H.F. _____ Section 1. Section 123.3, subsection 29, Code 2015, is 1 amended to read as follows: 2 29. “Micro-distillery” means a business with an operational 3 still which, combining all production facilities of the 4 business, produces and manufactures less than fifty nine 5 hundred thousand proof gallons of distilled spirits on an 6 annual basis. 7 Sec. 2. Section 123.28, Code 2015, is amended to read as 8 follows: 9 123.28 Restrictions on transportation. 10 It is lawful to transport, carry, or convey alcoholic 11 liquors from the place of purchase by the division to a state 12 warehouse or depot established by the division or from one such 13 place to another and, when so permitted by this chapter , it 14 is lawful for the division, a common carrier, or other person 15 to transport, carry, or convey alcoholic liquor sold from a 16 state warehouse, depot, or point of purchase by the state to 17 any place to which the liquor may be lawfully delivered under 18 this chapter . The division shall deliver alcoholic liquor 19 purchased by class “E” liquor control licensees. Class “E” 20 liquor control licensees may deliver alcoholic liquor purchased 21 by class “A”, “B”, or “C” liquor control licensees and class 22 “C” micro-distilled spirits permittees , and class “A”, “B”, 23 or “C” liquor control licensees and class “C” micro-distilled 24 spirits permittees may transport alcoholic liquor purchased 25 from class “E” liquor control licensees. A common carrier or 26 other person shall not break or open or allow to be broken or 27 opened a container or package containing alcoholic liquor or 28 use or drink or allow to be used or drunk any alcoholic liquor 29 while it is being transported or conveyed, but this section 30 does not prohibit a private person from transporting individual 31 bottles or containers of alcoholic liquor exempted pursuant to 32 section 123.22 and individual bottles or containers bearing 33 the identifying mark prescribed in section 123.26 which have 34 been opened previous to the commencement of the transportation. 35 -1- LSB 2617YC (2) 86 ec/nh 1/ 7

H.F. _____ This section does not affect the right of a special permit 1 or liquor control license holder to purchase, possess, or 2 transport alcoholic liquors subject to this chapter . 3 Sec. 3. Section 123.32, subsection 1, Code 2015, is amended 4 to read as follows: 5 1. Filing of application. An application for a class “A”, 6 class “B”, class “C”, or class “E” liquor control license, for 7 a class “A” micro-distilled spirits permit, for a class “C” 8 micro-distilled spirits permit, for a retail beer permit as 9 provided in sections 123.128 and 123.129 , or for a class “B”, 10 class “B” native, or class “C” native retail wine permit as 11 provided in section 123.178 , 123.178A , or 123.178B , accompanied 12 by the necessary fee and bond, if required, shall be filed with 13 the appropriate city council if the premises for which the 14 license or permit is sought are located within the corporate 15 limits of a city, or with the board of supervisors if the 16 premises for which the license or permit is sought are located 17 outside the corporate limits of a city. An application for 18 a class “D” liquor control license and for a class “A” beer 19 or class “A” wine permit, accompanied by the necessary fee 20 and bond, if required, shall be submitted to the division 21 electronically, or in a manner prescribed by the administrator, 22 which shall proceed in the same manner as in the case of an 23 application approved by local authorities. 24 Sec. 4. Section 123.33, Code 2015, is amended to read as 25 follows: 26 123.33 Records. 27 Every holder of a liquor control license or a class “C” 28 micro-distilled spirits permit shall keep a daily record, in 29 printed or electronic format, of the gross receipts of the 30 holder’s business. The records required and the premises of 31 the licensee or permittee shall be accessible and open to 32 inspection pursuant to section 123.30, subsection 1 , during 33 normal business hours of the licensee or permittee . 34 Sec. 5. Section 123.43A, subsection 2, Code 2015, is amended 35 -2- LSB 2617YC (2) 86 ec/nh 2/ 7

