Senate File 368 - Introduced SENATE FILE BY COMMITTEE ON NATURAL RESOURCES AND ENVIRONMENT (SUCCESSOR TO SF 276) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to alcoholic beverages, by providing for the 2 manufacture and sale of native distilled spirits and 3 establishing a related permit fee, relating to the activities 4 of the grape and wine development commission, and providing 5 for the transfer of wine sale revenues to the grape and wine 6 development fund. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 2783SV 81 9 rn/pj/5 PAG LIN 1 1 Section 1. Section 123.32, subsection 1, Code 2005, is 1 2 amended to read as follows: 1 3 1. FILING OF APPLICATION. An application for a class "A", 1 4 class "B", class "C", or class "E" liquor control license, for 1 5 a class "A" or class "B" native distilled spirits permit, for 1 6 a retail beer permit as provided in sections 123.128 and 1 7 123.129, or for a class "B", class "B" native, or class "C" 1 8 native retail wine permit as provided in section 123.178, 1 9 123.178A, or 123.178B, accompanied by the necessary fee and 1 10 bond, if required, shall be filed with the appropriate city 1 11 council if the premises for which the license or permit is 1 12 sought are located within the corporate limits of a city, or 1 13 with the board of supervisors if the premises for which the 1 14 license or permit is sought are located outside the corporate 1 15 limits of a city. An application for a class "D" liquor 1 16 control license and for a class "A" beer or class "A" wine 1 17 permit, accompanied by the necessary fee and bond, if 1 18 required, shall be filed with the division, which shall 1 19 proceed in the same manner as in the case of an application 1 20 approved by local authorities. 1 21 Sec. 2. Section 123.41, subsection 1, Code 2005, is 1 22 amended to read as follows: 1 23 1. Upon application in the prescribed form and accompanied 1 24 by a fee of three hundred fifty dollars, the administrator may 1 25 in accordance with this chapter grant and issue a license, 1 26 valid for a one=year period after date of issuance, to a 1 27 manufacturer, other than a manufacturer of native distilled 1 28 spirits licensed pursuant to section 123.43A, which shall 1 29 allow the manufacture, storage, and wholesale disposition and 1 30 sale of alcoholic liquors to the division and to customers 1 31 outside of the state. 1 32 Sec. 3. NEW SECTION. 123.43A NATIVE DISTILLED SPIRITS == 1 33 PERMITS. 1 34 1. Subject to rules of the division, a manufacturer of 1 35 native distilled spirits holding a class "A" native distilled 2 1 spirits permit pursuant to this section may sell, keep, or 2 2 offer for sale native distilled spirits. As provided in this 2 3 section, sales may be made at retail for off=premises 2 4 consumption when sold on the premises of the manufacturer of 2 5 the native distilled spirits, or in a retail establishment 2 6 operated by the manufacturer. Any other sale shall only be 2 7 made to the division for wholesale disposition and sale by the 2 8 division. 2 9 2. For the purposes of this section, "native distilled 2 10 spirits" means distilled spirits manufactured by a distillery 2 11 located in this state in which at least eighty percent of the 2 12 raw materials consumed in the production of the distilled 2 13 spirits are grown in this state. 2 14 3. A manufacturer of native distilled spirits shall not 2 15 sell more than five thousand gallons of native distilled 2 16 spirits on the premises of the manufacturer, or in a retail 2 17 establishment operated by the manufacturer, annually. 2 18 4. A manufacturer of native distilled spirits shall not 2 19 sell native distilled spirits other than as permitted in this 2 20 chapter and shall not allow native distilled spirits sold to 2 21 be consumed upon the premises of the manufacturer except as 2 22 provided in subsection 6. However, prior to sale, native 2 23 distilled spirits may be sampled on the premises where made, 2 24 when no charge is made for the sampling. A person may 2 25 manufacture native distilled spirits for consumption on the 2 26 manufacturer's premises, when the native distilled spirits or 2 27 any part of the native distilled spirits are not manufactured 2 28 for sale. 2 29 5. A class "A" native distilled spirits permit for a 2 30 native distilled spirits manufacturer shall be issued and 2 31 renewed annually upon payment of a fee of twenty=five dollars 2 32 which shall be in lieu of any other license fee required by 2 33 this chapter. The class "A" permit shall allow the native 2 34 distilled spirits manufacturer to sell, keep, or offer for 2 35 sale the manufacturer's native distilled spirits as provided 3 1 under this section. 