January 2012

A. FEDERAL / NATIONAL / INTERNATIONAL

Small Brewer Federal Excise Tax Legislation Update

H.R. 1236, the Small Brewer Reinvestment and Expanding Workforce Act (Small BREW Act) introduced by Representatives Jim Gerlach (PA-6) and Richard E. Neal (MA-2), now has 147 co-sponsors.  S.534, companion legislation in the Senate introduced by Senators John Kerry (MA-D) and Mike Crapo (ID-R), has 37 co-sponsors.

H.R. 1236 and S. 534 mirror the provisions contained in last session's H.R. 4278 and S. 3339 which gained the support of 132 U.S. Representatives and 28 Senators respectively. Specifically, the bills would reduce the small brewer rate on the first 60,000 barrels by 50 percent (from $7.00 to $3.50/barrel) and institute a new rate $16.00 per barrel on beer production above 60,000 barrels up to 2 million barrels.  Breweries with an annual production of 6 million barrels or less would qualify for these tax rates.

Tax & Trade Bureau Existence Threatened?

The Office of Management and Budget has asked the Department of the Treasury, parent agency of the Tax & Trade Bureau (TTB), to investigate and report on the feasibility of moving the bureau's tax collection function to the Internal Revenue Service and the regulatory and public safety responsibilities to the Food and Drug Administration, effective in fiscal year 2013.  This would essentially and effectively dismantle the agency.  The Brewers Association believes this would be detrimental to small brewer interests and will be monitoring developments closely.

Changes to Certificate of Label Approval

TTB has opened a public comment period on proposed changes to TTB Form 5100.31, Application for and Certification/Exemption of Label/Bottle Approval, (Certificate of Label Approval, or COLA).  Part of the bureau's efforts to streamline the COLA application and review process, the contemplated changes would affect the application portion of the form, including elimination of the requirement to show wording appearing on caps and seals and other materials firmly affixed to the container.  Other changes affect the conditions of approval and circumstances under which approved labels may be modified without submission of a new COLA.

See the Federal Register notice to learn more details and to comment on the proposed revisions by February 27.

B. THE COURTS

Texas Small Brewer Wins Partial Victory Against State Alcoholic Beverage Commission 

In a decision handed down earlier this week by the U. S. District Court for the Western District of Texas, several provisions of Texas alcohol law have been found to violate the First Amendment of the Constitution.   The court found in favor of Jester King Craft Brewery, one of several parties that filed suit in federal court against the Texas Alcoholic Beverage Commission (TABC), invalidating provisions that do not allow: 1) accurate labeling of a brewery's products (requiring the use of the terms "beer" and "ale" in a manner inconsistent with general industry use); 2) the ability to inform customers of where they can purchase the brewery's products; and 3) the ability to state alcohol content or the use of terms indicative of strength on labels or in advertising.

The provisions challenged in the suit, but left in place following the ruling, include the prohibition on production brewers selling their beer directly to consumers on the brewery premise and the requirement that out of state breweries obtain a separate license in order to sell their products in Texas.

In Jester King's reaction to the ruling, the brewery left the door open to potential future action, stating "...small brewers still face many unjust and unnecessary obstacles that need to be removed before we can stand on equal footing with Texas winemakers and brewers in other states."  Early indications are that the Texas Alcoholic Beverage Commission will not appeal this week's ruling. 

C. THE STATES

Direct Shipping

New Jersey
Passing the Senate and under consideration by House committee, Senate Bill 3172 creates a new out-of-State winery license governing New Jersey direct sales by wineries licensed in other states. Under the bill's provisions, wineries that produce a maximum of 250,000 gallons per year and farm wineries will be permitted to directly sell their products to licensed retailers.

Vermont
Senate Bill 168 proposes to allow retail wine merchants to ship wine in and out of state.

Distribution and Franchise 

New Hampshire
Introduced and sent to the Commerce and Consumer Affairs Committee, House Bill 1411 seeks to establish a committee to study small brewer relationships with distributors.

Trade Practice & Other

Michigan
Recently signed into law, House Bill 5087 removes the 200,000 barrel limit under which a brewery permit holder may sell its beer for on-premises consumption at not more than one location that is on any of its licensed brewery premises and sell to consumers for off-premises consumption where the beer is produced.  Microbrewers already enjoy these privileges.

Nebraska
The Nebraska Liquor Control Commission has made a number of recommendations to the Governor and legislature concerning the regulation of alcohol within the state, among which is increasing the gallonage production cap on microbreweries and brewpubs.  The Commission recommends that the current cap, set in 1988 at 10,000 barrels, should be increased to 20,000 barrels so that these breweries can "compete in the changing marketplace."

New Hampshire
H.B. 1172 authorizes nano brewery licensees to sell their products at farmers' markets.

H. B. 1208 would increase the size of servings that may be consumed on the premises of a nano brewery (from 4 ounces to 16 ounces) and would prohibit the liquor commission from requiring federal label approval for beverages sold exclusively in the state of New Hampshire.

House Bill 1236 allows beverage manufacturers, nano breweries, and brew pubs to obtain up to 5 on-premises licenses.

New Jersey
Passing the legislature and awaiting gubernatorial action, A.B. 4012 eliminates the permit requirement for home production of wine and beer for personal use.

North Carolina
Signed into law by the Governor, House Bill 796  allows all brewery permit holders to sell at retail malt beverages that have been manufactured at the brewery or at another out of state location by the same permittee only on the premises of the brewery.

Ohio
Signed into law by the Governor, House Bill 243 allows beer manufacturer permit holders to offer for sale tasting samples of beer manufactured on the premises. Under the bill, "tasting sample" is defined to mean a small amount of beer that is provided in not more than four servings of not more than two ounces each to an authorized purchaser and that allows the purchaser to determine, by tasting only, the quality and character of the beer.

Pennsylvania
House Bill 11 passed committee, but has not been taken up by the full House for a vote.  Among many provisions, the bill would permit the Pennsylvania Liquor Control Board to extend Sunday store hours for beer distributors from 9 a.m. to 9 p.m., allow them to sell 16-ounce six packs or 16-ounce 12 packs of beer and permit them to sell wine, although it would not allow beer distributors to sell 12-ounce six packs.  Other businesses that hold a liquor license (e.g. bars, supermarkets, delis) would be allowed to sell cases of beer.

Signed into law by the Governor, House Bill 242 provides that a manufacturer may sell malt or brewed beverages produced and owned by the manufacturer to individuals on the licensed premises for consumption on the licensed premises where sold if it complies with the conditions and regulations placed upon holders of brewery licenses. A manufacturer also may sell any malt or brewed beverages produced and owned by the manufacturer to individuals on the licensed premises for consumption off the licensed premises in containers or packages of unlimited quantity and of any volume.

Amended and passed out of committee, Senate Resolution 216 directs the Budget and Finance Committee to conduct an economic impact study of the brewery industry in the Commonwealth.

Washington
Opponents of the recently passed ballot initiative I-1183 have filed suit to block implementation of its provisions.  The measure closes state liquor stores, selling those assets, with the state licensing private parties to distribute spirits and to sell spirits in retail stores meeting certain criteria.  The measure establishes licensing fees for the sale and distribution of spirits based on the licensee's sales revenues. It also changes some wine distribution laws and allows non-uniform wholesale pricing for wine and spirits.  Although a preliminary injunction to stop implementation was denied, the court challenge remains active.

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