H.F. _____ to read as follows: 1 2. A micro-distillery shall not sell more than one and 2 one-half liters per person per day, of micro-distilled spirits 3 on the premises of the micro-distillery. In addition, a A 4 micro-distillery shall not directly ship micro-distilled 5 spirits for sale at retail. The micro-distillery shall 6 maintain records of individual purchases of micro-distilled 7 spirits at the micro-distillery for three years. 8 Sec. 6. Section 123.43A, Code 2015, is amended by adding the 9 following new subsection: 10 NEW SUBSECTION . 4A. Notwithstanding any other provision of 11 this chapter, a person engaged in the business of manufacturing 12 micro-distilled spirits may sell micro-distilled spirits 13 it manufactures at retail for consumption on the premises 14 of the manufacturing facility by applying for a class “C” 15 micro-distilled spirits permit with the authority as provided 16 in section 123.43B. A manufacturer of micro-distilled spirits 17 may be granted not more than one class “C” micro-distilled 18 spirits permit. 19 Sec. 7. Section 123.43A, subsection 6, Code 2015, is amended 20 to read as follows: 21 6. The division shall issue no more than three class 22 “A” micro-distilled spirits permits under this section to a 23 person. In addition, a micro-distillery issued a permit under 24 this section shall file with the division , on or before the 25 fifteenth day of each calendar month, all documents filed by 26 the micro-distillery with the alcohol and tobacco tax and 27 trade bureau of the United States department of the treasury, 28 including all production, storage, and processing reports. 29 Sec. 8. Section 123.43A, subsection 7, Code 2015, is amended 30 by striking the subsection and inserting in lieu thereof the 31 following: 32 7. A micro-distillery may sell the micro-distilled spirits 33 it manufactures to customers outside the state. 34 Sec. 9. NEW SECTION . 123.43B Authority under class “C” 35 -3- LSB 2617YC (2) 86 ec/nh 3/ 7

H.F. _____ micro-distilled spirits permit. 1 1. A person holding a class “C” micro-distilled spirits 2 permit for the same location at which the person holds a class 3 “A” micro-distilled spirits permit may sell its micro-distilled 4 spirits only at retail to patrons by the individual drink for 5 consumption on the licensed premises where it was manufactured. 6 2. A person holding a class “C” micro-distilled spirits 7 permit shall purchase micro-distilled spirits it manufactures 8 from a class “E” liquor control licensee only. 9 3. A class “C” micro-distilled spirits permit for a 10 micro-distillery shall be issued and renewed annually upon 11 payment of a fee of two hundred fifty dollars. 12 4. A person holding a class “C” micro-distilled spirits 13 permit and a class “A” micro-distilled spirits permit whose 14 primary purpose is manufacturing distilled spirits may purchase 15 beer from a wholesaler holding a class “A” beer permit for sale 16 at retail and may purchase wine from a wholesaler holding a 17 class “A” wine permit for sale at retail. 18 Sec. 10. NEW SECTION . 123.43C Class “C” micro-distilled 19 spirits permit —— application contents. 20 Except as otherwise provided in this chapter, a class “C” 21 micro-distilled spirits permit shall be issued to a person who 22 complies with all of the following: 23 1. Submits electronically, or in a manner prescribed by the 24 administrator, an application for the permit and states on the 25 application under oath: 26 a. The name and place of residence of the applicant and 27 the length of time the applicant has lived at the place of 28 residence. 29 b. That the applicant is a citizen of the state of Iowa, 30 or if a corporation, that the applicant is authorized to do 31 business in Iowa. 32 c. The location of the class “A” micro-distillery where the 33 applicant intends to use the permit. 34 d. The name of the owner of the premises, and if that owner 35 -4- LSB 2617YC (2) 86 ec/nh 4/ 7

H.F. _____ is not the applicant, that the applicant is the actual lessee 1 of the premises. 2 2. Establishes all of the following: 3 a. That the applicant meets the test of good moral character 4 as provided in section 123.3, subsection 34. 5 b. That the premises for which the permit is sought is and 6 will continue to be equipped with sufficient tables and seats 7 to accommodate twenty-five persons at one time, and in areas 8 where such business is permitted by any valid zoning ordinance 9 or will be so permitted on the effective date of the permit. 10 c. That the premises where the applicant intends to operate 11 conform to all applicable laws and health and fire regulations. 12 d. Consents to inspection as required in section 123.30, 13 subsection 1. 14 Sec. 11. Section 123.56, subsection 5, Code 2015, is amended 15 to read as follows: 16 5. Notwithstanding any other provision of this chapter , a 17 person engaged in the business of manufacturing native wine may 18 sell native wine at retail for consumption on the premises of 19 the manufacturing facility by applying for a class “C” native 20 wine permit as provided in section 123.178B . A manufacturer of 21 native wine may be granted not more than one class “C” native 22 wine permit. In addition, a holder of a class “C” native wine 23 permit that is also a holder of a class “C” micro-distilled 24 spirits permit may sell native wine at retail for consumption 25 on the premises at the same location where the holder sells its 26 micro-distilled spirits to patrons pursuant to sections 123.43A 27 and 123.43B. 28 Sec. 12. Section 123.92, subsection 2, paragraph a, Code 29 2015, is amended to read as follows: 30 a. Every liquor control licensee , and class “B” beer 31 permittee, class “C” native wine permittee, and class 32 “C” micro-distilled spirits permittee, except a class “E” 33 liquor control licensee, shall furnish proof of financial 34 responsibility by the existence of a liability insurance 35 -5- LSB 2617YC (2) 86 ec/nh 5/ 7

