BILL ANALYSIS �
SB 1531
Page 1
Date of Hearing: June 28, 2012
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 1531 (Wolk) - As Amended: June 20, 2012
SENATE VOTE : 39-0
SUBJECT : Alcoholic beverages: tied-house restrictions: opera
houses.
SUMMARY : Would allow donations of wine by winegrowers within
the County of Napa to an opera house in Napa County, under
specified conditions. Specifically, this bill :
1) Provides that a holder of a winegrower's license whose
licensed premises of production are located within the 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 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.
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2) Contains language (legislative findings and declarations)
relative to the necessity of requiring a separation between
manufacturing interests, wholesale interests and retail
interests.
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 (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
SB 1531
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association's retail on-sale license, as specified.
FISCAL EFFECT : Unknown.
COMMENTS :
Purpose of the bill : According to the author, 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.
Background : Under existing provisions of the ABC Act, alcoholic
beverage manufacturers are prohibited, in general, 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 (Tied-House Law). This prohibition
exists as part of California's long standing three-tier policy
of alcoholic beverage laws that will not allow a particular
entity (manufacturer) to give something of value to a member of
another tier (retailer).
Various exceptions to this restriction have been enacted through
the years in specific instances where the Legislature determined
that the public's interests were protected. However, the
Legislature traditionally does not grant exemptions that favors
the products of the entity seeking the exemption, or exemptions
that unfairly compromise the role of the distributors.
In support : 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.
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In opposition : Writing in opposition of this measure, the
California Beer & Beverage Distributors state this exception is
contrary to California's Tied-house laws. SB 1531 would
establish an exception unlike any other in the ABC Act, and
would lead to questionable retailer purchasing decisions.
Policy consideration : In order to stay consistent with past
Tied-house exemptions relating to donating alcohol products to
non-profit organizations, as defined and SB 131 (Wiggins) of
2009, the author should consider amending the bill to do the
following: 1) no donation of wine shall be used on the premises
or for the benefit of the opera house association's retail
on-sale license i.e., strike the provision which allows the
on-sale retail licensee to sell the donated wine at the
location; 2) the donated wine may be used or sold in connection
with fundraising events conducted by the non-profit opera house
licensee off the licensed premises; and 3) add a five-year
sunset date.
Prior legislation : SB 131 (Wiggins), Chapter 638, Statutes of
2009. Granted 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, as defined, and under
specified conditions.
SB 1022 (Strickland), Chapter 281, Statutes of 2010. The bill
enabled licensed distilled spirits "rectifiers" to donate or
sell their products to specified nonprofit entities for the
purpose of assisting in fund-raising efforts.
SB 1273 (Wiggins) 2009-10 Session. Would have allowed
winegrowers to sell bottled wine at certain events held by
qualified nonprofit organizations, if approved by ABC. (Died -
Not heard by the Senate Governmental Organization Committee)
AB 323 (Evans) Chapter 131, Statutes of 2007. Made
modifications to the ABC Act to enable custom crush wine
producers (boutique wineries) to donate and pour their wine at
winetasting events conducted by nonprofit organizations.
SB 88 (Chesbro) Chapter 588, Statutes of 2003. Permits ABC to
issue a wine sales event permit authorizing a winegrower
to sell bottled wine that is produced by the winegrower at an
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event held by a specific tax-exempt organization for not more
than five consecutive days at an approved event.
REGISTERED SUPPORT / OPPOSITION :
Support
Napa Valley Opera House
Opposition
California Beer & Beverage Distributors
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531