THE NATIONAL WINE POLICY BULLETIN

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1 THE NATIONAL WINE POLICY BULLETIN AUGUST 2015 There are a number of issues we are following on our members behalf, with talking points, as well as a round-up of state issues from around the country. Questions? Contact Michael Kaiser, Director of Public Affairs at mkaiser@wineamerica.org. To see past installments, login to wineamerica.org. Need help logging in? Tara at tgood@wineamerica.org or call at For WineAmerica members only. Do not distribute. FEDERAL Country of Origin Labeling: With the August congressional recess rapidly approaching, there is finally some movement on the Country of Origin Labeling (COOL) dispute. Last month, the House of Representatives passed a bi-partisan bill repealing the COOL requirements, last week two Senate proposals were put forward to attempt to remedy the COOL issue. Sen. Pat Roberts (R-KS), the Chair of the Senate Agriculture Committee has introduced a repeal of the COOL rules as an amendment to the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act. The DRIVE Act reauthorizes the Federal Highway Trust Fund and is being debated in the Senate this week. Adding the COOL reform to the bill allows for an expedited passage of the proposal, which is needed with the August recess looming, and the deadline for repealing the rules rapidly approaching. It remains to be seen whether or not the amendment comes up for a vote. Senator Debbie Stabenow (D-MI), the Ranking Member of the Senate Agriculture Committee and Senator John Hoeven (R-ND) have introduced the Voluntary Country of Origin Labeling and Trade Enforcement Act of This bill would make the COOL rules voluntary and is an attempt to avoid retaliatory tariffs. The Canadian and Mexican governments have both stated their opposition to this proposal, and have made it very clear that short of full repeal, they will proceed with retaliation. Congress returns from their August recess on September 8, any resolution on this issue will be after that date. USPS Shipping: The USPS Shipping Equity Act has been introduced by Rep. Jackie Speier (D-CA) in the House of Representatives. The bill would allow the shipment of beer, wine and spirits through the United States Postal Service, but it would not supersede the existing shipping laws in each states. Currently 42 states, and the District of Columbia allow some form of direct shipping for wine. This proposal would allow the USPS to compete directly with FedEx and UPS to ship alcohol.. It remains to be seen if and when the House takes up this bill. GMO Labeling: The House passed the Safe and Accurate Food Labeling Act. The bi-partisan bill establishes a voluntary federal labeling standard for genetically modified organisms. Additionally, the bill prohibits states from passing mandatory or more restrictive labeling standards. At this time there is no plan for the Senate to take up the bill.

2 TTB Funding: The Senate and House Appropriations Committees have passed the bills for Financial Services and General Government, which cover the funding of TTB. The House proposal authorizes TTB funding for FY 2016 at $106 million, a baseline of $101 million, with an added $5 million for labeling and formulation approvals. The Senate bill authorizes the baseline of $101 million. It is expected that during the House and Senate Conference on these bills, the Senate will add in the $5 million for label approval. THE STATES NEW YORK American Viticultural Area: On June 30, a proposal for a new American Viticultural Area in upstate New York (AVA) was submitted for approval by the TTB. This new area is located in northwestern New York in the Champlain Valley, near the Vermont border, and would recognize the 82 mile long valley where the grapes are currently being grown. The total size of the area is over 500 miles and currently does not fall under any other AVA. The proposal was submitted by Colin Read of North Star Vineyards on behalf of the Lake Champlain Growers Association. The TTB is accepting comments on the proposed Champlain Valley AVA until August 30. NORTHEAST Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont CONNECTICUT Regulation: As of July 1, all liquor stores in Connecticut have the option to stay open until 10 p.m., an hour later than the previous 9 p.m. law. This new regulation is purely an option for liquor stores, not a requirement. Some believe this law will be dangerous in the long run, and also cost stores more to stay open later. Supporters of this law believe it will allow the state to collect more taxes and will give consumers more choice of when to purchase alcohol. DELAWARE Direct Shipping: A bill to allow direct shipping in the state of Delaware failed in committee last month. Currently, Delaware allows a customer to buy wine on-site and then have it shipped to their residence, but after they leave the retailers they cannot have more wine shipped. This will would have opened up direct shipping, requiring wine producers to purchase a license and then ship through a licensed carrier, and there would be no limit on quantity per household. The Delaware legislature has adjourned until the end of the year, but this bill can be brought back up for consideration in 2016, and many see Delaware as one of the next states to allow direct shipping. MASSACHUSETTS Direct Shipping: The United Parcel Service (UPS) has acquired all the proper permits to begin the direct shipment of wine into Massachusetts. The state approved direct shipping last January and Fedex has been shipping to consumers since February. RHODE ISLAND Taxes: Sales taxes on wine and spirits will officially fall to zero this summer, as a law passed in 2013 repealing the sales taxes and beginning a 15 month trial period comes to end. Many claim that this