H.F. _____ policy in an amount determined by the division. If an insurer 1 provides dramshop liability insurance at a new location to 2 a licensee or permittee who has a positive loss experience 3 at other locations for which such insurance is provided by 4 the insurer, and the insurer bases premium rates at the new 5 location on the negative loss history of the previous licensee 6 or permittee at that location, the insurer shall examine and 7 consider adjusting the premium for the new location not less 8 than thirty months after the insurance is issued, based on the 9 loss experience of the licensee or permittee at that location 10 during that thirty-month period of time. 11 EXPLANATION 12 The inclusion of this explanation does not constitute agreement with 13 the explanation’s substance by the members of the general assembly. 14 This bill concerns micro-distilleries and the authority of 15 micro-distilleries and micro-distilled spirits manufacturers 16 and makes dramshop liability insurance requirements applicable 17 to certain native wine and micro-distilled spirits permittees. 18 Code section 123.3(29), concerning the definition of a 19 micro-distillery, is amended to provide that a micro-distillery 20 is a business that produces less than 900,000 proof gallons of 21 distilled spirits instead of the current limit of 50,000. 22 Code section 123.43A, providing for a class “A” 23 micro-distilled spirits permit, is amended. The bill 24 eliminates the current one and one-half liters per day limit 25 on sales of micro-distilled spirits on the premises. The 26 bill also allows the micro-distillery to sell the spirits it 27 manufactures to customers outside the state. The bill also 28 allows the micro-distillery to sell the spirits it manufactures 29 for consumption on the premises of the manufacturing facility 30 by applying for a new class “C” micro-distilled spirits permit. 31 The bill limits a manufacturer to no more than one of the new 32 permits. 33 Code provisions governing restrictions on transportation 34 (123.28), applications to local authorities for certain permits 35 -6- LSB 2617YC (2) 86 ec/nh 6/ 7

H.F. _____ (123.32), and records (123.33), are made applicable to the new 1 class “C” micro-distilled spirits permit. 2 New Code section 123.43B establishes the authority for a 3 class “C” micro-distilled spirits permit. The Code section 4 provides that the permit shall allow the manufacturer to sell 5 its micro-distilled spirits only at retail to patrons by the 6 individual drink for consumption on the licensed premises where 7 it was manufactured, and that the person holding the permit 8 shall purchase micro-distilled spirits it manufactures from a 9 class “E” liquor control licensee only. The new Code section 10 also allows a person holding a class “C” micro-distilled 11 spirits permit and a class “A” micro-distilled spirits permit 12 to purchase beer and wine from a wholesaler with an appropriate 13 class “A” beer or wine permit for sale at retail. The annual 14 fee for the permit shall be $250. 15 New Code section 123.43C provides for the information 16 necessary for a person to apply for a class “C” micro-distilled 17 spirits permit. The bill requires the applicant to submit 18 information regarding the applicant and the location of the 19 micro-distillery. The application shall also provide that the 20 applicant is of good moral character and that the premises for 21 which the permit is sought is authorized to sell spirits for 22 consumption on the premises by applicable zoning ordinance and 23 is of sufficient size. 24 Code section 123.56, concerning native wines, is amended 25 to allow a holder of a class “C” native wine permit that also 26 is a holder of a class “C” micro-distilled spirits permit to 27 sell native wine at retail for consumption on the premises at 28 the same location where the holder sells its micro-distilled 29 spirits. 30 Code section 123.92, concerning the dramshop Act, is amended 31 to provide that a class “C” native wine permittee and a class 32 “C” micro-distilled spirits permittee shall furnish proof 33 of financial responsibility by having a liability insurance 34 policy. 35 -7- LSB 2617YC (2) 86 ec/nh 7/ 7