ABL Updates: July/August 2019
2019 House Calendar (pdf)
Tennessee Wine & Spirits Retailers Association v. Thomas (U.S. Supreme Court)
On June 26, in a 7-2 vote, the Supreme Court struck down the Tennessee residency requirement for retail liquor licenses. As the petitioner in the case, the Tennessee Wine and Spirits Retailers Association had asked the Court to hold that Tennessee’s durational-residency requirement for granting retail and wholesale alcohol licenses is protected under the Twenty-first Amendment, and to reverse the Sixth Circuit Court of Appeals’ contrary ruling.
Full text (pdf) of the 57-page opinion: https://www.supremecourt.gov/opinions/18pdf/18-96_5i36.pdf
1. reaffirmed the existence of the Dormant Commerce Clause;
2. expanded Granholm by holding that Granholm and the Dormant Commerce Clause are not just limited to alcohol producers;
3. established a Dormant Commerce Clause/Section 2 test that a State must provide “concrete evidence” that an alcohol regulation “actually promotes public health or safety, while also showing “nondiscriminatory alternatives would be insufficient to further those interests”; and
4. held this 2-year durational residency requirement wasn’t even close to meeting this test.
This decision will prompt more challenges to state alcohol regulations, including basic residency requirements. The Court has created a test for alcohol laws that will require expert evidence and analysis to defend alcohol regulations. State alcohol associations and those with interests in state alcohol regulation should be vigilant about intervening in future cases.
The two-part test the Court has now set for alcohol laws:
1. Is there concrete evidence that the regulation provides enough public health and safety benefits?
2. Are there no other policy or regulatory alternatives to get at that interest?
H. Res. 285…Introduced on April 3, H. Res. 285 recognizes “over 85 years of successful State-based alcohol regulation since the creation of an effective system of independent beer, wine, and spirits distribution.” It is cosponsored by Rep. Derek Kilmer (D-WA) and Sean Duffy (R-WI), the co-chairs of the Congressional Hospitality Caucus. It emphasizes many principles and facts that ABL supports federally and its members embrace in their states. (House Simple Resolutions (H. Res.) and Senate Simple Resolutions (S. Res.) address matters entirely within the prerogative of one chamber or the other. They do not require the approval of the other chamber or the signature of the President, and they do not have the force of law.)
Impaired Driving…There are four bills that ABL is monitoring that address drunk driving:
- Abbas Stop Drunk Driving Act (H.R. 514) – Rep. Debbie Dingell (D-MI); Introduced 1/11/19; No cosponsors – This bill calls for the Department of Transportation to implement a federal motor vehicle safety standard that requires all new vehicles be equipped with an ignition interlock device within one year of the bill’s enactment.
- Impaired Driving Repeat Offender Prevention Act (H.R. 2998) – Rep. Nita Lowey (D-NY); Introduced 5/23/19; No cosponsors – This bill would require states to mandate the installation of an ignition interlock device in vehicles operated by those who have DWI convictions for at least 180 days.
- Prevent Impaired Driving Child Endangerment Act (H.R. 3008) – Rep. Kathleen Rice (D-NY); Introduced 5/23/19; No cosponsors – This bill would set criminal penalties for motorists convicted of driving while intoxicated or impaired with a child passenger. The bill would require drivers accused under the law be charged with a felony, punishable by up to 4 years in prison. Those convicted would have their license suspended unless an ignition interlock system is installed. The driver would also need to undergo mandatory substance-abuse treatment, while authorities would be required to report the incident to a state child-abuse registry. States that fail to comply with the law would lose a percentage of federal funding, the bill states.
- End Drunk Driving Act of 2019 (H.R. 3011) – Rep. Kathleen Rice (D-NY); Introduced 5/23/19; No cosponsors – This bill would give automobile manufacturers a decade to equip all new cars sold in the United States with technology that detects a driver’s blood alcohol content and prevents the vehicle from moving, if the driver is at or above the legal intoxication limit.
