1. Updates on ABC-related Bills, Wine Yeast Sales Tax Exemption, Prop 65, & Ballot Propositions March 8, 2016

2. There are three important ABC bills: SB 1032 (Galgiani) re: banning IRCs on wine SB 1426 (Hall) re: Suppliers using Off-sale or On-sale Retailers as “Spokespersons” AB 2121 (Gonzalez) re: Mandatory Server Training for On-sale Licensees’ Staff ABC-related Legislation

3. The people of the State of California do enact as follows: SECTION 1. Section 25600.3 of the Business and Professions Code is amended to read: 25600.3. (a) A beer manufacturer or a beer wholesaler nonretail licensee shall not offer, fund, produce, sponsor, promote, furnish, or redeem any type of coupon. (b) A licensee authorized to sell alcoholic beverages at retail shall not accept, redeem, possess, or utilize any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. nonretail licensee SB 1032 (Galgiani)

4. (c) For purposes of this section: (1) "Beer manufacturer""Nonretail licensee"means a manufacturer, winegrower, wine blender, manufacturer's agent, rectifier, bottler, broker, importer, wholesaler, or holder of a an out ‑ of ‑ state beer manufacturer's license, a holder of an out ‑ of ‑ state beer manufacturer's certificate, a holder of a beer and wine importer's general license when selling beer, malt beverages, cider, or perry, or a winegrower that is a wholly owned subsidiary of a beer manufacturer. certificate, or any beer manufacturer or winegrower located without the state, or any officer, director, agent, or affiliate of such person. SB 1032 (Galgiani)

5. (2)"Beer wholesaler" means a holder of a beer and wine wholesaler license when selling beer, malt beverages, cider, or perry. (3) (2)"Cider" has the same meaning set forth in Section 4.21(e)(5) of the Code of Federal Regulations. (3)"Perry" has the same meaning set forth in Section 4.21(e)(5) of the Code of Federal Regulations. SB 1032 (Galgiani)

6. (4) "Coupon" means any method by which a consumer receives an instant discount at the time of a purchase of any item if an alcoholic beverage purchase is required in connection with such purchase that is funded, produced, sponsored, promoted, or furnished, either directly or indirectly, by a beer manufacturer or beer and wine wholesaler, nonretail licensee, including, but not limited to, a paper coupon, a digital coupon, an instant redeemable coupon (IRC), or an electronic coupon commonly referred to as a scan or scanback. "Coupon" does not include: SB 1032 (Galgiani)

7. (A) A mail ‑ in rebate by which the consumer purchases an item and submits required information in order to receive a rebate or discount from the beer manufacturer. nonretail licensee. (B) A coupon discount that is offered and funded by a distilled spirits manufacturer, distilled manufacturer's agent, brandy manufacturer, distilled spirits importer general, distilled spirits importer, or rectifier, brandy wholesaler, distilled spirits wholesaler wholesaler, or a holder of a craft distiller's license, regardless of other licenses held, that offers a discount on the purchase of a distilled spirits product if beer, malt beverages, cider, or perry or wine products are not advertised in connection with the coupon. SB 1032 (Galgiani)

8. (C) A coupon offered and funded by a winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a wine product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon. (D) SB 1032 (Galgiani)

9. (C) A discount that is offered and funded by a beer manufacturer on the purchase of beer, malt beverages, cider, or perry at the licensed premises of production or other licensed premises owned and operated by the beer manufacturer. (D) A discount that is offered and funded by a winegrower on the purchase of wine at the licensed premises of production or other licensed premises owned and operated by the winegrower. SB 1032 (Galgiani)

10. (E) A discount offered and funded by a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a nonalcoholic beverage item if beer, malt beverages, or wine products are not advertised in connection with the discount. (F) A discount, refund, or rebate funded, produced, sponsored, promoted, and furnished exclusively by a licensee authorized to sell alcoholic beverages at retail. SB 1032 (Galgiani)

11. (5)"Perry" has the same meaning set forth in Section 4.21(e)(5) of the Code of Federal Regulations. (6)"Wine wholesaler" means a holder of a beer and wine wholesaler license when selling wine. SB 1032 (Galgiani)

