SSB 3140

Description

Senate File 2374 relates to alcoholic beverage control and establishes new retail alcohol licenses and fee structures. The Bill also relates to the regulation of restaurant food delivery and provides civil penalties. Table 8A and Table 8B, presented at the end of this Fiscal Note, summarize the fiscal impacts of the various Bill divisions. The Bill is effective January 1, 2023, and provides for transition provisions for current licenses.

Background

The Alcoholic Beverages Division (ABD) of the Department of Commerce is the regulatory entity for the sale and distribution of alcohol in the State of Iowa. The Division is responsible for the enforcement of State and federal laws and regulations regarding the sale and use of alcoholic products. The Beer and Liquor Control Fund (Liquor Control Trust Fund) is administered by the Office of the State Treasurer and consists of revenues from the following sources:

• Alcoholic liquor sale receipts
• Permit and license fees
• Wine tax collections
• Miscellaneous revenue

Table 1 — Liquor Control Trust Fund Deposits FY 2017 – FY 2021 Iowa Code section 123.17(3) specifies that if gaming revenues are not sufficient to meet the total amount of revenues directed to be deposited in the Revenue Bonds Debt Service Fund and the Revenue Bonds Federal Subsidy Holdback Fund, funds may be transferred from the Liquor Control Trust Fund to account for the difference. Each quarter, the Treasurer of State prepares an estimate of gaming revenues and the Liquor Control Trust Fund ending balance. To date, no moneys from the Liquor Control Trust Fund have been transferred to the Revenue Bonds Debt Service Fund.Deposits FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Liquor Sales 305,619,127$ 320,049,812$ 339,537,641$ 367,284,902$ 415,835,178$ License and Permit Revenue 15,664,468 16,613,682 18,773,557 17,676,967 19,134,834 Beer Tax Collections* 13,904,082 13,592,912 13,438,680 9,435,077 18,207,794 Wine Tax Collections 8,078,043 8,166,553 8,219,810 5,677,108 11,008,117 Miscellaneous Revenue 6,115,965 4,806,557 5,290,473 5,614,701 6,198,781 Total Deposits 349,381,685 363,229,516 385,260,161 405,688,755 470,384,704 Total Expenses 219,986,581 228,179,166 244,804,012 261,613,359 302,348,510 Net Revenues 129,395,104$ 135,050,350$ 140,456,149$ 144,075,396$ 168,036,194$ *Beer tax collected is deposited into the State General Fund.

Iowa Code section 123.17(5) requires that at least 7.0% of gross monthly liquor sales (or at least $9.0 million annually) be transferred to the State General Fund. Of the State General Fund transferred amount, a minimum of $2.0 million is transferred annually to the Iowa Department of Public Health (IDPH) for substance abuse treatment and prevention. This provision is met annually through the appropriations made in the Health and Human Services Appropriations Bill. Beginning in FY 2022, there is a new transfer of $1.0 million to the Iowa Economic Development Authority for a statewide tourism marketing campaign under Iowa Code section 123.17(7).

Additionally, fees paid to the ABD for liquor control licenses, wine permits, beer permits, and fines collected from civil penalties are transferred to cities and counties issuing those licenses. Sunday sales license fees are also to be allocated to the IDPH for grants to cities and counties operating substance abuse programs pertaining to education, prevention, referral, or posttreatment services.

Table 2 below shows the transfers from ABD revenue in FY 2021.

Table 2 — FY 2021 Revenue Transfers Division I — Retail Alcohol Licenses

Description and Background

Division I replaces liquor control licenses with retail alcohol licenses and modifies the classes within the new category of retail alcohol licenses. The Division also updates the retail alcohol license application process. Division I is effective January 1, 2023. The Bill makes the following retail license changes to move from 14 license types to 8 license types: Class “B” Retail Alcohol License (Grocery and Convenience Stores)

• Repeals the current class “C” beer permits and class “B” wine permits and combines them in part into a new class “B” retail alcohol license that allows the licensee to sell wine and beer for consumption off premises.
• Adds the privilege to sell wine and beer to class “C,” “D,” “F,” and special class “C” retail alcohol licensees for resale for on-premises consumption. Such wine sales must be limited to less than one case of any wine brand, and such beer sales must be limited to no more than five cases of beer, high alcoholic content beer, and canned cocktails. There will be only one of these sales made per retail alcohol licensee in a 24-hour period, and class “A” beer permittees are to be held harmless regarding any beer resold.