Music Licensing…The Department of Justice (DOJ) has opened a review and public comment period on the consent decrees governing ASCAP and BMI. The MIC Coalition expects to make comment, and ABL staff recommends that ABL make comment as well. ABL and other interested parties successfully petitioned the DOJ to extend the deadline to August 9.
Craft Beverage Modernization & Tax Reform Act…A majority of U.S. Senators are now cosponsoring the 2019 Craft Beverage Modernization and Tax Reform Act (CBMTRA). As of July 1, there are 64 cosponsors of S. 362, joined by 238 cosponsors of the House bill, H.R. 1175. Federal excise taxes on alcohol will revert to their previous levels on January 1, 2020 if the current rates are not made permanent or extended. Industry associations supporting the CBMTRA include Brewers Association, Beer Institute, WineAmerica, Wine Institute, Distilled Spirits Council, American Craft Spirits Association, and U.S. Association of Cider Makers.
S-Corp…The House Select Revenue Subcommittee held a hearing on June 25 entitled "How Recent Limitations to the SALT Deduction Harm Communities, Schools, First Responders, and Housing Values." Many Main Street Employers lost the ability to deduct the State and local taxes they pay on their business income because tax reform subjected deductions on state and local taxes (SALT) paid by pass-through business owners to the same $10,000 cap as taxes paid on wages and property. In response to this new policy, the S Corporation Association and the Parity for Main Street Employers coalition has been working with states to restore the SALT deduction at the state level by allowing pass-through businesses the option of paying their SALT at the entity level. To date, four state legislatures have adopted this reform - Connecticut, Wisconsin, Oklahoma, and Louisiana.
Estate Tax…As Congress looks for ways to extend expiring tax provisions in the Tax Cuts Jobs Act, one of the majority proposed pay-for’s is to end current estate tax provisions early. This proposal came to fruition with the introduction of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (H.R. 3301) on June 17. The bill sunsets the temporary $11 million per person estate tax exemption prematurely. The exemption will revert to $5.5 million per person on December 31, 2022 instead of December 31, 2025 as passed in the Tax Cuts and Jobs Act. The Family Business Coalition and the Family Business Estate Tax Coalition sent letters to Congress opposing the estate tax roll back. On a related note, the list of cosponsors on the Death Tax Repeal Act (H.R. 218) is now up to 107. ABL continues to believe that marshalling support for this bill is an effective way to combat the roll-back of TCJA estate tax provisions.
Industry Letter on Retaliatory Tariffs…In May, ABL joined other industry groups to sign-on to a letter to the U.S. Trade Representative (USTR) to urge that the U.S. remove imports of brandy/Cognac, liqueurs, cordials and wine from the EU from a proposed retaliatory tariff list in connection with a World Trade Organization (WTO) case. ABL joined American Distilled Spirits Association, American Craft Spirits Association, Distilled Spirits Council, Kentucky Distillers Association, National Association of Beverage Importers, Wine & Spirits Wholesalers of America, WineAmerica, Wine & Spirits Wholesalers of America and Wine Institute on the letter.
FDA Hearing on CBD…The Food and Drug Administration (FDA) held its first public hearing on CBD in food and drinks and how to regulate the newly legalized cannabis product on May 31. The hearing provided information on CBD's safety in food products and how the FDA might regulate manufacturing, marketing and labeling. Speakers included hemp growers, start-up businesses, academic researchers and consumer advocates, all with varying views on how strictly CBD should be regulated but united in their urging of the FDA to act soon with its rules. CBD, short for cannabidiol, is a non-psychoactive compound found in the cannabis plant that purports to relax the body without altering the mind like THC. Congress legalized hemp-derived CBD in December 2018. The hearing came at the urging of Congress, and with some large, potential CBD market entrants sitting on the sidelines due to the regulatory uncertainty surrounding the ingredient.