12. The people of the State of California do enact as follows: SECTION 1. Section 25513 is added to the Business and Professions Code, to read: 25513. (a) For purposes of this section: (1) "Authorized licensee" means a manufacturer, winegrower, manufacturer's agent, rectifier, California winegrower's agent, beer manufacturer, holder of an out ‑ of ‑ state beer manufacturer's certificate, distilled spirits manufacturer, distilled spirits rectifier, distilled spirits manufacturer's agent, or craft distiller. SB 1426 (Hall)

13. (2) "Person" means a natural person 21 years of age or older. (b) Notwithstanding any other provision of this division, an authorized licensee may compensate a person with ownership interest in a retail license for promotional or marketing services of the authorized licensee's products, subject to the following conditions: (3) The authorized licensee compensating the person shall not utilize the person to conduct promotional and marketing activities to promote or market alcoholic beverages on the premises of the retailer in which the person has an ownership interest. SB 1426 (Hall)

14. (4) All compensation the authorized licensee pays to the person shall be based solely on the person's promotional and marketing activities and shall not be related directly or indirectly to the sale of alcoholic beverages by the retailer in which the person has an ownership interest. (5) The name, image, and brand of the retailer in which the person has an ownership interest shall not be featured or referenced in any way in any advertising of brands sold by the authorized licensee compensating the person. SB 1426 (Hall)

15. (6) The person shall not be involved in the decisions by the authorized license regarding the selection of retailers that will offer for sale the brands the person is compensated to promote and market. (c) A licensee that is not an authorized license shall not shall not compensate a person under this section and shall not directly or indirectly underwrite, share in, or contribute to the costs of compensation authorized by this section. SB 1426 (Hall)

16. (d) Any officer, director, or agent of an authorized licensee that is compensated by that authorized licensee for promotional or marketing services of the authorized licensee's products shall not be subject to the conditions of subdivision (b), notwithstanding the fact that the authorized licensee, or any officer, director, or agent of that authorized licensee, holds an ownership interest in a retail license. SB 1426 (Hall)

17. (e) (1) An authorized licensee who, through coercion or other illegal means, induces, directly or indirectly, a holder of a wholesaler's license to provide compensation to a person pursuant to this section shall be guilty of a misdemeanor and shall be punished by imprisonment in the county jail not exceeding six months, or by a fine in an amount of ten thousand dollars ($10,000), or by both imprisonment and fine. SB 1426 (Hall)

18. 2) An authorized licensee or person who violates any provision of this section shall be guilty of a misdemeanor and shall be punished by imprisonment in the county jail not exceeding six months, or by a fine in the amount of ten thousand dollars ($10,000), or by both imprisonment and fine. (f) Nothing in this section shall limit the activities authorized under Section 25503.1. (g) The Legislature finds and declares both of the following: SB 1426 (Hall)

19. 1) That it is necessary and proper to require a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages in order to prevent suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages produced by overly aggressive marketing techniques. (2) Any exception established by the Legislature to the general prohibition against tied interests must be limited to the express terms of the exception so as to not undermine the general prohibitions. SB 1426 (Hall)

20. (h) This section will remain in effect only until January 1, 2022, and as of that date is repealed. SEC. 2. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution. SB 1426 (Hall)

21. The people of the State of California do enact as follows: SECTION 1. This act shall be known, and may be cited, as the Responsible Interventions for Beverage Servers Training Act of 2016. SEC. 2. Article 4 (commencing with Section 25680) is added to Chapter 16 of Division 9 of the Business and Professions Code, to read: 4. Responsible Interventions for Beverage Servers (RIBS) Training Act of 2016 AB 2121 (Gonzalez)

22. 25680. For purposes of this article, "RIBS training course" means a Responsible Interventions for Beverage Servers training course approved by the department pursuant to Section 25682. 25681. (a) Beginning July 1, 2020, a person who sells or serves alcoholic beverages, or a person who manages a person who sells or serves alcoholic beverages, for consumption on the premises of an on ‑ sale retail licensee shall successfully complete an approved RIBS training course within three months of employment and every three years thereafter. AB 2121 (Gonzalez)

