BILL ANALYSIS �
AB 1812
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Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
AB 1812 (Chesbro) - As Amended: March 27, 2012
SUBJECT : Alcoholic beverages: beer.
SUMMARY : Declares that beer aged in an empty wooden barrel
previously used to contain wine or distilled spirits shall be
defined exclusively as "beer" and shall not be considered a
dilution or mixture of any other alcoholic beverage.
Specifically, this bill :
1) Revises the definition of "beer" for purposes of the
Alcoholic Beverage Control Act (Act) to also provide beer aged
in an empty wooden barrel previously used to contain wine or
distilled spirits shall be defined exclusively as "beer" and
shall not be considered a dilution or mixture of any other
alcoholic beverage.
EXISTING LAW :
1) Establishes the Department of Alcoholic Beverage Control
(ABC) and grants it the exclusive authority to administer the
provisions of the Act in accordance with laws enacted by the
Legislature.
2) Defines "beer" as any alcoholic beverage obtained by the
fermentation of any infusion or decoction of barley, malt, hops,
or any other similar product, or any combination thereof in
water, and includes ale, porter, brown, stout, lager beer, small
beer, and strong beer but does not include sake, known as
Japanese rice wine.
3) Defines "distilled spirits" as an alcoholic beverage
obtained by the distillation of fermented agricultural products
and includes alcohol for beverage use, spirits of wine, whiskey,
rum, brandy, and gin, including all dilutions and mixtures
thereof.
4) Recognizes three types of alcoholic beverages for tax
purposes, namely, distilled spirits, beer, and wine.
FISCAL EFFECT : This bill is keyed fiscal by Legislative
AB 1812
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Counsel.
COMMENTS :
Purpose of the bill : AB 1812 seeks to clarify in Business and
Professions Code Section 23006 that "beer" aged in empty wooden
barrels previously used to contain wine or distilled spirits
will continue to be defined as "beer" in order to protect the
existing regulatory and licensure structure in California.
The California Craft Brewers Association, the sponsor of this
bill are "concerned that current law creates ambiguity on how
wooden barrel-aged craft beers are defined and categorized for
purposes of regulation for licensure of manufacturing,
distribution, and retail sales, as well as, taxation."
The sponsor states that in the last 15 years, California's craft
beer industry has gained worldwide acclaim for their use of
traditional Belgian-style brewing techniques that incorporate
the use of wooden barrels to age craft beers. These empty
wooden barrels are expensive and are recycled by craft brewers
from previous use by the wine or distilled spirits industries.
The sponsor states that "many California craft beers receive
flavor with minute amounts of distilled alcohol from the wood in
this process and because of this it is believed these beers
could be defined as "distilled spirits" upsetting the stability
of existing regulatory and licensure structures." AB 1812 will
provide clarity that beer aged in repurposed wooden barrels will
continue to be defined as beer under B & P Section 23006.
Background :
Alcohol regulation : The enactment of the 21st Amendment to the
U.S. Constitution in 1933 repealed the 18th Amendment and ended
the era of Prohibition. Accordingly, states were granted the
authority to establish alcoholic beverage laws and
administrative structures to regulate the sale and distribution
of alcoholic beverages. In California, this responsibility was
originally entrusted to BOE. In 1955, however, the State
Constitution was amended to shift this responsibility to the
newly established ABC. ABC has the exclusive authority to
administer the provisions of the Alcoholic Beverage Control 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
AB 1812
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this state and the collection of license fees or occupation
taxes for this purpose.
The Board of Equalization (BOE) adopted regulations in 2008 to
address the "alcopop" issue by declaring a rebuttable
presumption that all alcoholic beverages, except for wine, are
to be considered "distilled spirits." The BOE established a
threshold of 0.5% distilled alcohol by volume as the boundary
for manufacturers to rebut the presumption and declare under
penalty of perjury that their products have less than 0.5%
distilled alcohol and are therefore legally considered "beer"
for purposes of taxation. The legal theory used by the BOE to
support their regulation hinged on the broad interpretation of
the words "dilutions and mixtures thereof" within the existing
definition of "distilled spirit."
Under this strict legal interpretation, one could argue that any
amount of alcohol derived from distilled spirits when mixed with
beer would re-classify that alcoholic beverage as a "distilled
spirit." This would apply to even the smallest of amounts that
are far below BOE's arbitrary threshold of 0.5%.
Currently, BOE taxes beer at $0.20 per gallon and distilled
spirits at $3.30 per gallon.
Prior legislation : AB 346 (Beall), Chapter 624, Statutes of
2008. Provides that any container of beer or alcoholic
beverage, other than sake, that is approved for labeling as a
malt beverage under the Federal Alcohol Administration Act
(FAAA), that derives 0.5% or more of its alcoholic content by
volume from flavors or other ingredients containing distilled
alcohol and that is sold within this state on or after July 1,
2009, shall bear a distinctive, conspicuous, and prominently
displayed label, or firmly affixed sticker, as defined.
AB 2013 (Saldana), 2005-06 Session. Would have required all
surtaxes, penalties, and interest, resulting from the
reclassification of an alcoholic beverage from a beer to a
distilled spirit, be transferred to the Youth Alcohol Problem
Prevention Fund. (Held in Assembly G.O. Committee at the
request of the author)
AB 417 (Aghazarian), 2005-06 Session. Would have modified the
definition of beer to include any alcoholic beverage that
qualifies as a malt beverage under federal law. (Vetoed by
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Governor)
REGISTERED SUPPORT / OPPOSITION :
Support
California Craft Brewers Association
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531