3 will will help the liquor stores in the state compete with stores in neighboring Massachusetts, which repealed all wine, beer, and spirit taxes in The state is expected to lose approximately 7.2 million in sales tax revenue, but gain much of it back through excise taxes, which were increased in Beer and malt beverages are not exempt from sales tax under this law. SOUTHEAST Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia TENNESSEE Regulation: Last November, voters in Tennessee approved ballot measures in 78 municipalities to allow supermarkets to sell wine. The law will not come into effect until July of 2016, but stores and wholesalers have many provisions with which they must comply to be eligible for wine sales before next summer. These provisions include the requirement that a grocery store must get permission from a liquor store owner to sell wine if the liquor store is located within in 500 feet of the grocery, wine wholesalers cannot provide any extra display information or graphics to help the sales of their brand, wine can only be delivered to a loading dock, and the sale of wine on Sundays and most major holidays is prohibited. GREAT LAKES Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin ILLINOIS Regulation: The Wine Institute and some associate wineries have brought suit against the Illinois Department of Revenue and the Attorney General s office in response to charges that they must pay taxes on online wine orders to the state. Jeremy Diamond, a Chicago lawyer, has been acting on the behalf of the state in issuing hundreds of Illinois False Claims Act complaints that claim the wineries have not paid sales tax on online orders. The suits against the wineries are aided by Illinois civilian whistleblower law, which allows private citizens to sue in the name of the state and collect a percentage of what is eventually collected by the state. INDIANA Direct Shipping: A new law has come into effect that makes direct shipping laws simpler in the state of Indiana. SB 113 removes the requirement for a face-to-face transaction with the consumer when wine is shipped to their business location. The law also removes a previous requirement to report the customer s name and address to the Alcohol and Tobacco Commission. Direct shipping amounts to the state have also been increased from 27,000 liters a year to 47,000 liters. Additionally, a former regulation requiring a direct shipper to buy a 1,000 dollar alcohol tax bond to be licensed has been removed. The law also clarifies that those who hold a direct wine seller license are required to pay wine excise tax. MICHIGAN Regulation: Governor Rick Snyder signed legislation in early July permitting the consumption of wine and beer on pedal-powered trolleys as patrons travel from bar to bar. This law also gives local municipalities the right to prohibit this practice, and spirits are not permitted on the trolleys under