23. (b) (1) An approved RIBS training course shall consist of at least four hours of instruction and include, but shall not be limited to, the following information: (A) The social impact of alcohol. (B) The impact of alcohol on the body. (C) State laws and regulations relating to alcoholic beverage control, including laws and regulations related to driving under the influence. AB 2121 (Gonzalez)

24. (D) Intervention techniques to prevent the service or sale of alcoholic beverages to underage persons or intoxicated patrons. (E) The development of management policies that support the prevention of service or sale of alcoholic beverages to underage persons or intoxicated patrons. (2) The department may, by regulation, establish additional training standards and curricula to be included in an approved RIBS training course. AB 2121 (Gonzalez)

25. (c) The department shall review an approved RIBS training course at least once every three years after the course is approved. 25683. (a) Beginning January 1, 2020, the department shall include information on the RIBS training course requirement pursuant to Section 25681, including information on documentation requirements, on the application for an on ‑ sale retail license and with the license renewal notices sent to on ‑ sale retail licensees. AB 2121 (Gonzalez)

26. (b) Beginning January 1, 2020, an on ‑ sale retail licensee applying for a new license shall certify on the application that all employees of the licensee subject to Section 25681 either have successfully completed a RIBS training course or, within the first calendar year of the issuance of the license, will have successfully completed a RIBS training course. The licensee shall provide the department with documentation of successful completion. (c) Beginning January 1, 2020, an on ‑ sale retail licensee applying for the renewal of the license shall certify on the application, and provide the department with documentation, that all employees of the licensee subject to Section 25681 have successfully completed a RIBS training course. AB 2121 (Gonzalez)

27. Wine Yeast Sales & Use Tax Exemption AT At WI’s request, Board of Equalization (BOE) legal staff opined in early January that the sales and use tax no longer applies to transactions involving wine yeast. Within a few weeks, staff went further and expanded the exemption to include wine yeast derivatives. The rationale for these changes is that since wine yeast is included in the definition of “food products”, the tax no longer applies.

28. Wine Yeast Sales & Use Tax Exemption AT Generally speaking, wineries are entitled to 3 years’ worth of refund checks. On March 15 th, BOE Chair Fiona Ma is hosting a meeting with staff, WI Associate Member Scott Labs, other yeast suppliers, and WI.

29. Proposition 65 AT There are three problems with OEHHA’s Rulemaking re: Clear & Reasonable Warning : Vaguely written, grandfather clause for businesses party to a court-approved consent judgment (CJ). Non-CJ party businesses need an opt-in clause to petition OEHHA to comply with alcohol industry’s CJ. Non-CJ parties burdened with costly, certified mail receipt to prove compliance.

30. Proposition 65 WARNING: Drinking Distilled Spirits, Beer, Coolers, Wine and other Alcoholic Beverages May Increase Cancer Risk, and, During Pregnancy Can Cause Birth Defects. Alcohol Can Cause Birth Defects and Increase Cancer Risk. Women Who May Be Pregnant Should Not Drink Any Amount of Alcohol. This includes Liquor, Beer, Coolers, and Wine. For more information go to www.P65Warnings.ca.gov/alcohol

31. Ballot Propositions A super-sized November ballot … up to 24 complicated measures. Highlights include: legalizing recreational marijuana, repealing the death penalty, repealing law banning one-time plastic bags, Lt. Governor’s gun control measure, redirecting bullet train funds to build water storage projects, and $9 billion schools construction bond. Plus, a number of tax measures, notably $2/pack, cigarette tax increase and extending Prop 30’s income taxes on higher wage earners till 2030.

32. Ballot Propositions – What Didn’t Qualify The Daughters of Charity withdrew a “split roll” property tax measure. It would have imposed higher taxes, for example, on vineyard parcels and winery property valued over $3 million. It would have left homeowners’ properties valued under $3 million unchanged. WI’s and other businesses’ contributions to the opposition helped dissuade the proponents. CTA’s opposition was the knockout punch. It didn’t want the competition with its Prop 30 tax extension.