Amended in Senate September 4, 2015

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 BillNo. 1295


Introduced by Assembly Members Levine,begin delete Gray,end deletebegin insert end insertbegin insertAchadjian, Bloom, Chang, Dahle, Daly,end insert Eggman,begin delete and Jonesend deletebegin insert Beth Gaines, Cristina Garcia, Gomez, Gordon, Gray, Roger end insertbegin insertHernández, Jones, Jones-Sawyer, Nazarian, Perea, and Quirkend insert

begin delete

(Principal coauthor: Assembly Member Nazarian)

end delete
begin delete

(Coauthor: Assembly Member Dodd)

end delete
begin insert

(Coauthors: Assembly Members Bigelow, Chávez, Dodd, Gallagher, Maienschein, McCarty, and Mark Stone)

end insert

(Coauthors: Senatorsbegin insert Hancock,end insert Hill, Wieckowski, and Wolk)

February 27, 2015


An act to amend Sections 23363.1, 23771, andbegin delete 23772,end deletebegin insert 23772end insert 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, Levine. 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 manufacturebegin delete or produceend delete distilled spirits, subject to specified conditions, including that the licensee manufacturebegin delete or produceend delete no more than 100,000 gallons of distilled spirits perbegin insert fiscalend insert 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 spirits 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 spirits 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:

P2    1

SECTION 1.  

Section 23363.1 of the Business and Professions
2Code
is amended to read:

3

23363.1.  

(a) A distilled spirits manufacturer’s license or a craft
4distiller’s license authorizes the licensee to conduct tastings of
5distilled spirits produced or bottled by, or produced or bottled for,
6the licensee, on or off the licensee’s premises.

P3    1(b) (1) Distilled spirits tastings may be conducted by the
2licensee off the licensee’s premises only for an event sponsored
3by a nonprofit organization. A distilled spirits manufacturer shall
4not sell or solicit sales of distilled spirits atbegin delete suchend deletebegin insert anend insert event. The
5sponsoring organization shall first obtain a permit from the
6department.

7(2) For purposes of this subdivision, “nonprofit organization”
8does not include any community college or other institution of
9higher learning, as defined in the Education Code, nor does it
10include any officially recognized club, fraternity, or sorority,
11whether or not that entity is located on or off the institution’s
12campus.

13(c) Tastings on the licensee’s premises shall be subject to the
14following conditions:

15(1) The total volume of tastings of distilled spirits shall not
16exceed one and one-half ounces per individual per day.

17(2) Tastings shall only include the products that are authorized
18to be produced or bottled by or for the licensee.

19(3) A person under 21 years of age shall not serve tastes of
20distilled spirits.

21(d) Notwithstanding Section 25600, the licensee may provide
22distilled spirits without charge for any tastings conducted pursuant
23to this section. The licensee may charge for tastings conducted by
24the licensee on its licensed premises.

25(e) This section shall not relieve the holder of a distilled spirits
26manufacturer’s license of any civil or criminal liability arising out
27of a violation of Section 25602.

28

SEC. 2.  

Article 6 (commencing with Section 23500) is added
29to Chapter 3 of Division 9 of the Business and Professions Code,
30to read:

31 

32Article 6.  Craft Distiller’s Licenses
33

 

34

23500.  

This act shall be known, and may be referenced as, the
35Craft Distillers Act of 2015.

36

23501.  

The Legislature hereby finds and declares all of the
37following:

38(a) The regulation and licensing of the sale of alcoholic
39beverages in this state has operated for over 80 years under what
40is commonly referred to as the “three-tier system,” which generally
P4    1prohibits vertical integration within the distilled spirits industry.
2This system has helped in protecting against undue marketing
3influences within the distilled spirits industry and assisted the goals
4of promoting temperance and reasonable regulation of the sale of
5distilled spirits within the state. In addition, this system has helped
6create thousands of jobs and billions of dollars in economic
7development within California.

8(b) Small craft distillers have begun to operate in this state, and
9these craft distillers have begun to increase employment and
10provide jobs and economic development in various locations within
11the state.

12(c) It is the intent of the Legislature, in enacting this act, to
13encourage the development of the craft distilling industry within
14the state by enacting various limited exemptions to the general
15provisions of the three-tier system, while also continuing to uphold
16and support the three-tier system as the appropriate mechanism
17for regulating and licensing the sale of distilled spirits in California.

18

23502.  