Special Class “B” Retail Native Wine License (Grocery and Convenience Stores) Renames the class “B” native wine permit to a special class “B” retail native wine license.Transfer FY 2021 Actuals General Fund Reversion 120,600,000$ 7.0% General Fund Transfer 29,225,511 State Aid to Cities and Counties 2,638,105 Sunday Sales Grants 944,896 Total 153,408,512$ Class “C” Retail Alcohol License (Bars and Restaurants)

• Renames the current class “C” liquor control license to class “C” retail alcohol license.
• Adds the privilege to purchase wine from class “B” or class “E” retail alcohol license holders in quantities of less than one case of any wine brand. Any one license holder may not make more than one of these purchases in a 24-hour period.
• Adds the privilege to purchase beer from class “A” beer permittees and beer from class “B” and “E” retail alcohol licensees in quantities limited to no more than five cases of beer, high alcoholic content beer, and canned cocktails. There may be only one of these sales made per retail alcohol licensee in a 24-hour period, and class “A” beer permittees are to be held harmless regarding any beer resold.

Special Class “C” Retail Alcohol License (Bars and Restaurants)

• Renames the current special class “C” liquor control license to special class “C” retail alcohol license.
• Adds the privilege to purchase wine from class “B” or class “E” retail alcohol license holders in quantities of less than one case of any wine brand. Any one license holder may not make more than one of these purchases in a 24-hour period.
• Adds the privilege to purchase beer from class “A” beer permittees and beer from class “B” and “E” retail alcohol licensees in quantities limited to no more than five cases of beer, high alcoholic content beer, and canned cocktails. There may be only one of these sales made per retail alcohol licensee in a 24-hour period, and class “A” beer permittees are to be held harmless regarding any beer resold.
• Adds the privilege to sell wine to consumers for consumption off the premises. Class “D” Retail Alcohol License (Trains, Airplanes, and Watercraft)
• Renames the current class “D” liquor control license to class “D” retail alcohol license.
• Adds the privilege to purchase wine from class “B” or class “E” retail alcohol license holders in quantities of less than one case of any wine brand. Any one license holder may not make more than one of these purchases in a 24-hour period.
• Adds the privilege to purchase beer from class “A” beer permittees and beer from class “B” and “E” retail alcohol licensees in quantities limited to no more than five cases of beer, high alcoholic content beer, and canned cocktails. There may be only one of these sales made per retail alcohol licensee in a 24-hour period, and class “A” beer permittees are to be held harmless regarding any beer resold.

Class “E” Retail Alcohol License (Grocery and Convenience Stores)

• Renames the current class “E” liquor control license to class “E” retail alcohol license and allows the new class “E” retail alcohol licensee to purchase and sell wine and beer, in addition to liquor and high alcoholic content beer.
• Adds the privilege to sell wine to class “C,” “D,” “F,” and special class “C” retail alcohol licensees for resale for on-premises consumption in quantities limited to less than one case of any wine brand and only one of these sales made in a 24-hour period.
• Adds the privilege to sell beer to class “C,” “D,” “F,” and special class “C” retail alcohol licensees for resale for on-premises consumption in quantities limited to no more than five cases of beer, high alcoholic content beer, and canned cocktails. There shall be only one of these sales made per retail alcohol licensee in a 24-hour period, and class “A” beer permittees are to be held harmless regarding any beer resold.

Class “F” Retail Alcohol License (Nonprofit Clubs)

• Renames the current class “A” liquor control license to class “F” retail alcohol license.
• Adds the privilege to purchase wine from class “B” or class “E” retail alcohol license holders in quantities of less than one case of any wine brand. Any one license holder may not make more than one of these purchases in a 24-hour period.
• Adds the privilege to purchase beer from class “A” beer permittees and beer from class “B” and “E” retail alcohol licensees in quantities limited to no more than five cases of beer, high alcoholic content beer, and canned cocktails. There may be only one of these sales made per retail alcohol licensee in a 24-hour period, and class “A” beer permittees are to be held harmless regarding any beer resold.

Among these changes, the following license and permit types were also repealed:

• Class “C” beer permit (Grocery and Convenience Stores)
• Class “B” wine permit (Grocery and Convenience Stores)
• Class “B” liquor control license (Hotels and Motels)
• Special class “C” native distilled spirits liquor control license (Iowa Native Distilled Spirits Manufacturers)
• Class “B” beer permit (Restaurants and Bars)
• Class “C” native wine permit (Retail Native Wine Establishments)

Table 3 provides a summary overview of the changes to the existing licensing structure in Division I.