4 the regulation. Drivers of these trolleys would have to remain sober and have to carry up to 2 million dollars in insurance. Beer & Spirits: The growth in the craft beer industry in Michigan is prompting discussion within the beverage alcohol sector on the best way for the state to support the beer, wine/cider and spirits industries. The current funding model for the Michigan Grape and Wine Industry Council (created in 1985) in the Department of Agriculture and Rural Development calls for dedication of all non-retail license fees collected by the Michigan Liquor Control Commission to the Council s $750,000 annual budget. stry MIDWEST Arkansas, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, Texas TEXAS Marketing & Promotion: Texas Hill Country Wineries is currently working on the 2016 Hill Country Wine Symposium. The event will take place from January 12-13, 2017 at Horseshoe Bay Resort in Marble Falls, Texas. Registration for this event should be available by the end of August. Land Use: During the 84th Legislative Session, Senate Concurrent Resolution 41, signed by Governor Greg Abbott, designated Terry County as the official Grape Capital of Texas. The county, southwest of Lubbock, grows more grapes than all the other counties in the state combined. According to the Fort Worth Star Telegram, Terry County had 800 acres of vineyards in 2013 and expect to have 3,000 by the end of 2015 and 10,000 in the future. ROCKY MOUNTAIN Alaska, Arizona, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming ARIZONA Regulation: On July 1 Governor Steve Ducey signed HB 2317 into law, which requires any bottle labeled with the Arizona appellation to contain at least 75 percent of grape or fruit produced in Arizona. Also, the entire winemaking process must take place within in the state, from fermentation or labeling. Supporters say this law will help crack down on out of state wineries that want to use the Arizona name to help in sales. Many others, including several in the Arizona wine industry have pointed out that federal law already requires the 75 percent rule for any state appellation and this new regulation may be tough to enforce on the state level. COLORADO Regulation: The Colorado Wine Industry Development Board (CWIDB) is working with Liquor Enforcement and the rest of the beverage alcohol industry on regulatory language to implement the statutory changes passed last session to give local licensing authorities more input into the application process and approval of manufacturer sales rooms for breweries, distilleries and wineries. Other regulations under consideration include powdered alcohol manufacture and sales plus the sale of

5 growlers and self-service dispensing equipment in bars. The wine industry is also seeking clarification on importing samples for educational seminars and donation procedures for charity events. IDAHO Taxes: In the state of Idaho, beer that contains more than 4% ABV is considered strong beer and is taxed at the same level as wine, and falls under the wine excise tax. A potential separation of strong beer and wine under the Idaho tax code may be coming in the near future. CALIFORNIA American Viticultural Area: In March, a 22,280 acre American Viticultural Area (AVA) called the Los Olivos District in Santa Barbara County, California was formally proposed by the Alcohol and Tobacco Tax and Trade Bureau (TTB). The Los Olivos District would be included in the already created Santa Ynez Valley AVA. The proposal is still in the public comments section of the process and is likely to be approved by late OREGON Regulation: Oregon s six-month legislative session wrapped up on July 6. Democrats enjoyed a strong majority in both chambers and even with the unprecedented resignation of Governor John Kitzhaber in February, Democrats pressed on to achieve some notable legislative accomplishments. Among these is a requirement for employers to provide paid sick leave if they employ 10 or more employees. The Oregon Winegrowers Association (OWA) successfully lobbied for increased funding for Oregon State University s Fermentation Science Program ($2.4 million for the biennium) and new resources for the Oregon Department of Agriculture s testing laboratory to aid in chemical drift investigations ($1.7 million). OWA worked to halt a legislative effort by aggregate producers to make it easier to site aggregate mines on farmland and pushed back on efforts to lift the preemption against local governments enacting alcohol tax increases. Legislators introduced a number of bills to raise the minimum wage from the current $9.25 to up to $15/hour. No bill was passed but discussions will continue in the interim, with a possible ballot measure in Privatization of liquor sales could also appear on the 2016 ballot. WASHINGTON Regulation: The Washington State Legislature worked for (a new state record) 176 days, including three special sessions, before finally this month adjourning sine die for the 2015 legislative session. Although it took far longer than state leaders anticipated to adjourn, they did accomplish their goals of passing new operating, capital, and transportation budgets that are receiving bipartisan accolades for moving the state forward. On the wine front, the Washington Wine Institute (WWI) had a very successful 2015 legislative session on behalf of their members. WWI passed a new off-premise, private event permit wineries can now use 12 times a year, they lead the charge to secure a ten year renewal of the B&O tax incentive for out-of-state sales, and Washington State wineries will see no new taxes or regulations placed upon them this year.