(a) The department may issue a craft distiller’s license
19to a person that has facilities and equipment for the purposes of,
20and is engaged in, the commercial manufacture of distilled spirits.
21The craft distiller’s license authorizes the licensee to do all of the
22following:

23(1) Manufacturebegin delete or produceend delete distilled spirits. A licensed craft
24distiller maybegin delete manufacture, or have manufactured for them,end delete
25begin insert manufactureend insert up to 100,000 gallons of distilled spirits perbegin delete year,end delete
26begin insert fiscal year (July 1 through June 30),end insert excluding brandy the craft
27distiller manufactures or has manufactured for them pursuant to a
28brandy manufacturerbegin insert license, as reported to the department in the
29manner prescribed by the department for the fiscal year prior to
30the date of submitting an application for theend insert
license.

31(2) Package, rectify, mix, flavor, color, label, and exportbegin insert only
32thoseend insert
distilledbegin delete spirits, whetherend deletebegin insert spiritsend insert manufacturedbegin delete or producedend delete
33 by thebegin delete licensee or any other person.end deletebegin insert licensee.end insert

34(3) Only sell distilled spirits that arebegin insert manufactured andend insert packaged
35bybegin delete or forend delete the licensee solely to a wholesaler, manufacturer,
36winegrower, manufacturer’s agent, or rectifier that holds a license
37authorizing the sale of distilled spirits or to persons that take
38delivery of those distilled spirits within this state for delivery or
39use without the state.

40(4) Deal in warehouse receipts.

P5    1(b) A craft distiller’s license shall not be issued to any person,
2any officer, director, employee, or agent of such person, or any
3person who is affiliated with, directly or indirectly, a person that
4manufactures or has manufactured for them more than 100,000
5gallons of distilled spirits per year within or without the state,
6excluding brandy it manufactures or has manufactured for them
7pursuant to a brandy manufacturer license, or to any person that
8is affiliated with, directly or indirectly, a wholesaler.

9(c) (1) The fee for an original craft distiller’s license issued
10pursuant to this section shall bebegin delete six hundred dollars ($600)end deletebegin insert end insert
11begin insert consistent with the distilled spirits manufacturer’s licenseend insert and
12shall be adjusted pursuant to subdivisions (b) and (c) of Section
1323320.

14(2) The annual license fee for a craft distiller’s license shall be
15begin delete three hundred dollars ($300)end deletebegin insert consistent with the distilled spirits
16manufacturer’s licenseend insert
and shall be adjusted pursuant to
17subdivisions (b) and (c) of Section 23320.

18(3) All moneys collected as fees pursuant to this section shall
19be deposited in the Alcohol Beverage Control Fund as provided
20in Section 25761.

21(d) A licensed craft distiller shall report to thebegin delete department at the
22end of each fiscal year,end delete
begin insert department,end insert at the timebegin delete andend deletebegin insert of renewalend insert in
23the manner prescribed by the department, the amount of distilled
24spiritsbegin delete produced by or for the licensee,end deletebegin insert manufactured,end insert excluding
25brandybegin delete producedend deletebegin insert manufacturedend insert by or for the licensee pursuant to
26a brandy manufacturer license, during the previous fiscal year.begin insert If
27the report to the department establishes that the licensee no longer
28qualifies to hold a craft distiller’s license, the department shall
29renew the license as a distilled spirits manufacturer’s license.end insert

30

23504.  

Notwithstanding any other provision, a licensed craft
31distiller may sell up to the equivalent ofbegin delete three 750-ml bottlesend deletebegin insert 2.25
32liters in any combination of prepackaged containersend insert
per daybegin insert per
33consumerend insert
of distilled spirits manufactured by the licensee at its
34premises to a consumer attending an instructional tasting conducted
35by the licensee on its licensed premises pursuant to subdivision
36(c) of Section 23363.1.

37

23506.  

(a) Notwithstanding any other provision of this
38division, a licensed craft distiller or one or more of its direct or
39indirect subsidiaries of which the licensed craft distiller owns not
40less than a 51-percent interest, who manufactures or produces,
P6    1bottles, processes, imports, or sells distilled spirits under a craft
2distiller’s license or any other license issued pursuant to this
3division, or any officer or director of, or any person holding any
4interest in, those persons may serve as an officer or director of,
5and may hold the ownership of any interest or any financial or
6representative relationship in, any on-sale license, or the business
7conducted under that license, provided that, except in the case of
8a holder of on-sale general licenses for airplanes and duplicate
9on-sale general licenses for air common carriers, all of the
10following conditions are met:

11(1) The on-sale licensee purchases all alcoholic beverages sold
12and served only from California wholesale licensees.

