |
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          Original Committee Reference:  G.O.


          SUMMARY:  Prohibits the Department of Alcoholic Beverage Control  
          (ABC) from issuing a license to manufacture, distribute, or sell  
          powdered alcohol, as defined.  Specifically, this bill:


          1)Prohibits ABC from issuing a license to manufacture,  
          distribute, or sell powdered alcohol. 


          2)Defines "powdered alcohol" to mean an alcohol prepared or sold  
          in a powder or crystalline form that is used for human  
          consumption in that form or reconstituted as an alcoholic  
          beverage when mixed with water or any other liquid. 


          3)Prohibits the possession, purchase, sell, offer for sale,  
          distribution, manufacture, or use of powdered alcohol. 









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          4)Specifies that any person who possesses, purchases, or uses  
          powdered alcohol is guilty of an infraction and subject to a  
          fine of $125.


          The Senate amendments:


          1)Remove a provision requiring ABC to revoke or suspend any  
            license if the licensee or the agent or employee of the  
            licensee manufacturers, distributes, or offers for retail sale  
            powdered alcohol. 


          2)Remove a provision that specifies that any person who sells,  
            offers for sale, manufacturers, or distributes powdered  
            alcohol is guilty of an infraction that shall be punishable by  
            a fine of not more than $500. 


          3)Make technical and clarifying changes.


          EXISTING LAW:  


          1)Federal Law grants states the authority to establish alcoholic  
            beverage laws and administrative structures to regulate the  
            sale and distribution of alcoholic beverages. 


          2)Establishes the Alcoholic Beverage Control Act (Act) which  
            contains various provisions regulating the application for,  
            the issuance of, the suspension of, and the conditions imposed  
            upon, alcoholic beverage licenses by ABC.


          3)Imposes regulations on the sale of alcoholic beverages and  
            creates penalties for violations of those regulations.










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          4)Grants ABC exclusive authority to administer the provisions of  
            the Act. 


          5)Establishes three types of alcoholic beverages for tax  
            purposes, namely, distilled spirits, beer and wine. 


          6)Stipulates that any person who sells or offers for sale any  
            vaporized form of alcohol produced by an alcohol vaporizing  
            device shall be guilty of a misdemeanor punishable by a $1,000  
            fine or imprisonment in a county jail for up to six months.   
            Provides that any person who purchases or uses any vaporized  
            form of alcohol produced by an alcohol vaporizing device is  
            subject to a fine of $250.


          7)Prohibits the use in any advertisement of alcoholic beverages,  
            of any subject matter, language or slogans addressed to and  
            intended to encourage minors to drink alcoholic beverages.


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


          COMMENTS:  This bill, as amended in the Senate is consistent  
          with Assembly actions.


          Purpose of the bill.  According to the author, "powdered alcohol  
          provides everyone, but especially children, a new way to drink  
          and experiment with alcohol.  The odorless, easily concealable  
          white powder can turn any water bottle into vodka, or increase  
          liquor's alcohol content to higher and dangerous levels.  With  
          the risks and harms traditional liquid alcohol already present  
          to children, allowing another path to those distressing outcomes  
          is unacceptable."


          Powdered alcohol.  As the name suggests, powdered alcohol is  
          powder that when mixed with water or any other liquid becomes an  








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          alcoholic beverage.  Small amounts of liquid alcohol are  
          enclosed in cyclodextrins, which are literally small rings of  
          sugar.  Once water or any other liquid is added the sugar  
          dissolves and the alcohol is freed into the drink.  Powdered  
          alcohol gained media attention in the United States when in  
          April 2014 the U.S. Alcohol and Tobacco Tax and Trade Bureau  
          (TTB) approved labels for a product called Palcohol.  


          Proponents of powdered alcohol have touted its lightweight and  
          its ease to transport as some of the benefits of powdered  
          alcohol compared to liquid alcohol.  