Table 3 — Summary of Division I Changes to Retail Licenses

Assumptions and Fiscal Impact

Division I establishes new retail alcohol licenses and is not projected to have an identifiable fiscal impact. Division II establishes the fees for the new licenses; this portion of the Fiscal Note identifies the fiscal impact for each new license type.Current License/Permit Name New License Name N/A Class "B" Retail Alcohol License Class "B" Native Wine Permit Special Class "B" Retail Native Wine License Class "C" Liquor Control License Class "C" Retail Alcohol License Special Class "C" Liquor Control License Special Class "C" Retail Alcohol License Class "E" Liquor Control License Class "E" Retail Alcohol License Class "A" Liquor Control License Class "F" Retail Alcohol License Class "D" Liquor Control License Class "D" Retail Alcohol License Charity Beer, Spirits, and Wine Auction Permit Charity Beer, Spirits, and Wine Event Permit Class "C" Beer Permit Class "B" Wine Permit Class "B" Beer Permit Repealed Class "B" Liquor Control License Repealed Class "C" Native Distilled Spirits Liquor Control License Repealed Class "C" Native Wine Permit Repealed

Charity, Beer, Spirits, and Wine

Special Event License

Repealed (incorporated into Class "B" Retail Alcohol License) Division II — Alcohol Beverage Control Fees

Description and Background

Division II establishes new fee structures for the retail alcohol licenses created in Division I, as well as amends existing license fees for manufacturing and wholesaling licenses. Division II is effective January 1, 2023. The changes are listed below by retail alcohol license and manufacturing/wholesaling license.

Retail Alcohol Licenses — Annual Fees Class “B” Retail Alcohol License (Grocery and Convenience Stores) The fees for the new class “B” retail alcohol license are as follows, based on size and location of the premises:

Special Class “B” Retail Native Wine License (Grocery and Convenience Stores) The fee for the new class “B” retail native wine license is increased from $25 to $125, an increase of $100 compared to the current class “B” native wine permit. Class “C” Retail Alcohol License (Bars and Restaurants) The fees for the new class “C” retail alcohol licenses are decreased by $50 compared to the current class “C” liquor control license, and the population thresholds are increased. Currently, there is a 30.0% surcharge on class “C” liquor control licenses. The Bill retains this 30.0% surcharge on class “C” retail alcohol licenses. The new fees are as follows:

• $550 ($715 with surcharge) for establishments located within cities with a population of 2,500 or less.
• $900 ($1,170 with surcharge) for establishments located within cities with a population of over 2,500 but less than 15,000.
• $1,250 ($1,625 with surcharge) for establishments located within cities with a population of 15,000 or more.

Special Class “C” Retail Alcohol License (Bars and Restaurants) The fee for a special class “C” retail alcohol license remained the same as the current special class “C” liquor control license; however, the population threshold is increased. The Bill retains the 30.0% surcharge on special class “C” retail alcohol licenses. The new fees are as follows:

• $150 ($195 with surcharge) for establishments located within cities with a population of 2,500 or less.
• $300 ($390 with surcharge) for establishments located within cities with a population of over 2,500 but less than 15,000.
• $450 ($585 with surcharge) for establishments located within cities with a population of 15,000 or more.

Class “E” Retail Alcohol License (Grocery and Convenience Stores) The fees for a class “E” retail alcohol license are as follows:City

Population

Less than 1,500 square feet 1,501 to 2,000 square feet 2,001 to 5,000 square feet Over 5,000 square feet 2,500 or less 75$ 150$ 250$ 350$ 2,500 to 15,000 150 250 350 500 Over 15,000 250 350 500 750 Charity Beer, Spirits, and Wine Special Event License (Charity Events) Current fees for the charity beer, spirits, and wine auction permit and the charity beer, spirits, and wine event permit are made applicable to a charity beer, spirits, and wine permit. Class “F” Retail Alcohol License (Nonprofit Clubs) Current fees for a class “A” liquor control license are made applicable to a class “F” retail alcohol license.

Class “D” Retail Alcohol License (Trains, Airplanes, and Watercraft) Current fees for a class “D” liquor control license are made applicable to a class “D” retail alcohol license.

Table 4 includes a summary of the changes to retail licenses.

Table 4 — Summary of Changes to Retail Licenses Fees

Manufacturing/Wholesale Annual Fees

Distiller’s Certificate of Compliance

The Distiller’s Certificate of Compliance fee is increased from $50 to $200.