3 2 6. A class "B" native distilled spirits permit for a 3 3 native distilled spirits manufacturer shall be issued and 3 4 renewed annually upon payment of a fee of twenty=five dollars 3 5 which shall be in lieu of any other license fee required by 3 6 this chapter. The class "B" permit shall allow the native 3 7 distilled spirits manufacturer to sell native distilled 3 8 spirits at retail for consumption on the premises of the 3 9 manufacturing facility, or in a retail establishment operated 3 10 by the manufacturer. A manufacturer of native distilled 3 11 spirits may be granted not more than one class "B" native 3 12 distilled spirits permit. 3 13 7. For the purposes of this section, "manufacturer" 3 14 includes only those persons who process in Iowa the Iowa=grown 3 15 raw materials consumed in the production of distilled spirits 3 16 by the person. 3 17 8. For the purposes of this section, section 123.43 shall 3 18 not apply to a manufacturer of native distilled spirits. 3 19 9. The sale of native distilled spirits to the division 3 20 for wholesale disposition and sale by the division shall be 3 21 subject to the requirements of this chapter regarding such 3 22 disposition and sale. 3 23 Sec. 4. Section 123.53, Code 2005, is amended by adding 3 24 the following new subsection: 3 25 NEW SUBSECTION. 3A. The treasurer of state shall transfer 3 26 to the grape and wine development fund established in section 3 27 175A.5 a sum of money equal to five percent of the gross 3 28 amount of wine sales made by the division from the beer and 3 29 liquor control fund on a monthly basis. 3 30 Sec. 5. Section 123.53, subsection 4, Code 2005, is 3 31 amended to read as follows: 3 32 4. The treasurer of state, after making thetransfer3 33 transfers provided for insubsectionsubsections 3 and 3A, 3 34 shall transfer to the division from the beer and liquor 3 35 control fund and before any other transfer to the general 4 1 fund, an amount sufficient to pay the costs incurred by the 4 2 division for collecting and properly disposing of the liquor 4 3 containers. 4 4 Sec. 6. Section 175A.3, subsection 1, paragraph a, Code 4 5 2005, is amended to read as follows: 4 6 a. Establish and administer grape and wine development 4 7 programs as provided in section 175A.4 and account for and 4 8 expend moneys from the grape and wine development fund created 4 9 pursuant to section 175A.5. Prior to authorizing an 4 10 expenditure of moneys, the department shall consult with the 4 11 grape and wine development commission. The commission shall 4 12 make recommendations to the department regarding the 4 13 expenditure of moneys to enhance and develop the native wine 4 14 industry and to provide an infrastructure to encourage the 4 15 growth of the native wine industry in this state. 4 16 Sec. 7. Section 175A.3, subsection 2, Code 2005, is 4 17 amended by adding the following new paragraph: 4 18 NEW PARAGRAPH. f. Make recommendations to the department 4 19 regarding a proposed expenditure of funds as provided in 4 20 subsection 1, paragraph "a". 4 21 Sec. 8. Section 175A.5, subsection 1, Code 2005, is 4 22 amended to read as follows: 4 23 1. A grape and wine development fund is created in the 4 24 state treasury under the control of the department. The fund 4 25 is composed of moneys appropriated by the general assembly and 4 26 moneys available to and obtained or accepted by the department 4 27 from the United States or private sources for placement in the 4 28 fund. The fund shall include moneys deposited into the fund 4 29 from the beer and liquor control fund as provided in section 4 30 123.53, and from the wine gallonage tax as provided in section 4 31 123.183. 