          Critics of powdered alcohol argue that powdered alcohol will be  
          much easier to over consume, conceal and be acquired by minors.   
          Critics point to the ability to add powdered alcohol to liquid  
          alcohol to produce a greater concentration than intended.  In  
          addition, critics point to the ease in which people, including  
          youths, could bring alcohol to places where it is banned; such  
          as sporting events, movie theaters, parks, and schools. 


          Powdered Alcohol Authorization.  Though the TTB approved the  
          Palcohol labels in April of 2014, within two weeks the TTB  
          issued a statement stating that the approval had been issued in  
          error.  However, in March 2015, the TTB again approved four  
          powdered alcohol products with the brand name "Palcohol" for  
          sale in the United States (U.S).  


          Shortly after TTB approval, the U.S. Food and Drug  
          Administration (FDA) responded to inaccurate reports that  
          implied that the FDA had approved powdered alcohol as being  
          safe.  Rather, the FDA clarified that its role was to evaluate  
          the nonalcoholic ingredients.  Based on that evaluation, the FDA  
          stated, "The use of ingredients in the proposed products was in  
          compliance with FDA's regulations.  The agency notes that the  
          ingredients used in the products are typical of ingredients  
          found in many processed foods."  The FDA concluded that they had  
          no legal basis to block their entry into the U.S. market. 









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          However, individual states, not the TTB, are responsible for  
          regulating the sale of alcohol and tobacco products at the  
          retail level, including sales to minors.  As of November 2015,  
          27 states have banned powdered alcohol outright.  Two states,  
          Maryland and Minnesota have a one-year temporary statutory ban.   
          Three states, Colorado, Delaware, and New Mexico have added  
          powdered alcohol in their statutory definitions of alcohol so  
          that the product can be regulated under existing alcohol  
          regulations.  


          As of today, powdered alcohol is not being sold anywhere in the  
          United States, though the Palcohol Web site does state that the  
          product will be available, "as soon as we can."


          In support. According to the California Alcohol Policy Alliance,  
          "powdered alcohol is perhaps the most dangerous, youth  
          attractive alcohol product allowed in the market.  We cannot  
          ignore the dangers the product poses to underage drinkers.  If  
          this product hits the California market, serious injuries,  
          alcohol poisonings, and even deaths will result."


          The Health Officer's Association of California states that,  
          "mixing powdered alcohol with smaller amounts of water than  
          directed will result in extremely potent beverages.  In its  
          powdered and compact form, this product will be easy to conceal  
          and bring to areas where alcohol is prohibited, such as schools;  
          or where alcohol is sold and regulated, such as cultural events.  
           When alcohol is for sale at an event or location, retailers are  
          required to monitor customers' intake to prevent over  
          intoxication.  This becomes much more difficult when customers  
          can bring their own alcohol in powdered form."


          In opposition.  Palcohol claims that, "Palcohol is a  
          revolutionary new product that offers so many innovative  
          solutions in medicine, recreation, travel, energy, aviation,  
          pharmaceuticals, the military, food production, manufacturing  
          and many more.  In addition, because Palcohol is so much lighter  








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          to ship than liquid alcohol, it will reduce the carbon  
          footprint."


          In addition, Palcohol argues that, "a ban will be a double  
          whammy financially.  The state will have to spend money to  
          enforce the ban and on top of that, the government won't realize  
          the significant tax revenue from the legal sales of powdered  
          alcohol so it's fiscally irresponsible to ban powdered alcohol."


          Prior/Related Legislation. SB 819 (Huff) of the current  
          legislative session prohibits ABC from issuing a license to  
          manufacture, distribute, or sell powdered alcohol, as defined,  
          and requires ABC to revoke the license of any licensee who  
          manufactures, distributes, or sells powdered alcohol, as  
          provided.  (Pending on the Assembly Floor)


          SB 39 (Padilla), Chapter 140, Statutes of 2011, prohibited the  
          importation, production, manufacture, distribution, or sale of  
          beer to which caffeine has been directly added as a separate  
          ingredient at retail locations in California, as defined.


          Analysis Prepared by:                                             
                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0003852