BILL ANALYSIS Ó AB 1554 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1554 (Irwin) As Amended June 29, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |76-0 |(April 28, |SENATE: | 39-0 |(August 16, | | | |2016) | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- 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. AB 1554 Page 2 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. AB 1554 Page 3 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 AB 1554 Page 4 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. AB 1554 Page 5 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 AB 1554 Page 6 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