4 32 EXPLANATION 4 33 This bill relates to the manufacture and sale of native 4 34 distilled spirits, the activities of the grape and wine 4 35 development commission, and the transfer of wine sale revenues 5 1 to the grape and wine development fund. 5 2 The bill provides that a manufacturer of native distilled 5 3 spirits may sell, keep, or offer for sale native distilled 5 4 spirits for off=premises consumption either through sales on 5 5 the manufacturer's premises, or in a retail establishment 5 6 operated by the manufacturer. The bill restricts any other 5 7 form of sale to sales made to the alcoholic beverages division 5 8 for wholesale disposition and sale by the division. The bill 5 9 defines "native distilled spirits" to mean distilled spirits 5 10 manufactured by a distillery located in Iowa in which at least 5 11 80 percent of the raw materials consumed in the production of 5 12 distilled spirits are Iowa=grown. 5 13 The bill provides that a manufacturer shall not sell more 5 14 than 5,000 gallons of native distilled spirits on the premises 5 15 of the manufacturer, or in a retail establishment operated by 5 16 the manufacturer, annually. The bill specifies that unless a 5 17 manufacturer has obtained a class "B" native distilled spirits 5 18 permit, the manufacturer shall not allow native distilled 5 19 spirits sold to be consumed upon the premises of the 5 20 manufacturer, but that prior to sale they may be sampled on 5 21 the premises where made, when no charge is made for the 5 22 sampling. 5 23 The bill provides for two new permits applicable to native 5 24 distilled spirits, both requiring a fee of $25 for initial 5 25 issuance and annual renewal. A class "A" native distilled 5 26 spirits permit allows a manufacturer to sell, keep, or offer 5 27 for sale the manufacturer's native distilled spirits, and a 5 28 class "B" native distilled spirits permit allows a 5 29 manufacturer to sell native distilled spirits at retail for 5 30 consumption on the premises of the manufacturing facility, or 5 31 in a retail establishment operated by the manufacturer. The 5 32 bill provides that a manufacturer may be granted not more than 5 33 one class "B" native distilled spirits license. 5 34 The bill provides that a "manufacturer" of native distilled 5 35 spirits includes only those persons who process in Iowa the 6 1 Iowa=grown raw materials consumed in the production of 6 2 distilled spirits. The bill also provides that the sale of 6 3 native distilled spirits to the alcoholic beverages division 6 4 for wholesale disposition and sale by the division shall be 6 5 subject to the requirements of Code chapter 123 relating to 6 6 liquor sales and distribution by the division. 6 7 The bill provides that a manufacturer of native distilled 6 8 spirits is not considered a manufacturer pursuant to Code 6 9 sections 123.41 and 123.43, which require a license allowing 6 10 the manufacture, storage, and wholesale disposition and sale 6 11 of alcoholic liquors to the division and to customers outside 6 12 of the state. The bill makes conforming changes to Code 6 13 chapter 123 relating to these provisions. 6 14 The bill also provides that the treasurer of state shall 6 15 transfer on a monthly basis from the beer and liquor control 6 16 fund to the grape and wine development fund established in 6 17 Code section 175A.5 an amount equal to 5 percent of gross wine 6 18 sale revenues. The amount transferred would be added to other 6 19 amounts deposited into the fund and used to carry out grape 6 20 and wine development programs as provided in Code section 6 21 175A.4. 6 22 The bill additionally provides that the department of 6 23 agriculture and land stewardship shall, prior to authorizing 6 24 an expenditure of money from the grape and wine development 6 25 fund, consult with the grape and wine development commission. 6 26 The bill provides that the commission shall make 6 27 recommendations to the department regarding the expenditure of 6 28 moneys to enhance and develop the native wine industry, and to 6 29 provide an infrastructure to encourage its growth in Iowa. 6 30 LSB 2783SV 81 6 31 rn:nh/pj/5