13(2) The number of distilled spirits items by brand offered for
14sale by the on-sale licensee that are manufactured, produced,
15bottled, processed, imported, or sold by the licensed craft distiller
16or by the subsidiary of which the licensed craft distiller owns not
17less than 51 percent, or by any officer or director of, or by any
18person holding any interest in, those persons does not exceed 15
19percent of the total distilled spirits items by brand listed and offered
20for sale by the on-sale licensee selling and serving that distilled
21spirit. Notwithstanding paragraph (1), distilled spirits sold pursuant
22to this provision may be purchased from a California licensed craft
23distiller so long as the distilled spirits purchased are produced or
24bottled by, or produced and packaged for, the same licensed craft
25distiller that holds an interest in the on-sale license and such direct
26sales do not involve more than two on-sale licenses in which the
27licensed craft distiller or any person holding an interest in the
28licensed craft distiller holds any interest, directly or indirectly,
29either individually or in combination or together with each other
30in the aggregate.

31(3) None of the persons specified in this section may have any
32of the interests specified in this section in more than two on-sale
33licenses.

34(b) Notwithstanding any other provision of this division, a
35licensed craft distiller that has an interest in one or more on-sale
36retail licenses pursuant to this section may continue to hold that
37interest in the event the licensee no longer qualifies as a craft
38distiller, provided that the interest was first obtained at a time when
39the licensee did hold a craft distiller’s license pursuant to Section
4023502.

P7    1(c) A craft distiller licensee may sell all beers, wines, brandies,
2or distilled spirits to consumers for consumption on the premises
3in a bona fide eating place as defined in Section 23038, which is
4located on the licensed premises or on premises owned by the
5licensee that are contiguous licensed premises and which is
6operated by and for the licensee, provided that any alcoholic
7beverage products not manufactured or produced by the licensee
8must be purchased from a licensed wholesaler. Beer, wine, and
9brandy may be used in the preparation of food and beverages in
10the bona fide public eating place for consumption on the premises.

11

23508.  

begin insert(a)end insertbegin insertend insertA licensed craft distiller may also have upon its
12licensed premises all beers, wines, and distilled spirits, regardless
13of source, for sale or service only to guests during private events
14or private functions not open to the general public. Alcoholic
15beverage products sold at the premises that are not manufactured
16or produced and bottled by, or manufactured or produced and
17packaged for, the licensed craft distiller shall be purchased by the
18licensed craft distiller only from a licensed wholesaler.

begin insert

19(b) Notwithstanding any other provision of this division, in the
20event that the licensee no longer qualifies as a craft distiller due
21to the amount of distilled spirits reported pursuant to Section
2223502, the licensee may continue to hold the privileges granted
23by this section.

end insert
24

SEC. 3.  

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

26

23771.  

A distilled spirits license of any kind, except a distilled
27spirits manufacturer’s, a craft distiller’s, or a distilled spirits
28manufacturer’s agent’s license, shall not be issued to any person,
29or to any officer, director, employee, or agent of any person that
30manufactures distilled spirits within or without this state.

31

SEC. 4.  

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

33

23772.  

(a) A distilled spirits manufacturer’s or distilled spirits
34manufacturer’s agent’s license shall not be held by any person that
35holds any ownership or interest, directly or indirectly, by stock
36ownership, interlocking directors, trusteeship, loan, mortgage, or
37lien on any personal or real property, or otherwise, in any craft
38distiller’s, distilled spirits wholesaler’s, rectifier’s, or retailer’s
39license.

P8    1(b) The provisions of this section shall not apply to the financial
2or representative relationship between a manufacturer, winegrower,
3manufacturer’s agent, rectifier, distiller, bottler, importer, or
4wholesaler, or any officer, director, or agent of that person, and a
5person holding only one of the following types of licenses:

6(1) On-sale general license for a bona fide club.

7(2) Club license (issued under Article 4 (commencing at Section
823425) of Chapter 3).

9(3) Veterans’ club license (issued under Article 5 (commencing
10at Section 23450) of Chapter 3).

11(4) On-sale license for boats, trains, sleeping cars, or airplanes
12where the alcoholic beverages produced or sold by the
13manufacturer, winegrower, manufacturer’s agent, rectifier, bottler,
14importer, or wholesaler or any officer, director, or agent of that
15person are not sold, furnished, or given, directly or indirectly, to
16the on-sale licensee.



O

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