Manufacturer’s License

The fee for a manufacturer’s license is decreased from $350 to $300.City

Population

Less than 1,500 square feet 1,501 to 2,000 square feet 2,001 to 5,000 square feet Over 5,000 square feet 2,500 or less 750$ 1,500$ 2,500$ 3,500$ 2,500 to 15,000 1,500 2,500 3,500 5,000 Over 15,000 2,500 3,500 5,000 7,500Current License Name Current Annual Fee Amount New License Name New Annual Fee Amount N/A N/A Class "B" Retail Alcohol License Varies by city population and square footage Class "B" Native Wine Permit $25 Special Class "B" Retail Native Wine License $125 Class "C" Liquor Control License Varies by city population Class "C" Retail Alcohol License Decrease of $50 and varies by increased city population thresholds Special Class "C" Liquor Control License Varies by city population Special Class "C" Retail Alcohol

License

Varies by increased city

population thresholds Class "E" Liquor Control

License

Varies by city population, square footage, and the presence of gasoline sales Class "E" Retail Alcohol License Varies by increased city population and adjusted square footage Class "A" Liquor Control

License

Varies by city population, club

membership, and days open Class "F" Retail Alcohol License Class "D" Liquor Control License Varies by classification Class "D" Retail Alcohol License

Charity Beer, Spirits, and Wine

Auction Permit $100

Charity Beer, Spirits, and Wine

Event Permit $100 Class "C" Beer Permit Varies by square footage Class "B" Wine Permit $500 Class "B" Beer Permit Varies by city population Class "B" Liquor Control

License Varies by city population

Class "C" Native Distilled Spirits License $250 Class "C" Native Wine Permit $25

Repealed N/A

No change

Charity, Beer, Spirits, and Wine

Special Event License

Class “A” Native Distilled Spirits License The fee for a class “A” native distilled spirits license is decreased from $500 to $300.

Beer Permit Fees

• The permit fee for a class “A” beer permit for a native brewery is decreased from $750 to $300.
• The permit fee for a special class “A” beer permit is decreased from $750 to $300.
• The fee for a Brewer’s Certificate of Compliance is decreased from $500 to $200.

Wine Permit and License Fees

• The fee for a native class “A” wine permit is increased from $25 to $100.
• The fee for a Vintner’s Certificate of Compliance is increased from $100 to $200. Table 5 includes a summary of the changes to manufacturing/wholesale license fees. Table 5 — Summary Changes to Manufacturing/Wholesale Fees

License Type Current License Fee New License Fee Class "A" Beer (Native) $750 $300 Class "A" Wine (Native) $25 $100 Special Class "A" Beer $750 $300 Class "A" Native Distilled Spirits $500 $300 Brewer's Certificate of Compliance $500 $200 Distiller's Certificate of Compliance $50 $200 Vintner's Certificate of Compliance $100 $200 Manufacturer's License $350 $300 Class "A" Wine $750 No change Class "A" Beer $750 No change Wine Carrier Permit $100 No change Broker's Permit $25 No change Direct Shipper's Permit $25 No change

Assumptions

The assumptions are listed separately below for each new retail alcohol license that has a fee change compared to current licenses. It is assumed that implementation of the new retail alcohol licenses will start upon enactment of SF 2374, with complete implementation by October 1, 2022. Therefore, for the purposes of this Fiscal Note, 75.0% of the total fiscal impact will be realized in FY 2023, with the full fiscal impact being realized in succeeding fiscal years. Class “B” Retail Alcohol License (Grocery and Convenience Stores) The class “B” retail alcohol license replaces the class “B” wine permit and class “C” beer permit. The new class “B” retail alcohol license utilizes a fee structure based on square footage of the premises and the population of the city in which the premises is located. However, the fee structure for the existing class “B” wine permit is based on duration of the permit, and the fee for the class “C” beer permit is based on square footage of the premises. As a result, the ABD does not currently collect the population data or the square footage of data for current class “B” wine permittees needed to accurately estimate the fiscal impact of the new class “B” retail alcohol license.

Special Class “B” Retail Native Wine License (Grocery and Convenience Stores) In FY 2021, there were 748 class “B” native wine permits issued. For the purposes of this Fiscal Note, it is assumed that the number of issued licenses in future fiscal years under the increased fee amount will be similar to the number issued in FY 2021.

Class “C” Retail Alcohol License (Bars and Restaurants)

• Class “C” liquor control licensees will be licensed under the new class “C” retail alcohol license. Current class “C” liquor control licenses are issued based on city population.
• The following current licensees may obtain a class “C” retail alcohol license: class “B” liquor control licensees, class “C” native distilled spirits liquor control licensees, class “A” beer permit holders that also hold class “B” beer permits, and class “A” wine permit holders that also hold class “C” native wine permits.
• Sixty-five percent of class “C” retail alcohol license fees, excluding the surcharge, are remitted to local authorities. This is no change to current law. The total revenue impact to the Liquor Control Trust Fund is calculated assuming a 30.0% surcharge on all applicable licenses.
• For the purposes of this Fiscal Note, it is assumed that the number of issued licenses in future fiscal years under a class “C” retail alcohol license will be similar to the number of